At a pivotal point in the cinema classic “Animal House,” Dean Wormer confronts members of the Delta fraternity—which is already on “double secret probation”—about their grades: 

Dean Wormer (turning to Flounder first): “Zero point two… Fat, drunk and stupid is no way to go through life, son. Mr. Hoover, president of Delta house? One point six; four Cs and an F. A fine example you set! Daniel Simpson Day…Has no grade point average. All courses incomplete. Mr. Blutarsky…Zero point zero.”

Now it’s not fair to compare the American public at large to the Delta fraternity. However, a recent study conducted by the Bankers Life and Casualty Company Center for a Secure Retirement indicates that 1 in 7 Americans believes—incorrectly—that Medicare is free.

Additionally the study found that among pre-Medicare baby boomers (ages 47 to 64) and older adults (ages 65 to 75) with incomes between $35,000 and $75,000, almost three-quarters (72%) did not know that most Medicare recipients pay a monthly premium, copays and deductible. In fact, the retiree’s cost for Medicare Part B premiums is substantial and varies with incomes. For 2012, the monthly cost per person ranges from $99.90 to as much as $319.70.

And, a majority of people also pay for a Medicare Supplement policy—or contribute towards their employer’s Medicare Supplement—which typically ranges from $300 to $400 a month, depending on the location, age and benefit plan selected.

Of course, unless confined at a hospital, Medicare does not cover Long-Term Care expenses, and those benefits are basically limited to skilled nursing and are capped. So, Long-Term Care represents a significant risk and possible catastrophic cost if an individual does not have a Long-Term Care insurance (LTCi) policy.

Another study indicates that U.S. workers are concerned about reductions in their retirement benefits. According to a survey by the actuarial firm Towers Watson, nearly half (44%) of workers are indeed worried about cuts to their retirement benefits.

Interestingly, 55% of the respondents said they are willing to pay a higher amount from their pay to ensure that they have a guaranteed retirement, which is up from 46% two years ago. In a similar vein, half of the respondents said they would contribute a portion of their pay to ensure they have access to health care benefits if they retire before they are eligible for Medicare benefits. That survey result is also an increase from two years ago, when the response was 40%.

So what are the implications for independent insurance agents?

First, there is a significant opportunity for agents to talk with their clients to help educate them on Medicare basics. In addition, an agency could put links to Q&A information about Medicare on its website. Agencies can also offer Medicare Supplements and LTCi coverage, or partner with an individual or MGA to work with their agency.

Second, they should approach their commercial lines customers and ask them if they provide these benefits to their employees, even on a contributory basis. Small employers can offer LTCi on a tax-favored basis—that is, the company can pay for the benefits up to certain age and dollar limits and avoid designating it as taxable income to their employees.

Clearly, these studies indicate there are a lot of misconceptions and anxiety regarding Medicare, and agents are well-positioned to help their clients deal with these challenges.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and an IA l-h contributing editor.