If you retire before age 65, you must be prepared to address two insurance issues. One, finding health coverage in the period before you can sign up for Medicare. Two, finding a way to pay for that coverage.
You know it will probably be expensive, but do you realize just how expensive? A single retiree may pay as much as $500-1,000 per month for private health insurance. For a couple, the monthly premiums can surpass $2,000. These are ballpark figures; fortunately, seniors without pre-existing health conditions can locate some less expensive plans offering short-term coverage, albeit with high deductibles.1,2
If you find yourself in this situation, what are your options? It is time to examine a few.
You could retire gradually or take a part-time job with access to a group health plan. Ask your employer if a phased retirement is possible, so you can maintain the coverage you have a bit longer. Securing part-time work with health benefits elsewhere could be a tall order, as it may be much tougher to find a job in your early sixties; not all employers value experience as much as they should
You could turn to the health insurance exchanges. Purchasing your own coverage could be a first for you, and you may not be optimistic about your prospects at the Health Insurance Marketplace (healthcare.gov) or a state exchange. Your prospects could be better than you assume. As a Miami Herald article points out, a married couple younger than 65 earning around $65,000 could likely get a bronze plan for free through the Marketplace, thanks to federal government subsidies. A couple would be eligible for such aid with projected 2019 earnings in the range of $16,460-$65,840. For the record, the open enrollment period for buying 2019 coverage ends December 15.2
You could arrange COBRA coverage. If you voluntarily or involuntarily retire from a company or organization that has 20 or more employees and a group health plan, that employer must give you the option of extending the health insurance you had while working for up to 18 months (or in some instances, up to 36 months). This is federal law, part of the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985. (There is a notable exception to this: an employer can legally choose not to offer you COBRA benefits if you were fired due to “gross misconduct,” though the law defines that term hazily.) COBRA coverage is expensive: you effectively pay your employer’s monthly premium as well as your own, plus a 2% administrative fee. If you miss a premium payment by more than 30 days, your COBRA benefits may be canceled.3,4
You might be lucky enough to secure retiree health insurance. Some employers do offer this to retiring workers; if yours does not, your spouse’s employer might. It is not cheap by any means, but it may be worthwhile.1
As a last option, you could move to another country (or state). You could relocate to a nation that has either a universal health care system or much cheaper health care costs than ours does, either temporarily or permanently. If you decide to stay in that nation for the long term, you will really need to think about whether or not you want to sign up for Medicare at 65. Alternately, another state may present you with a cheaper health care picture than your current state does; a little research may reveal some potential savings.1
Review these options before you retire. See how the costs fit into your budget. Have a conversation about this topic with an insurance or financial professional, because you may end up leaving work years prior to age 65.
As always, please reach out to your advisor if you have questions about this topic or you would like a referral to an insurance professional.
1 - forbes.com/sites/nextavenue/2018/08/07/shopping-for-health-insurance-before-medicare-kicks-in/ [8/7/18]
2 - tinyurl.com/yccclxmc [10/18/18]
3 - bizfilings.com/toolkit/research-topics/office-hr/what-is-cobra-what-employers-need-to-know [10/23/18]
4 - forbes.com/sites/heatherlocus/2018/10/21/what-you-need-to-know-about-3-key-options-for-health-insurance-after-divorce/ [10/21/18]
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