September 30, 2014 Note: This article from July 2011 has just been updated. A lot has happened in the health care market since then, particularly the Affordable Care Act (aka Obamacare). And so this is now Part 3 in our Health Care Insurance series – see links to Parts 1 and 2 in Further Reading below
Congratulations on your retirement. Now, what the heck are you going to do about health insurance?
Millions of baby boomers are finding themselves retired before the “normal” retirement age of 65. Whether your retirement is the fulfillment of a dream or an unwanted outcome, it usually comes with a huge question – what to do about health insurance? This article will help you understand your options, particularly if you find yourself retired before Medicare takes care of most of your health care insurance issues.
If you retire at age 65 or later you will most likely have no major health care insurance issues to worry about. That’s because Medicare enrollment will cover most of your health insurance needs. You could still face major out-of-pocket costs for non-reimbursed expenses, so supplemental insurance might be a good idea. But if you have not yet reached the magic age of 65, what are your health care options?
The Health Insurance Options
– Healthcare insurance provided by your previous employer. Traditionally this was the ideal situation, particularly if your employer paid all of most of the premiums after you retire. You can continue along as you were doing in your working years, with the coverage and plans you are used to. If this describes your situation, your biggest concerns should be what happens if your employer goes bankrupt, dramatically changes the plan, or cancels coverage at some point in the future.
– – You are on COBRA. Government regulations require that your health care insurance continue for at least 18 months after you stop working. You will, however, have to sign up for it and (normally) pay for it. In some states and situations the continuation period might be longer, so check with your employer or insurance professional to find out more. With COBRA the big risk is that your coverage will run out before you reach the age of 65, leaving you without coverage and scrambling to get it. In most states and circumstances your insurance carrier can cancel your coverage after 18 months. The Affordable Care Act (ACA) now protects you if you have an existing medical situation, so you will have options.
— You have no health insurance. You might not have had health insurance now for a number of reasons. Perhaps your previous employer did not provide insurance, so you are not eligible for COBRA. Or, your COBRA might have run out, you never signed up for it, or you lapsed on your payments. Now it is the law that you have some type of health care insurance. If you are too poor to afford it, the government will either subsidize it (ACA), or provide it for you (Medicare). If you make less than $46,000 a year for an individual, $94,200 for a family of four, you should be eligible for a tax credit to make your insurance affordable.
What are your options if you don’t have insurance coverage, or expect not to have it in the near future?
Fortunately, you do have some options for health insurance, even in the worst cases. First, let’s consider your options if you currently have coverage, presumably with COBRA, but expect that insurance to run out before you hit 65.
– Check out your state health care exchange There are multiple reasons to do this. For one, you are now required to have health care coverage. For another, everyone needs it. Rates will vary depending on where you live and how many companies are competing to provide coverage. The good news is that you can probably get equivalent coverage for less than you are paying under COBRA.
– Consider a High Deductible Health Plan (HDHP). Most insurance professionals agree that low-deductible plans are a money maker for the insurance companies and an unnecessary high cost for most consumers. Most experts recommend going with the highest deductible you can afford, usually $5,000 or $10,000. The money you pay out in increased deductibles will in most cases be more than made up by the lower premiums you pay. Note, you need to have a high deductible plan to take advantage of our next idea, a Health Savings Account.
– Start a Health Savings Account (HSA), if you haven’t already. If you have a high deductible health insurance plan you might be eligible to open an HSA that is paired with a high deductible plan. With an HSA you can pay money into your account and get a deduction from your income tax on that amount. You can then use the money in that account for legitimate medical expenses (including dental, vision, and prescription drugs), along with deductibles and co-pays. You will even earn tax-free interest on the balance in your account. In 2014 individuals can contribute $3300 to their HSA and couples $6550. Individuals over 55 can contribute an additional $1000. One restriction – you cannot pay your health insurance premiums or non-prescription drugs from your HSA. Once you become enrolled in Medicare you are no longer eligible for an HSA. Here is a good resource for HSA FAQs
Where can you get health care insurance?
Having been used to employer-sponsored health care plans all of their lives, most baby boomers are puzzled about where to find a good health insurance company. The new state health care exchanges can be confusing (and so is the federal exchange in those states that don’t have them. Fortunately there are 800 numbers to call to help.
Go to your state health care exchange. Start with www.Healthcare.gov. It will help lead you to your state exchange (or federal if your state opted out). A new enrollment period starts Nov. 15.
– Contact your existing resources. Your life and/or property insurance provider might be able to provide you with a recommendation. Although you can easily buy health insurance online, there is no substitute for the ability to have a qualified professional guide you through the process and answer your questions.
– Go to the yellow pages or look online. If you type “medical insurance quotes
How much will you have to pay?
Your premiums will vary according to your personal situation. Factors like age, sex, and smoking will have an impact. Quotes will vary by company and state as well. A non-smoking couple in good health might expect to pay somewhere between $500 and $1000 a month for a high-deductible $10,000) plan.
What can you do if money is an issue?
Fortunately there are some options available, other than just holding your breath and hoping you don’t get sick before you get on Medicare. Here are a few:
– Are you a veteran? The Veterans Administration provides health care for veterans, a very valuable benefit. However you need to get registered into the system to take advantage. Most people recommend registering into the system early, so that when you do have a need you are ready to go. The quality of care and accessibility of care will vary widely by region and hospital, so be prepared – you probably won’t be able to breeze in and get instant care. You might have to wait a long time and not get every service you might want. Many veterans rely on the VA to get deeply discounted prescriptions.
– Lose your bad habits. Remember when we said that rates are dependent on many factors? If you are a smoker, stop now. Likewise if you are overweight or out of shape, shed those pounds now, so that you can get the lowest quote possible. If you drive a motorcycle or have a dangerous hobby, you might want to avoid situations that increase the chance that you could become injured.
– Talk with an insurance professional. If the quotes you are getting are just too much for you to pay, perhaps your agent can come up with a plan that will get you some type of affordable coverage. There is no substitute for what you can learn from a qualified expert who you think you can trust.
What if you have a serious pre-existing condition?
This is the good news with the ACA. You can not only get insurance, but you won’t have to pay extra to get it.
Health insurance and Medicare are among the most complex and important topics any retiree faces. We have attempted to put together a brief overview of the issues here – but we have only scratched the surface. Before you make any important decision like this do your homework and talk to as many experts as you can find. Good luck!
Healthcare.gov – Start here for answers to almost all your questions.
Is Medical Tourism in Your Future?
Now That You’re 65 – 10 Things You Need to Know (Part 1 in a series – includes how to sign up for Medicare)
Topretirements Survey Results: Our Members Love Medicare!
Affording Health Care Costs in Retirement
What do you think – and what will you do?
We look forward to your comments and shared experiences about post-retirement healthcare. Please use the Comments section below to share!