How Far Are Adult Kids Willing to Go to Help Aging Parents?

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A study by Fidelity Investments reveals that adult children have their parents’ backs and far more than parents may think, although 93% of parents say it would be unacceptable to become financially dependent on their children; only 30% of children feel the same. Nearly four in 10 families disagree as to roles and responsibilities as parents get older. Among the other communication gaps:

  • 92% of parents expect one of their children to assume the role of executor of the estate, but 27% of the kids who are expected to be the executor don’t know that they are expected to do so. Fifty-five percent of parents expect the oldest child to be executor.
  • While 72% of parents expect one of their children will assume long-term caregiver responsibilities in retirement if need be, 40% of the kids identified as filling this role didn’t know this. Of those that do, 58% are women. One surprising trend is that a growing number of Millennials are providing care giving support for a parent.
  • While 69% of parents expect one of their children to help manage their investments and retirement finances, 36% of the kids identified as filling this role didn’t know this.

John Sweeney, executive vice president of Retirement and Investing Strategies at Fidelity said, “Many families need to do a better job of being on the same page when it comes to financial planning, as there are real emotional and financial consequences when family conversations don’t happen or lack sufficient depth. At some point every family will face issues related to aging, which is why it’s important to take the time to sort through the details related to care giving responsibilities and estate planning, before declining health forces the issue. Doing so can lead to far better emotional and financial outcomes for everyone.”

Why aren’t these conversations taking place? Part of it seems to be a matter of timing, since only 33% of parents and their children agree when it’s appropriate to initiate these conversations; that is, whether to have them well before retirement, upon entering retirement or closer to when health and finances become an issue. Part of it may be that families don’t realize the importance of talking these topics through: a significant portion of those surveyed have yet to discuss retirement plans (38% of parents, 43% of adult children) say it’s because the subject never comes up! Even if conversations are taking place, the depth and extent of the conversations is often inadequate, as the study uncovered significant gaps in the following areas:

  • Long-term care: 43% of parents say they have not had detailed conversations with family members about long-term care and elder care. An additional 23% have not had any conversations at all. While 72% of children think their parents should be tackling the issue of long-term care/elder care, only 41% of their parents say they actually are. As healthcare costs have risen in the past few years, this has become an increasingly important topic. According to the latest Fidelity Investments Retirement Health Care Cost Estimate, the average couple can expect to spend an estimated $245,000 on health care throughout retirement.
  • Will and estate planning: Sixty-nine percent of parents say they’ve had detailed conversations with their children on this subject, 52% of children say they haven’t.
  • Living expenses in retirement: Thirty-four percent of parents say they have not had detailed conversations with family members about covering their living expenses in retirement. An additional 16% have not had any conversations on the topic at all.
  • Shelter from the Storm: With conversation comes greater peace-of-mind.

One thing is certainly clear: having detailed conversations around finances can help families avoid panic when it matters most. In fact, 93% of children who say they have had any detailed conversation with their parents are significantly more likely to have greater peace-of-mind around these issues. Likewise, 95% of parents reported feeling greater peace of mind as a result of estate planning conversations.

One-third of parents and their children say frank conversations should occur after retirement and when health and finances have become an issue—at which point, it may be too late. These conversations should begin taking place before retirement, and certainly well before any challenges arise. “It’s actually a good idea for conversations about finances to be taking place among families no matter what your age, whether you are in your twenties and looking to build a strong financial foundation or in your sixties and transitioning into retirement,” added Sweeney.

Ask as many detailed questions as you can. Don’t be afraid to ask even the most seemingly obvious questions. Three out of 10 families surveyed disagreed as to whether or not the children knew where to find important family documents such as wills, power of attorney and health care proxies. (For those looking for a safe, electronic storage location, Fidelity recently introduced FidSafe®, a secure digital place to store, access and share all of a families’ most important documents.)

When having discussions, follow the “voice not vote” rule. While family members should have a role in the planning process, make sure the ultimate decisions made are consistent with the wishes of the parents, who are charting the course of the rest of their lives. If a financial advisor is already involved in planning, having these discussions with the advisor can be a good place to start.

Define family roles. Advanced planning can help define roles and choose when and how different people will be involved. For example, who will have power of attorney or be the executor of your estate? It’s important to consider the personalities of each child, as well as their proximity, relationship with parents and other nuances that play into long-term decision making.

