When today's baby boomers were growing up in the 1950s and 1960s, their parents purchased health insurance that reflected their life expectancy at that time (65 to 70 years). Just about everyone bought first-dollar coverage and received defined benefit pension plans.
Times have certainly changed. Now, life expectancy has increased to 77.6 years. As a result, baby boomers are facing health insurance issues that were of lesser concern to yesterday's seniors (their parents). Long term care is foremost among those concerns. A recent statistic from AARP says that 40 percent of the population enters a nursing home at some point in their life. Fortunately, though, as life expectancy (and its accompanying health issues) has increased, the number of insurance choices for the average consumer has risen as well.
Armed with new plans like health savings accounts (HSAs) and health reimbursement accounts (HRAs), the health agent would be well advised to seek out clients from both ends of the 1946 to 1964 boomer continuum. The new health insurance models that could most benefit this group are catching on quickly; HSA sales have topped the 1 million mark since their January 2004 rollout, and experts predict HSAs could account for anywhere from 15 to 50 percent of the market by 2010.
Ideal prospects
Both older and younger baby boomers are ideal candidates for HSAs. While it's true that older clients don't have the power of compounding that younger clients have, a knowledgeable agent can show them how an HSA still builds up tax-free funds as the expense of long term care continues to rise.
Younger baby boomers are an even more natural fit for HSAs, as many of them question whether they will benefit in any substantive way from federal programs. Thus, they are cognizant of the need to plan ahead. This gives the agent an opening to demonstrate exactly how an HSA can enable them to compound their resources. Agents can explain that any funds not needed for medical expenses can be applied toward long term care premiums, as well as other expenses not covered by their health plan.
Those younger boomers on track for early retirement constitute a valuable subgroup of potential clients. With their 401(k)s in hand, they are ripe for financial advice related to rollovers of funds, proper allocation of assets, estate planning, inheritance planning, etc. The advantages of index annuities should be presented to this demographic as a risk-free investment alternative.
In many respects, technology is the great divide between younger and older baby boomers. Younger boomers are technologically savvy and computer-literate, and have little difficulty managing their funds online. They're looking for a tech-savvy agent who has a functioning Web site, email address, and the ability to transact business using technology in an efficient manner.
Older boomers typically aren't as technologically astute, so they need an agent to handle the technological aspects of their financial needs. For instance, a younger boomer can easily download and digest a PowerPoint presentation from an agent's Web site while an older boomer will most likely need more face time, with the agent acting in a supportive role throughout the process.
Jeff Kubik is president of Employee Benefit Risk Management Services Inc., based in Oak Brook, IL. EBRM is a general agency that provides no-fee agency service, including same-day application scrubbing and direct underwriter access for agents. For more information, visit www.ebrm.com.
