Many challenges arise when it comes to health insurance options after retirement. If you are 65 years old or older, you are likely eligible for health insurance through the Medicare program. However, you may need additional insurance to help cover your out-of-pocket costs. You may also have access to health insurance through your former employer.
If You Retire Before Age 65
If you retire before age 65, the good news is that coverage for pre-existing conditions cannot be denied under the Affordable Care Act (ACA), which was signed into law in March 2010. You can purchase ACA plans through the health insurance marketplace in your state, which may be HealthCare.gov or a specific state site like Covered California. These plans are required to provide 10 essential benefits, including prescription drugs, preventive care, and emergency services.
ACA plans can be expensive, but you may be able to reduce your monthly premium costs by choosing a high-deductible option. Your deductible is the amount you pay for covered services before the plan starts to pay its benefits. A higher deductible typically means a lower monthly payment, but it also means higher out-of-pocket costs before your healthcare coverage kicks in. It may be advisable to pay a higher premium if you do not have the income or savings to cover your out-of-pocket costs.
Benefits of Group Health Insurance for Retirees
The number of companies offering healthcare for retired employees is decreasing, but your employer may offer the option to continue health insurance after retirement, especially if you work in the public sector. Contact your company’s human resources department as you plan for retirement. Ask whether you have continued access to health insurance after retirement and how much it will cost you.
Inquire whether you have access to Consolidated Omnibus Budget Reconciliation Act (COBRA) benefits if your employer does not provide health insurance for retirees. Compare the costs of retiree health insurance or COBRA with marketplace insurance plans if you retire before you become eligible for Medicare. You should also ask how coverage changes when you become eligible for Medicare.
Exploring Your Medicare Options
You are eligible for Medicare starting at age 65 in most cases. If you have worked for at least 10 years (and have paid Medicare taxes during those years), you qualify for free Medicare Part A. You may also qualify for Medicare before age 65 if you are permanently disabled or have end-stage renal disease.
Medicare includes the following parts: Part A covers hospital inpatient care, limited skilled nursing facility care, hospice care, and some home health care. Part B covers other aspects of healthcare, including outpatient care, doctor visits, and durable medical equipment. You must pay a monthly premium for Part B. Part D covers prescription drugs, and its benefits are accessed by purchasing Part D plans through private insurance companies.
On its own, Medicare has gaps, so many retirees choose supplemental coverage. The two primary options if you do not have access to employer health coverage are: Medicare Supplement Insurance: also known as Medigap, these plans help cover gaps in Medicare. They pay after Medicare, so providers will bill Medicare first and then bill the supplement for the balance. There are many plan options, and they are standardized, so if you shop for Plan A with one insurance company, it will have the same benefits as Plan A with another company. Medicare Advantage Plans: also known as Part C of Medicare, these plans are offered as an alternative to Medicare and may include prescription drug coverage. You do not need a separate Part D plan if it includes drug benefits. They may also include other benefits like vision and dental coverage.
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If you want to purchase additional Medicare insurance, it’s best to do so when you first enroll in Part B of Medicare because you will have a special enrollment period and cannot be denied coverage. Some retirees postpone enrollment in Part B if they have access to coverage through a working spouse. You may have to answer health questions and undergo medical underwriting after your special enrollment period ends. A plan may be offered at a higher price or coverage may be denied.
You can enroll or change plans every fall if you wish to buy a Medicare Advantage plan. You can also change Medicare Advantage plans from January 1 to March 31 of each year. You can shop for both types of plans through the health insurance marketplace in your state.
You will receive a booklet called “Medicare & You” every year you are eligible for Medicare. The booklet reviews how Medicare works and provides detailed information about any changes. You can also download the booklet or choose to receive an electronic copy each year.
Talking to an Agent
An experienced health insurance agent can help you navigate health insurance options after retirement. They can conduct a comprehensive analysis of your options by asking questions about your current doctors and medications and then tell you about plans that will provide the most value for the cost based on your personal health situation.
Another option is to find your state’s Health Insurance Assistance Program (SHIP), which will provide volunteers to help you understand your options and assist you in enrolling.
Review Plan Options Each Year
Once you secure health insurance after retirement, you should be proactive in evaluating it regardless of your age. Review the available options for coverage during the open enrollment period every fall.
Benefits and costs change, and it’s possible that a new plan could offer you better coverage at a lower price. You won’t know unless you look. Again, you may want to speak with an experienced agent or contact your state’s SHIP program to ensure that a plan change will be in your best interest.
Frequently Asked Questions (FAQs)
How much does health insurance cost for early retirees?
Your health insurance costs will depend on your age at retirement, the level of the plan you choose, and whether you qualify for premium assistance. The Kaiser Family Foundation reported that the average monthly cost of mid-level ACA plans was $438 per month in 2022. This number may be higher for older individuals.
How do I pay for healthcare after retirement?
According to data from Fidelity’s Retirement Health Care Cost Estimate, a couple retiring at age 65 in 2022 will need approximately $315,000 (after taxes) to cover all healthcare expenses in retirement. This is a substantial amount and does not account for early retirement possibilities. Start saving for retirement early and consistently to cover those costs. Maximize your health savings account if you have one, and be proactive in maintaining your health and activity.
How can I reduce healthcare costs in retirement?
Aside from working on staying healthy, there are other ways you can manage healthcare costs in retirement. This requires good income planning so that you do not earn too much to qualify for support for a health plan. Putting money into a health savings account is a great way to store tax-free money for healthcare expenses in retirement. You might also consider taking a part-time job that includes health benefits.
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Sources:
- HealthCare.gov. “Coverage for Pre-Existing Conditions.”
- Department of Health and Human Services. “What Is the Affordable Care Act?”
- HealthCare.gov. “What Marketplace Health Insurance Plans Cover.”
- Kaiser Family Foundation. “Average Marketplace Premiums by Metal Tier.”
- Kaiser Family Foundation. “Retiree Health Benefits at the Crossroads.”
- Department of Health and Human Services. “Who Is Eligible for Medicare?”
- Medicare.gov. “What’s Medicare?”
- Medicare.gov. “What’s Medicare Supplement Insurance (Medigap)?”
- Medicare.gov. “Medicare Advantage Plans.”
- Medicare.gov. “When Can I Buy Medigap?”
- Medicare.gov. “Joining a Health or Drug Plan.”
- Fidelity. “How to Plan for Rising Health Care Costs.”
Source: https://www.thebalancemoney.com/health-insurance-when-i-retire-2388600
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