Losing health insurance can be frightening at any age, but particularly at retirement. Health issues appear more often with increasing age, and at retirement, income may also decline. Health care costs continue to rise, adding worry. The key is familiarizing yourself with the options, and choosing one that balances cost, risk and your personal situation.
Retiree health insurance falls into two age categories -- pre- and post-Medicare insurance. Retirees age 65 and over receive benefits from Medicare, the government-sponsored insurance program. Coverage is guaranteed with Medicare. Most participants pay a monthly premium, and limits may apply for benefits, such as prescription drugs. Private Medicare supplemental policies can be purchased to cover expenses not provided by Medicare. People retiring before age 65 must find other options unless they are receiving Social Security benefits due to a disability, in which case Medicare benefits may be available. Individuals should register for Medicare coverage three months before age 65. A delay may result in higher premiums.
Traditionally, employers provided health insurance for their employees, and many provided continuing company-paid benefits for retirees. The first option is to check if any benefits are provided upon retirement. Some companies allow retirees not yet eligible for Medicare to continue to participate in the company’s health insurance plan at their own expense until age 65. Participation in such a group plan is generally cheaper than other alternatives. In addition, the Consolidated Omnibus Budget Reconciliation Act, or COBRA, requires companies with 20 or more employees that offer group health insurance to continue the benefit for early retirees, but it only lasts for 18 months. Retirees pay 102 percent of the group rate. Some companies offer post-Medicare supplemental policies, or subsidies to obtain private supplemental insurance. Married retirees should also check a spouse’s health plan for a possible extension of coverage. Other options for early retirees include part-time work for an employer who provides group health insurance.
Retirees can purchase individual coverage plans. A good place to start is to contact the insurance company that administered a prior group plan to see if it can be converted to an individual policy. Premium costs will be higher for the same benefits, but options that might lower the cost include higher deductibles and co-payments for office visits and procedures. A plan that offers coverage from a specific medical network will also lower premiums. Other options include catastrophic coverage plans. They cover expenses associated with major medical events, but routine office visits and other services are borne by you, so the premiums are less. An insurance professional representing several companies may be able to customize a plan that best serves individual needs. Effective in January 2014, the Affordable Health Care Act will provide health care insurance options via state exchanges, designed to lower the cost of individual health insurance.
Many professional organizations offer health insurance to their members, including alumni organizations. These plans may offer competitive group rates. Also, if your company’s pension was taken over by the Pension Benefit Guaranty Corporation, you may be eligible for a health insurance premium subsidy. Another consideration is to investigate retirement organizations such as AARP. They often join forces with insurance companies to offer competitively-priced insurance policies for retirees, with pre- and post-Medicare options. Early retirees who are eligible for Medicare within one year might consider a short-term medical insurance plan. They may not cover pre-existing conditions, but usually cost less.
- U.S. Department of Labor: Retirement and Health Care Coverage
- Health Care.gov: Health Insurance Marketplace
- iQuote: What do do When You Lose Retiree Health Insurance
- Social Security Administration: Apply Online for Medicare
- Insure.com: Health Insurance Options for Early Retirees
- Pension Benefit Guaranty Corporation: Health Coverage Tax Credit (HCTC)
- Hemera Technologies/AbleStock.com/Getty Images