Skip to comments.The Health Insurance Dilemma: Choices for Retirees Under 65
Posted on 01/08/2008 4:06:16 AM PST by Kaslin
If you're fortunate enough to think about retiring early, you've obviously been doing some smart financial planning. But in spite of all the calculating you've done to prepare for this next phase in your life, there's one area where you might want to take a second look at the numbers - health insurance.
Take the situation of a colleague of mine. With a husband at full retirement age and eligible for Medicare, she decided to take early retirement so the two of them could travel. Being healthy, she felt comfortable with a high-deductible health insurance plan. But as she tells me now, she had no idea how quickly all the expenses could add up. Now she and her husband are paying more for health care than for their trips.
The potentially high expenses don't mean you have to change your plans; however, you need to take a realistic look at the cost of health care and factor it into your overall retirement budget.
Here are some eye-opening facts and important considerations:
According to a Harvard study, in 2001 medical bills were the No. 1 cause of personal bankruptcy in America. The AARP Public Policy Institute states that in 2005 more than 7 million Americans from age 50-64 were without health insurance. A recent Fidelity Investments analysis suggests that an average couple starting retirement today at age 65 and on Medicare will need $215,000 to pay for health care costs. Add the fact that the cost of health care has outpaced inflation for the past 15 years, and you can see why adequate health insurance is a crucial part of your retirement plan.
CONSIDER YOUR OPTIONS
So how can you make sure you're covered? You actually have a number of options.Evaluate your current coverage. If your employer offers retiree medical benefits until age 65 when you qualify for Medicare, you're one of the lucky ones. This type of continued coverage is becoming less common as employers' insurance costs rise, but it's definitely worth checking out. Your premium and co-payment may be more than you're paying now, but would be less than an individual policy.
Take advantage of COBRA. You may be able to continue insurance under your employer's plan for 18 months after you retire. This short-term solution will cost more since you'll have to cover the entire premium, but it's ordinarily less expensive than an individual plan. Plus, it gives you some time to look at other alternatives.
Explore other group policies. If you're part of a professional, educational or religious organization, you may be able to purchase health insurance through that group at a lower cost. You could even decide to go back to school on a part-time basis and perhaps qualify for student health insurance.
Shop for an individual policy. For those between the ages of 50 and 64, an individual policy can be tricky, so it pays to shop around. It's a given that your most affordable choices will carry a high deductible, plus your medical history will be a factor in qualifying. While you may be generally healthy, I don't know anyone over 50 who hasn't had some past health issue that an insurance company could flag.
But it's not all gloomy. Seeing an opportunity, several health insurance companies like Humana, Aetna and Kaiser have recently introduced policies tailored specifically to this age group. To get an idea of what's available, an online resource like eHealthInsurance.com can be a good place to start, but it may make the most sense to work with an insurance broker.
See if your state has a high-risk pool. As a last resort, you may be able to get coverage through a state-run high-risk pool. This option is available to residents with pre-existing conditions who can't get an individual policy. Premiums are usually high and policies vary by state. The State Department of Insurance for your state can provide more information.
ASK SOME KEY QUESTIONS
When you get down to actually buying a policy, decide first and foremost how much you can afford to pay in premiums each month. Then, as you compare policies, be sure to ask these questions:
- What services are covered?
- How much is the deductible?
- What are the co-payments?
- What is the out-of-pocket maximum?
- Are pre-existing conditions covered?
While these questions may seem basic, asking them upfront could save you money and aggravation down the road.
LOOK INTO A HEALTH SAVINGS ACCOUNT
If you do end up with a high-deductible individual policy, a Health Savings Account (HSA) can help take some of the sting out of the medical costs you end up paying. An HSA is a tax-advantaged savings account that allows you to pay for qualified medical expenses with pretax dollars (you may want to consult with a tax professional to see how this would impact you). Similar to an IRA, you get a tax-deduction for the money you deposit each year, and the earnings can grow tax-free. You can easily make withdrawals from your HSA at any time with no penalty or taxes for qualified medical expenses. Any funds not used each year continue to accumulate in the account until needed.
