Business Corpus: Health Care Planning: A New Frontier For Advisors Eager To Add ValueBy providing health planning services, advisors expand their offerings and help clients grapple with steep medical bills. The post Health Care Planning: A New Frontier For Advisors Eager To Add Value appeared first on Investor's Business Daily.

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Many advisors provide retirement planning, tax planning and estate planning. As clients live longer and incur more medical bills, health care planning plays an equally important role.

Helping clients anticipate and address health care issues requires a different set of skills for advisors. The landscape is constantly changing, from insurance reforms to home care options to new medical tests and treatments, posing an ongoing challenge to planners who want to stay a step ahead of the latest developments.

Out-of-pocket costs are tough to predict, especially for clients under age 65 who do not qualify for Medicare. And broaching sensitive health topics with anxious clients can test an advisor's ability to communicate with empathy and tact.

Nevertheless, advisors who offer health care-related services seek to deepen their impact and deliver much-needed support. Budgeting for such care — now and in the future — is increasingly viewed as a critical part of comprehensive financial planning.

"As a fiduciary, I recognized that health care can be a major expense," said Jim Shagawat, a certified financial planner in Paramus, N.J. "I figured that here's a way I can make a difference for 20, 30 or 40 years of my clients' lives."

Like many advisors, Shagawat seeks to demystify health savings accounts for clients while helping them navigate the complexities of the health insurance marketplace. But he knows his limits.

"There's no way I could keep up on everything going on with health care without a consultant," Shagawat said. So in early 2018, he contracted with an outside firm to provide his clients with more advanced and customized health planning expertise.

Fix Billing Errors

For Shagawat, offering his clients free access to what he calls a "health care advisor" rounds out his array of services. He encourages them to meet with the consultant to manage their medical expenses and devise a strategy to address concerns ranging from assisting their special-needs children to affording expensive prescription drugs.

He pays a retainer to the consulting firm based on the number of clients who use the service. Neither he nor the consultant sells insurance.

"That way, our advice is objective," he said. "And our clients save time, money and get peace of mind knowing that they've implemented the right health care strategies."

The consultant works with Shagawat's clients to find an appropriate health insurance plan, qualified medical providers and discounted prescription drugs. In some cases, the consultant even reviews their medical bills.

"A lot of people get medical bills and pay them without checking for errors," Shagawat said. "Yet some hospital bills charge for extra days or extra tests that a doctor orders and then a nurse cancels," and the consultant flags such inaccuracies.

Shagawat finds that some clients pondering early retirement in their late 50s and early 60s worry about managing health care costs and obtaining insurance before they can enroll in Medicare. Once they sign up, they may struggle to select the best Medicare supplement insurance plan. Matching them with the consultant gives them the tools to make smart moves.

Shock Waves

Advisors who do not enlist a consultant to help clients with health care planning still need to tackle difficult conversations about medical matters. Individuals facing a grim diagnosis may experience a flurry of emotions.

Ideally, advisors anticipate such adverse situations and discuss them when clients are healthy. Running through a series of worst-case scenarios — and assuring clients that there's a plan in place for even the most serious calamity — can contain the fallout if it occurs.

"It's the psychological part, not just the medical part," Shagawat said. He adds that beyond the shock many people undergo when learning of their grave condition, cripplingly high health care costs are a primary cause of personal bankruptcy.

Paul Sarama, an advisor with Steward Partners Global Advisory, treats health care costs as a key factor in planning a client's financial future. He wants to minimize the likelihood that clients will recoil if they face an unexpected health crisis later in life.

"Because health care is such a big expense, we include it as a line item in a client review," he said. Over a 20-year period, he may calculate an annual increase in health care costs that ranges between 5% and 5.9%.

"We'll add these assumptions into our retirement spending projections," he said. "It adds clarity to the future, and while clients are slightly shocked at the costs over time, they appreciate" knowing they can withstand a medical blow without derailing their overall financial plan.

Estimating potential health care costs is fraught with uncertainties. Expenses not covered by Medicare, such as hearing aids and most eyeglasses, can add up. And for the roughly half of seniors who need long-term care, the price tag for paid assistance can add tens of thousands of dollars.

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