Commit to follow-up conversations to keep the dialogue going. These conversations are not “one and done.” Keep the momentum going and schedule as many get-togethers as needed—and revisit those plans at least annually, to make sure they still make sense.

Health Care Costs Are A Major Problem for Small Business

Small businesses are facing huge health care cost increases while struggling to navigate the Affordable Care Act (ACA), according to a survey by the National Small Business Assn. (NSBA). “The smallest businesses are in worse shape than they were just one year ago,” said NSBA president and CEO Todd McCracken. Just 41% of firms with five or fewer employees offer health benefits, down from 46% one year ago.”

Offer rates dropped among all small firms too; 65% of small firms offer health insurance, down from 70% one year ago. One in five said that premium increase exceeded 20% during their most recent renewal. While cost is the number one driver of whether a small business will offer health insurance, complexity and administrative burden cannot be underestimated since the overwhelming majority of small business owners handle their firm’s health benefits. Just nine percent of small-business owners plan to purchase health insurance through the Small Employer Health Options Program (SHOP) exchange or an individual exchange, down from 14% last year. The average small business owner spends as much as 13 hours a month on ACA compliance

Workers Get a Break from Health Cost Increases

Forty-seven percent of workers say they have not experienced a change in health care costs in 2015 compared to 36% in 2014. One-half of workers with health insurance coverage have had an increase in health care costs in the past year, according to a survey by the Employee Benefits Research Institute (EBRI).  Twenty-five percent of workers say the U.S. health care system is poor; 30% say it’s fair; 13% say it’s very good; and 4% say it’s excellent. Dissatisfaction appears to be focused primarily on cost. However, 50% of those with health insurance coverage are extremely or very satisfied. Only 9% are not satisfied with their health plan.

How Incentives Can Make Health Care More Affordable

A three-year Cigna study shows how a handful of correctable health conditions contribute to the health care costs of American workers. Study provides evidence that those with unhealthy biometrics and those who have not completed biometric screening measures are more likely to incur high costs. Findings provide evidence that incentive programs can lead to better health engagement and behavior, clinical outcomes and costs.

The bad news is that higher weight, cholesterol, blood pressure and blood sugar can raise health costs and out-of-pocket health expenses. The worse news is that what you don’t know about your health could be even more costly to you.

The good news is there are health improvement programs and incentive strategies that are proven to help people address the conditions that increase costs, according to a three-year study of health plan consumer data by Cigna.

The Cigna study of 200,000 customers shows how a handful of correctable health conditions can contribute to their average annual health care costs. A body mass index (BMI) of more than 30 increases total health care costs by an average of more than $2,460 per customer per year, and adds $492 in annual out-of-pocket costs.

A cholesterol reading of more than 240 translates into an average total health care cost increase of $1,644 per health plan customer, per year, and adds more than $353 in annual out-of-pocket costs.
Two or more chronic conditions indicated by unhealthy BMI, blood pressure, cholesterol, and blood sugar raises annual out-of-pocket expense by almost $1,300 per year, and total healthcare costs by nearly $9,000 per year.

When it comes to health conditions, those who have not undergone a biometric screening have higher health costs. For example, those who have not had blood pressure screening have total health costs that are $2,064 higher per year, and $400 more in out-of-pocket costs, than those who have verified that their blood pressure is lower than 140/90.

Those who have not had a blood glucose screening have total health costs that are $1,332 higher per year, and $266 more in out-of-pocket costs, than those who have verified that their blood glucose is lower than 100.
Incentives more than doubled biometric screening rates from 20% to 55% in 2014.

Incentives increase the probability of engaging in a coaching program by 24% and by 30% for those with chronic conditions. Incentives increase the probability of setting and meeting goals by 18% and meeting with a health coach by 43%. Incentives also increased the probability of meeting biometric targets.

Cigna’s chief nursing officer, Mary Picerno said, “Employers are increasingly rewarding employees who identify and address their potential health risks by discounting the employee’s health plan premiums or adding funds to their health spending account to lower their annual out-of-pocket expenses.”

Online Tool Allows Californians to Compare Health Care Costs

California Healthcare Compare is a new web-based tool that allows Californians to access and compare healthcare prices and quality ratings online. Commissioner Jones directed the California Department of Insurance to get federal Affordable Care Act grant funds to enhance transparency in healthcare pricing. Commissioner Jones then partnered with the University of California San Francisco (UCSF) and Consumer Reports to createHealthcareCompare.insurance.ca.gov.

