Top Reasons Advisors Need to Talk Healthcare Planning with Their Younger Clients

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Young professionals are generally focused on building their careers, paying down debt, growing their families, saving for down payments, and increasing their incomes. And it’s these things they want to talk about when engaging in financial planning. When they’re healthy and energetic, it can be easy for young adults to let healthcare planning take a mental backseat. 

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This is a huge missed opportunity for both young adults and the financial advisors they’re working with.

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Healthcare planning is essential at this stage of life. As a financial advisor working with young professionals, you can have an enormous impact on your clients’ well-being and financial security by starting this discussion early. 

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How Do Young Adults Benefit From Healthcare Planning?

As young clients begin to execute strategies to save and invest for their future retirement, they must realize that the amount they’re saving needs to include a major expense besides cost-of-living needs and lifestyle preferences. That expense is the enormous cost of healthcare. 

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It’s never too early to start talking to clients about the rising costs of healthcare, as well as how their personal and family medical histories can provide insight into their future needs. Starting these conversations early means that clients are better prepared for their future and better able to adjust to changes in their healthcare expenses as time goes on.

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But don’t forget that young adults have medical costs now, too. 

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Many young adults need to plan for expensive medical care unique to their stage of life. If they plan to have children, most insured couples will spend anywhere between $5,000 to $15,000 per baby on prenatal care, labor, and delivery. Of course, the actual cost depends on the state they live in, their insurance coverage, and any complications that arise. 

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Additionally, even if they’re generally healthy, young adults typically have multiple options to choose from when it comes to selecting a healthcare insurance plan. Choosing the right plan for both their medical needs and their financial needs can have a huge impact on their finances—and they may not realize the necessity of reevaluating their insurance options each year.

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How Financial Advisors Can Implement Healthcare Planning with Young Clients

The most important thing you can do with your young clients is to simply start the conversation about healthcare needs and medical costs. By starting the conversation, you provide your clients an opportunity to reveal pertinent information and ask questions about their medical and healthcare needs that are integral to their financial situation.

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There are several ways to begin this conversation naturally, but talking to your clients about their health insurance options is one of the best ways to start. Below, we’ll review how discussing health insurance for young adults, HSAs, and health insurance options for children can result in meaningful healthcare planning for your young clients.  

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Health Insurance for Young Adults

Whether your younger clients have access to employer-sponsored health insurance or purchase a plan from the Marketplace, they’ll have access to an open enrollment period each year. During this time, they’ll have the chance to evaluate their healthcare plan options alongside their changing medical needs.

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This is a crucial period in any professional's life, but especially for young adults. Young professionals can use the open enrollment period to evaluate different opportunity costs of balancing an affordable insurance premium with the amount of coverage they need at this stage of life. Additionally, they may be able to take advantage of various tax savings strategies.

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Although you may not be a benefits specialist, you can help your clients determine what’s most important to them in a healthcare plan. You can also explain to them the various opportunities and downsides of different types of plans in general terms.

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Health Savings Accounts 

Although they’re not right for every young adult, High-Deductible Health Plans (HDHP) with Health Savings Accounts (HSAs) are often a top choice. A Health Savings Account is a medical savings and investment account that offers a triple tax advantage:

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• Tax-free contributions
• Tax-free growth 
• Tax-free withdrawals 

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While medical needs and costs are relatively low, many young adults opt for a low-cost insurance plan with a high deductible, which allows them to save more money into the tax-advantaged HSA instead of paying expensive premiums for insurance they may never use. They’ll be able to contribute money to the account, invest it to earn interest, and use it for qualified medical expenses—all without being subject to taxes. 

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And if that wasn’t enough, their HSA funds can function as retirement income after the age of 65. In other words, they’ll be able to withdraw the funds for non-medical expenses, too. Granted, they’ll have to pay income tax on those withdrawals, but there’s still benefit from pre-tax contributions and tax-free growth. 

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Be careful though, because having access to an HSA means that the plan has a high deductible. This means that clients are exposed to higher costs before their plan kicks in. If clients are anticipating a year of high healthcare utilization (having a baby, a surgery, or simply through managing a condition) then the risks of a high deductible might outweigh the benefits of the HSA.

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Health Plans for Children

Younger professionals are often raising children as well, which means they’ll need to make important decisions regarding their children’s health coverage. While many families are covered under a single health insurance policy, others have multiple plans to choose from.

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For example, if both parents have access to employer-sponsored healthcare plans, it may make financial sense for each partner to be on their own plan. They’ll then need to choose one (or both) to place their child under. While many choose to cover their child under one just plan, in certain cases it can make sense to utilize both parents’ plans if that is an option. 

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As their financial advisor, allowing your clients space to explore and discuss their options with you can help them make more informed decisions. 

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General Healthcare Costs for Working Professionals

While average health insurance costs depend on a number of factors, the average workplace plan costs individual employees $105 including their employer's contribution, while average marketplace plans can cost a single individual between $273 to $648 per month. In 2019, 35 to 44 year-olds with insurance spent an average of $5,163 on medical expenses. The average increased to $7,180 for 45 to 54-year-olds, showing how quickly costs can escalate with age.

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No matter the stage of life, every client needs to plan for healthcare costs, and healthcare planning is highly relevant to young professionals. Whether it’s taking advantage of an HSA or making more informed decisions about their healthcare options, healthcare planning is an important part of their financial journey.

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We understand that you’re always looking for the best ways to help your young clients succeed financially. During this time in their lives, healthcare planning can easily slip through the cracks. But as their trusted financial partner, you can help them radically shape their financial future by ensuring that it doesn’t. For more information and tips about healthcare planning, make sure to connect with us on LinkedIn!