TAKE CARE OF YOURSELF
Short of legislation for universal health care, rising costs are going to affect all of us in some way. The most important thing you can do right now is obtain the facts and make sure you're covered before you retire. And then, of course, stay healthy. Exercise, eat properly, don't smoke, and take advantage of preventive care. It will improve your mental and physical health, as well as protect your financial health, so you can enjoy your early retirement and all the full years ahead.
Now they tell me! :(
An HSA would be the logical choice as long as they don’t have the annual “use-it-or-lose-it” dilemma posed by Flexible Spending Accounts. Still, FSAs are a pretty good deal.
Good advice, of course, but if you get hit with a major illness or disease (even an accident) and don't have good insurance coverage, you're going to be in bad shape, financially.
don’t get sick, but if you do get sick, die
If I had known that I would live this long I would have taken better care of myself!
You got that right!! I'm charging my $1,200 PER MONTH (me only) health insurance premium to my credit cards because I'm undergoing cancer treatments twice daily for 8 weeks and can't afford not to have it at this time.
The advice about Kaiser is good, if you live in one of the large areas where Kaiser operates (I think California, Washington, Oregon, DC, Atlanta, and maybe New York). Excellent and relatively cheap coverage. My premium is about $275 a month with a very low deductible and copay. I’ve been a Kaiser patient for many years, through some major illnesses, and have had two kids with them. Zero complaints.
I guess Im one of the lucky ones. When I opted for early retirement from the City of New York, all my medical benefits continued to remain in effect. No premiums, small co-pays. And, thanks to Rudy, I can provide the same coverage to a future spouse or domestic partner, male or female, as my dependent.
My wife has MS, which is uninsurable unless you get insurance through your employer. It limits one’s options sometimes. They need to let more groups collectively negotiate, like churches, or just any group with a common interest to manage risk.
They forgot HIPAA, which mandates issuance of individual policies without pre-existing condition exclusions. For many early retirees, that’ll be the only coverage they can get.
The reason why it should have been included in the discussion is because there’s a catch 22 there. The article implies that COBRA is an option, and while that’s true, failing to choose and exhaust COBRA coverage disqualifies you from HIPAA coverage. The best thing anyone considering early retirement can do is consult an expert resource on the various insurance programs. It’s a mine field out there.
Sorry to hear about your wife. Hugs and prayers!! I agree. I’m self-employed. Premiums are a killer! House is up for sale so I can pay health insurance premiums, co-pays and drugs. We end up working all our lives for our kids, hospitals and doctors. Only people who pay full freight can understand it though.
BTDT. When my husband died after a 6 week illness with cancer, he had retired early a year before, and had no health insurance or life insurance. He spent only three days in the hospital, and died at home (per his wishes) but it cost us every penny we had plus some equity to pay living expenses along with treatments and his burial, which was very modest.
I am working part time and his social security benefits start this month. It has been hell. I am still not insured, I cannot afford it. I guess I’ll have to go on Medicaid if I get REALLY sick (I have rheumatoid arthritis).
Wish there was a policy I could afford. I had a job offer at a fast food place that includes insurance, I just might take it.
ps, he was very active, didn’t feel sick until he was dreadfully ill, happy, enjoying retirement. We did not see this coming.
How can an individual get a HSA or FSA?
I realize what you are going through, but, don't say anything about national health care on FR, even though all 37 industrialized countries have it. Ever hear of one of them getting rid of it? What good is the greatest health care if 85% of us can no longer afford it. Most here won't accept the fact the system is completely broke until they have to pay the true costs as individuals. Denying everyone in America affordable medical care is somehow patriotic and good Conservative thinking to most on these threads, yet, socialized school systems, libraries, water and sewer, police & fire departments are OK to be socialized.
Gimme national health care. If it's good enough for veterans, it's good enough for me. Nothing adversely affects my freedoms today more than trying to maintain private health insurance. I'll take my number and stand in line. At least I won't lose all my savings (already gone)and house (selling it now) over it.
I’m not asking for national health care. I’d like a policy I can afford to buy, as a tweener—between work and medicare, in two years. I’m not a big consumer of health care dollars, and neither was my husband.
I got my FSA as an elective program offered by my company; check with HR or, if you’re self-employed, you can enroll online with health care providers like Benisource. I’m checking on HSA, but only for retirement coverage (God, please get me to the finish line...).
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