Michael Lalas was already in the insurance industry when his parents turned 64-and-a-half — the age when the federal government sends people a 140-page manual on Medicare.
Lalas’ parents looked to him for help deciphering the manual, but when he finished reading it, he had no idea what it meant. “I had an insurance background and my head was spinning,” he says. “I thought, ‘How is a computer programmer or a plumber supposed to know?’”
The episode led Lalas to start a niche insurance agency, Senior Insurance Solutions in Flemington, designed specifically to help seniors (and seniors-to-be) sift through the bramble that is Medicare.
He will present “Understanding Medicare and Your Options for Senior Health Insurance When You Retire” on Thursday, March 22, at 8:30 a.m. at the Somerset County Business Partnership, 360 Grove Street at Route 22 East in Bridgewater. Cost: $30. Visit events.SCBP.org or call 908-218-4300.
Insurance is Lalas’ third main career. After graduating from Seton Hall with a bachelor’s in accounting in 1991, the Livingston native went to work for Coca-Cola Inc. for about seven years. He then moved on to wireless communications with T-Mobile for another seven years.
About seven years ago Lalas got into insurance and opened a traditional health insurance company in Flemington. But about two years ago, shortly after his parents hit retirement age, Lalas says he saw the need to focus on those who are about to retire. “It’s such a murky landscape,” he says of Medicare. “And the only time most insurance professionals learn about Medicare is when they take the exam.”
According to federal data, roughly 8,000 people turn 65 every day. Lalas says this trend will continue, with no abatement, for at least the next 15 years. This, he says, translates into a lot of confused people who do not understand what it means to migrate from a company-supplied healthcare benefits package to Medicare. “I just saw a dire need to explain this,” he says. There are policies that deal with supplemental insurance for seniors to help them pay for the gaps in Medicare coverage.
The gaps. Medicare sounds simple enough on the surface. You turn 65 (or become disabled for 24 consecutive months) and the federal government covers your healthcare. People seem to know that when they reach 65, their hospital stay is largely covered for them.
But things add up quickly. Medicare, after all, does not cover anyone 100 percent. “Let’s say you’re over 65 and you go to the hospital for 10 days,” Lalas says. “The average hospital stay is $3,000 a day. Medicare will pay everything but about $1,200.”
That’s not much for a hospital stay of a week and a half, right? But consider, Lalas says, that a lot of people who spend 10 days in a hospital end up returning to the hospital a few times. Suddenly that $1,200 bill inflates to $5,000. Maybe $8,000 in a calendar year. And there’s always next year ahead.
Supplemental insurance is gap coverage, Lalas says. For about $165 to $175 month, seniors can get coverage that plugs the holes left behind by Medicare.
Even if you manage to not return to the hospital after that 10-day stay, he says, the cost of the supplemental coverage (about $2,100 a year) is not so much more than the gap bill. It at least isn’t the $5,000 or $8,000 a lot of people end up owing.
Retiring. Most people about to retire are not aware of how Medicare will affect them, Lalas says. They have been working for 20 to 40 years, covered under a company-sponsored benefits plan, and they’ve “been on autopilot all this time,” he says.
Most interactions between beneficiaries and healthcare plans end with the $25 co-pay, Lalas says. People do not know what healthcare costs because they don’t have to worry about it.
Then they turn 65. If they continue to work (and many 65-plus-year-olds do these days), the company will shift them to Medicare. The company might supplement the coverage so that the employee is fully covered, but this, Lalas says, can be misleading to the beneficiary.
When a person who has been fully covered by health benefits retires after age 65 he is now responsible for any supplemental coverage. But many people don’t know they will need it, Lalas says — because they’ve been on autopilot.
These people go to the hospital and think they’ll just get the $100 emergency room co-pay bill in the mail, Lalas says. They’re in for a rude surprise.
You’re 65 and the boss. Companies large and small can save big on group benefits plans when someone turns 65, Lalas says. And that goes for the company’s owner.
Shifting 65-year-old employees to Medicare coverage takes hundreds of dollars a month off a business’ benefits payments — even if the company picks up the supplemental, he says. As opposed to paying $600, $800, maybe $1,000 a month for an employee, the company can now spend around $200 a month.
The process is a win-win for businesses, particularly small ones, Lalas says. The company can save money and the employee does not have to contend with trying to figure out everything in the 140-page manual.
They just need to be aware that even Medicare does not cover it all when you turn 65.