Getting Covered in Your 60s: After Retirement but Before Medicare

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Early retirement may sound like a dream, but when it comes to your post-employment healthcare, the reality is that you’re on your own for major medical insurance until you reach age 65 and qualify for Medicare. Retiring early isn’t on everyone’s radar. A survey in 2016 found that just 11 percent of the American workforce plans on retiring between ages 62 and 64. Overall, about 46 percent of workers plan to hold out until 65. But if you’re one of the 11 percent who plans on ducking out early, then you may be wondering about your options for health insurance.

Whatever you do, don’t skip out on coverage. The cost of getting covered may be high, but you’ll pay a higher price down the line if you go without health insurance. Instead, consider your options to bridge the gap until you qualify for Medicare, the low-cost senior entitlement program that you’ve paid into throughout your working life.

The Affordable Care Act provided an easy and accessible way for younger retirees to bridge the gap to Medicare, but current legislative processes and the ongoing political climate make it unclear as to whether the ACA will be around much longer. If you’re interested in enrolling in an individual health plan on or off the Obamacare marketplaces, now’s the time to explore your options, before changes take place to the current system and you lose out on the chance to be grandfathered in.

Planning for retirement healthcare coverage is critical. When your employer stops picking up the tab for part or all of your monthly premiums, health insurance is expensive. On average, it’s estimated that a couple retiring at 65 will spend $220,000 on healthcare during retirement, and those who retire at 62 will spend an additional $17,000 out of pocket until they enroll in Medicare. These figures should serve as a critical reality check as you plan for early retirement. Before you stop working, get your insurance ducks in a row so that you don’t have to worry about medical bills as you enjoy your newfound freedom. Let’s talk about your options.

Post-Employment Programs

Some employers do offer retirees health coverage, although the Kaiser Family Foundation estimates that only 28 percent of large firms and 3 percent of small firms offer such plans. These plans can give you the opportunity to stay with the same coverage you had access to as an employee, but with a higher out-of-pocket cost to you. As your employer won’t be covering a portion of your premiums, you’ll be responsible for the whole bill. These plans can also protect you in the case of a dispute with the health insurance company as your former employer can help advocate on your behalf, rather than a private plan where you’re on your own.

Before retiring, check with your employer to determine whether they offer such a plan and what the rates would be. Also, know that at any time your employer may discontinue the plan, which could force you to look for other options before you turn 65. These plans, if available, can provide an easy way to secure coverage for however long you might need. However, you should still plan for emergencies should your employer discontinue the plan.

COBRA

When you leave an employer, you’re eligible to purchase continuing health insurance coverage under the provisions of the 1986 Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA coverage, while convenient for short-term coverage, is generally very expensive. You’re responsible for paying the entire cost of the plan plus an administrative fee.

Coverage under COBRA is also limited to 18 months. While this might be enough time to cover you and your family until you reach Medicare eligibility, you should carefully review the cost of your plan under COBRA and begin saving early. The benefit of COBRA coverage is that you can remain on the same health plan you were previous enrolled in as an employee. To see if this option works for your budget, you can get information from your employer’s HR department about the potential costs of COBRA coverage.

Private Insurance

Private health insurance got a makeover with the passage of the Affordable Care Act in 2010, and millions of people took advantage of low-cost plans and tax subsidies to make private coverage more affordable. Right now, you still have the option to enroll in an ACA-compliant plan that guarantees 10 essential health benefits, among other protections. Enrollment starts in November 2017 unless you meet a qualifying life event, such as losing your job-based health insurance. In that case, you may be able to sign up as soon as you retire.

There’s a variety of options in the private health insurance industry since plans are sold through competing companies. You can:

  • Enroll on the federal marketplace or a state exchange, if your state has its own health insurance portal.
  • Enlist the help of an independent broker, who can help you find a plan that meets your needs and budget.
  • Sign up with a health insurance company directly.

Regardless of whether you purchase from an exchange or not, start with a centralized website, like this one, that allows easy comparison of different plan options and features. Carefully weigh the advantages and disadvantages, as well as the affordability of different combinations of premium costs and deductible levels.

The future of Obamacare is uncertain as of the time of this writing, but you still have a chance to sign up for individual health insurance if you’re about to retire or have done so within the last 60 days. Visit one of our sister sites, Obamacare.net, to learn more about your rights and protections under the law.

Short-term Health Plans

Short-term health insurance can provide coverage if you have only a short gap between the end of your employer plan and Medicare eligibility, but these plans vary widely by state, and there are plenty of reasons to avoid this option if you can. State laws govern the length of short-term insurance plans, which range from 30 to 364 days (or an average of about six months in most cases). You can find information about your state’s regulations through your state’s health department. These plans are best for:

  • Generally healthy people
  • People who only need catastrophic coverage for a few months
  • A very short gap in coverage before Medicare eligibility
  • When other short-term options are too expensive

Shop carefully when looking at short-term insurance coverage. These plans generally do not cover the same basic services offered by employer or private health insurance plans, including those required by the ACA, such as routine health screenings, hospitalizations and more. Short-term plans also do not usually cover pre-existing conditions, so you should consider whether this type of plan is beneficial for you even for a few months.

State Medicaid Plans

If you meet income requirements, Medicaid can also provide health coverage until your reach Medicare eligibility. Combined with the Children’s Health Insurance Program (CHIP), Medicaid provides health insurance to over 72 million people, particularly children, pregnant women, seniors, and people with disabilities. Medicaid is usually comprehensive and doesn’t limit coverage for those with pre-existing conditions.

Medicaid is a federal program that is managed by individual states, which set specific rules and guidelines within an overarching federal framework. Some states expanded their Medicaid program in conjunction with the Affordable Care Act, which broadened access to Medicaid programs, especially for low-income families. You can find more information about state regulations and eligibility online or through your state’s health department.

Part-Time Protection

Working another job during retirement may be the last thing on your mind, but snagging a part-time job that offers benefits can also help you find health coverage until you can enroll in a lower-cost Medicare plan. While part-time positions with health insurance offerings aren’t common, several employers – including Whole Foods, Starbucks and Lowe’s – do offer packages for part-time employees in order to attract higher-quality workers to fill certain positions.

There are other benefits to picking up part-time work after you retire from your primary job. Retirees are sometimes unsure about how to spend time once they’re no longer required to be anywhere at a specific time and complete specific tasks. Finding a part-time job can help ease the transition and bring in additional income. You may also find that the social and financial benefits of putting in a few hours a week outweigh decreased flexibility in your retirement schedule.

As with all big decisions, the key to success is research and planning. You’ll spend more on an individual policy than what you spent as an employee because you’re now responsible for the full cost of monthly premiums. Plan accordingly before you start arranging for retirement. While the ACA provided an affordable way for early retirees to find coverage, uncertainty in the current political climate means that you may not be able to count on Obamacare protections once you retire. Carefully review your available options and the financial impact of each so that you can enjoy this season of your life without stressing about medical bills.

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