A first of its kind in California, California Healthcare Compare allows consumers to compare hospital and medical group quality in the areas of maternity care, hip and knee replacement, back pain, colon cancer screening, and diabetes. The site also reveals estimated regional costs for more than 100 different medical procedures or conditions ranging from appendicitis to prostate cancer, illustrating dramatic price differences depending on where you seek care. To enhance consumers’ knowledge of the healthcare system, Consumer Reports provides expert tips and advice on how to navigate the healthcare system.

R. Adams Dudley, MD, Director of UCSF’s Center for Healthcare Value said, “This website would not be possible in most states because the information simply isn’t available. Because of the advocacy of California consumer and business groups and the vision of California’s insurers and providers, we have much more information about quality of care than most states. Therefore, we can tell a pregnant woman not only about the C-section rate at a hospital and whether she’ll be allowed to try for a vaginal delivery if she’s had a C-section before, but also what percentage of women at that hospital learn to breast feed before going home and how often complications happen.”

Californians with the Top Chronic Conditions: 11 Million and Counting

Chronic conditions are the leading cause of death and disability in the United States, and are the biggest contributor to health care costs. But there is wide variation in their incidence. Major differences depend on age, income, race and ethnicity, and insurance status, according to a report by the California HealthCare Foundation. The report finds that many Californians with chronic conditions are delaying needed care because of cost. The following are key findings:

  • About 40% of adults have at least one of the five chronic conditions studied.
  • High blood pressure is the most common chronic condition, affecting about one in four, or 7.6 million, adults in California.
  • The prevalence of chronic conditions falls as income rises. Fourteen percent of adults living under 138% of the federal poverty level have two or more chronic conditions compared to 8% of adults in the range of 400% or more of the federal poverty level.
  • 34% of Californians with psychological distress delayed getting needed medical care, and 27% delayed filling prescriptions. Cost or lack of insurance was frequently cited as the reason for these delays.
  • 70% of Californians who are 65 or older have at least one chronic condition, compared to 26% of those  18 to 39.

Employers Are Looking At Private Exchanges for Pre-65 Retirees

Large employers are looking at private exchange solutions for their pre-65 retirees, according to a survey by Towers Watson. Over the next two years, more than half of the employers that provide health care to pre-65 retirees are planning significant changes to their medical benefits.  Many employers have concluded that their costly pre-65 retiree medical benefit programs fail to meet their benefit or workforce management objectives.

Trevis Parson, chief health actuary of Towers Watson said “Pre-65 retiree medical plan sponsors have been eagerly awaiting options to deliver improved value to their early retirees. For too long, limited options and high costs have burdened employers and retirees alike. In part, these barriers have been addressed and now private exchanges can help retirees find coverage that best suits them.”

Cost trends for Medicare-eligible retirees after plan changes (3.9%) are similar to trends for active employees (4%). However, trends for pre-65 retirees after plan changes are much higher (5.5%), highlighting the total cost of providing medical coverage to these younger retirees without the benefit of Medicare. In addition, 73% of employers offering medical benefits to retirees under 65 said their 2015 plan costs already exceed the cap for the plan.

In the absence of better solutions, most employers have fallen back on traditional methods to control the costs of pre-65 retiree medical plans. For 2015, 61% of employers that provide pre-65 health coverage changed plan design. Forty-two percent offer account-based health plans (ABHPs) with high deductibles connected to tax-advantaged health savings accounts for the plan year 2015. Another 8% are considering ABHPs for 2016 or 2017. Also, many plan sponsors rely on cost shifting to retirees, using cap arrangements. Forty-five percent cap the company subsidy for pre-65 retirees. As a result, subsidy caps may divert employers’ attention away from actively managing the plans more effectively on behalf of retirees.

Increasingly, employers are interested in public exchanges as an alternative to providing pre-65 medical benefits. However, just 4% of employers have considered ending coverage and subsidies since retirees often have access to federally subsidized plans on public exchanges. Seventy percent would end coverage, but provide a private exchange solution that connects retirees to plans on the public exchanges. Confidence is growing that public exchanges will be a viable alternative for employer-sponsored coverage for pre-Medicare retirees: While only 8% are confident for 2015, confidence rises sharply to 35% for 2017.

