Financial Healthcare Planning 101: An Advisor's Guide to Healthcare Cost Estimators

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Healthcare costs in the U.S. are known to be amongst the highest in the world. As a result, it’s critically important to help your clients prepare for them as much as possible. But as with many other areas in financial planning, accurately planning for these costs can be easier said than done. 

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Visits to professionals such as physicians, dentists, and optometrists will certainly be necessary during your lifetime, while unexpected medical emergencies or diagnoses can happen to anyone. Suffice it to say, things can become quite complex when attempting to plan for healthcare costs, especially as the need for more services increases in retirement.

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A simple tool to supplement your planning process is a healthcare cost estimator. But with so many different types of healthcare cost estimators out there, this method of planning often creates complexities of its own. Together, we’ll review what a healthcare cost estimator is, the pros and cons of different kinds of healthcare cost estimators, and the inefficiencies you can run into when trying to use too many. 

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What Is a Healthcare Cost Estimator?

Healthcare cost estimators are tools that allow users to input their information to get estimates on insurance premiums, out-of-pocket costs, procedures, and many other healthcare expenses. Information needed for different estimators will vary. The information often includes, but is not limited to, your client’s: 

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• Age
• Income
• Zip code
• Gender
• Tax Filing Status
• Insurance Information

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However, many healthcare cost estimators won’t capture all the necessary variables needed for your client’s specific situation. And ironically, that’s because many of them only offer estimates for specific situations. Many users of healthcare cost estimators are left bouncing from site to site using calculators for their specific needs. 

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For example, they might find one to plan long-term care expenses and another to plan the cost of a diabetes diagnosis. This typically results in frustration due to the limitations of the options presented. 

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Health Insurance Estimators 

One of the major issues you might run into when searching for healthcare cost estimators is their limited estimation capabilities. That is, you’ll only be given information for specific types of medical costs. 

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Let’s take the Healthcare.gov cost estimator as an example. With this tool, you can plug in variables like age, zip code, tobacco use, number of dependents, and income level to get estimates for healthcare plan premiums. Additionally, you can find out if specific physicians, facilities, and prescription drugs are covered by the plans listed (Aside: these provider networks and drug formularies can often be inaccurate, but that’s a blog for another day!)

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But what if you needed an estimate for something more specific? What if you wanted to know the cost of a specific type of surgery your client may need to undergo? 

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Well, you may have to go to a non-government site for that.

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Health Services Estimators

Your specific facility, such as your hospital, could have a cost calculator that provides you with estimations for specific procedures like a knee replacement breaking down the hospital and physician fees depending on your insurance (or lack thereof). Because the cost of specific services can vary so much between states, zip codes, and even individual facilities, these types of estimators are quite location-specific and may not even exist for some areas.

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While more nuanced healthcare cost estimators allow for estimates for specific services, they also have drawbacks (namely, their lack of scope and scale for the complex reality of the many services required when needing a surgery). Additionally, this type of tool doesn’t provide information about long-term future costs an individual may face for decades.

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Long-term Future Cost Estimators

Some Fortune 500 companies also lend their data and directly provide healthcare cost estimators themselves. Often, they’re able to paint more comprehensive pictures of the costs your clients are likely to face in the future. For example, Vanguard’s healthcare cost estimator provides a more holistic, long-term view of future costs. Additionally, the figures it provides are adjusted for both inflation and location. 

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Users input their age, gender, retirement age, tax filing status, and projected income in retirement. They then select their health plan and general risk category. After this information is gathered, the Vanguard tool provides an overview of expected health care costs (e.g., insurance premiums, vision, and dental) and long-term care costs (e.g., room, board, and personal care). 

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While this bigger picture approach can be more convenient, a healthcare cost estimator like Vanguard’s still has its limitations. There is no way to account for scenarios that may have a huge impact on estimated costs, such as a cancer diagnosis, prescription drugs that aren’t covered by the clients’ Medicare plan, and more. 

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More importantly, there are no insights into whether the health plan inputted is in fact right for your client, so there is little ‘action’ that can be taken other than plugging the output into your financial plan.

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Vanguard’s estimator gets its data from its partnership with Mercer, a leading health and benefits provider. Other large providers like United Healthcare also have their own cost estimators. And while they may provide services to answer your questions, these company’s proprietary interests may be different from your own (and your clients’). 

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The Problem with Using Multiple Healthcare Cost Estimators

It’s often tempting to try to do everything ourselves. This is especially true in the age of the internet where limitless information is at your fingertips. 

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Naturally, you may think the best way to uncover healthcare costs for your clients is to use an assortment of estimators. One estimator might provide a general overview of healthcare plan premiums. Another may provide estimates for specific procedure costs. And a third, fourth, fifth, etc. can provide a comprehensive look at long-term care costs and answer any further questions. 

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But this is faulty logic. 

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You’ll end up spending far too much time, energy, and mental bandwidth going back and forth between estimators to find the right combination for your clients. And you’ll still need your time, energy, and mental bandwidth to deal with your other personal and professional responsibilities. 

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More importantly, do you fully understand the information presented, with all its considerations, and know how to explain it to your clients? My advice: don’t risk burnout, analysis paralysis, and information overload about healthcare costs.

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You need a true all-in-one source for information and cost estimations that are provided in a reliable and expedient manner. Thankfully, there is such a tool. 

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Let Caribou Simplify Healthcare Costs from Start to Finish

At Caribou, we understand the critical importance of providing your clients with up-to-date information on healthcare and a comprehensive understanding of their future estimated costs. We also understand how difficult this can be given the abundance of responsibilities on your plate. Nevertheless, the high and steadily rising costs of healthcare cannot be overlooked. 

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One way of gaining insight into these costs is through healthcare cost estimators. These online tools (supposedly) make it simple to input unique data and derive an estimate for your clients. However, most existing estimators do not provide a holistic view of all the costs you need to plan for, which requires you to use several tools at once. And this causes problems of its own. 

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We at Caribou sought to resolve this problem by developing an industry-leading, all-in-one solution to estimate healthcare costs for your clients from a comprehensive standpoint. Our resources provide financial advisors the ability to efficiently estimate one of the biggest financial burdens facing their clients. To see if we can help you generate more value for your clients, reach out to us, and click here to schedule a conversation today.