Joe Murad, managing director for Towers Watson’s Exchange Solutions said, “Pre-65 retiree medical benefits are complex. Companies have to consider the excise tax, new benefit options, provider networks, and subsidies along with the retirement needs of their workforce. Fortunately, with guaranteed issue, the ACA created a viable individual market for health insurance. Public exchanges simplify access to individual plans, and private exchange solutions help ease the experience of purchasing plans on public exchanges or directly from carriers. For the first time, employers can develop a pre-65 retiree medical strategy that meets the needs of retirees and helps them manage costs

Pre-Retirees Are “Terrified” About Health Care Costs

More than 62% of pre-retirees say they are terrified of what health care costs may do to their retirement plans, according to a survey by Nationwide’s Retirement Institute. The survey was conducted by Harris Poll of 801 Americans age 50 or older with at least $150,000 in household income. As health care costs in retirement continue to worry pre-retirees, about 26% of employed affluent boomers now believe they will never retire. Seventy-seven percent have not discussed their retirement health care costs with a financial advisor

Key Health Care Trends in 2015

Next year, the healthcare system will be front and center as the Supreme Court rules on the constitutionality of health insurance exchange subsidies and changes to the Affordable Care Act (ACA) continue. It will be a pivotal year for the healthcare industry with the ongoing rise of healthcare costs, acceleration of consolidation among providers and payers, and looming 2016 elections, according to a report by the Navigant Center for Healthcare Research and Policy Analysis. Here are six key areas to watch in 2015:

1. Significant uncertainty continues over the ACA: Administrative actions and amendments have brought 38 changes to the law, and more will follow. Gaining attention will be the expansion of Medicaid and an expansion of health exchange enrollment expansion among individuals and small businesses. There may be a change in the excise taxes on devices, drugs, and health plans. The industry will also be monitoring demonstrations and pilots like accountable care organizations (ACO). The ACA’s Physician Payment Sunshine Act will bring more transparency of business relationships along with intensified efforts to reduce the costs of unnecessary care and fraud. Congress will weigh in on the law’s implementation and funding, with repeal unlikely.

2. CMS expects healthcare costs to increase 6% a year for the next decade: More employers will drop insurance coverage for employees; those keeping coverage will use higher deductible products to shift financial risk to their employees. Health insurers and employers will press for bigger discounts and shift risk to providers. Bad debt will increase for providers and margins will shrink. Demand for services resulting from the newly insured and growing Medicare enrollment will exacerbate issues of access and workforce effectiveness. Sticker shock for hospital prices and specialty drugs will continue to be big issues as employers and consumers seek more transparency.

3. Providers will consolidate into regional health systems. Many will sponsor their own health insurance plans: Alternative medicine and technological advances will drive services from beds, to clinics, to homes, and to self-monitoring capabilities. Integrating these capabilities with physicians and business partners will mean the following for hospitals: heightened risk, diversification of businesses and competencies, centralization of back office functions and supply chain relationships, increased access to capital, and a stronger focus on complying with state and federal regulations. Maintaining the status quo is not an option for most hospitals.

4. Adherence to evidence-based care will be the industry’s biggest challenge: Thirty percent of health spending goes for tests, procedures, and diagnostics that have no scientific evidence of appropriateness. The Office of the Inspector General will penalize providers that do more than what’s necessary for purposes of financial gain. Also, social media fuels the public’s appetite to know what works best, who does it well, and at what cost.

• Medicare, Medicaid, health insurers, and employers believe that shifting risks to providers is the key to reducing costs while enhancing safety and quality: Replacing fee-for-service incentives with results means using bundled payments, value-based purchasing, penalties for avoidable re-admissions and unnecessary care, and other programs. The shift is already underway. Employers, plans, and the government are driving these changes. Clearly incentives are changing. Payers find this to their advantage, but providers are threatened. Engaging physicians, allied health professionals, and post-acute providers in the transition is cumbersome, complicated, politically risky, and expensive.

• The Informed Patient: The market for healthcare is composed of household that spend $16,000 a year for healthcare. It’s second only to their housing costs, and is increasing faster than their wages. Retail clinics are experiencing exponential growth as are alternative therapies, like yoga for pain management.

Survey: Consumers baffled by health care costs

Only about half of consumers can correctly calculate the out-of-pocket costs of a four-day hospital stay, a Kaiser Foundation survey shows. This and other gaps in knowledge about health care expenses demonstrate the need for health-benefit advisers, one expert says. Employee Benefit Adviser (11/12)

Last Updated 04/14/2021

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