You’ll have to find a health insurance plan to cover you until you’re eligible for Medicare if you retire before age 65. You have retirement health insurance options regardless of your age.
If You Retire Before Age 65
If you’re retiring before age 65, the good news is that you can’t be denied coverage for preexisting conditions due to the Affordable Care Act (ACA), which was signed into law in March 2010. You can purchase ACA plans through your state’s health insurance marketplace, which may be HealthCare.gov or a state-specific site like Covered California. These plans are required to provide 10 essential benefits, including prescriptions, preventive care, and emergency services. ACA plans can be expensive, but you may be able to keep your premium costs down by opting for a high-deductible option. Your deductible is the amount you pay for covered services before the plan starts paying benefits. A higher deductible typically means a lower monthly payment, but it also means higher out-of-pocket costs before your health care is covered. It may be worthwhile to pay a higher premium if you don’t have the income or savings to cover out-of-pocket costs.
Group Retirement Health Benefits
The number of companies offering health care for retired employees has been declining, but your employer may offer an option to continue health insurance into retirement, especially if you work in the public sector. Reach out to your company’s human resources department as you’re planning your retirement. Ask if you’ll have continued access to health insurance after you retire and, if so, how much it will cost you. Ask if you have access to Consolidated Omnibus Budget Reconciliation Act (COBRA) benefits if your employer doesn’t offer health insurance for retirees. Compare the cost of retiree health insurance or COBRA to marketplace insurance plans if you’re retiring before you’re eligible for Medicare. You should also ask how the coverage changes when you become eligible for Medicare.
Explore Your Medicare Options
You’re eligible for Medicare starting at age 65 in most cases. If you’ve worked at least 10 years (and paid Medicare taxes during those years), then you qualify for free Medicare Part A. You can qualify for Medicare before age 65 if you’re permanently disabled or have end-stage renal disease. Medicare includes the following parts:
Part A covers inpatient hospital care, limited care in a skilled nursing facility, hospice care, and some home health care. Part B covers other aspects of health care, including outpatient care, doctor care, and durable medical equipment. You must pay a monthly premium for Part B. Part D covers prescriptions. Its benefits are accessed by purchasing Part D plans through private insurance companies.
On its own, Medicare has gaps, so many retirees opt for additional coverage. The two primary options if you don’t have access to employer health coverage are:
Medicare supplemental insurance: Also known as Medigap, these plans help cover the gaps in Medicare. They pay after Medicare, so your care providers would bill Medicare and then bill the supplement for the balance. There are several plan options, and they’re standardized, so if you shop for a Plan A with one insurance company, it will have the same benefits as a Plan A with a different company.Medicare Advantage plans: Also known as Part C of Medicare, these plans are billed instead of Medicare and may include prescription coverage. You don’t need a separate Part D plan if it includes prescription benefits. They may also include other benefits like vision and dental coverage.
If you want to purchase a Medicare supplement, it’s best to do so when you start Medicare Part B because you have a special open enrollment period and can’t be denied coverage. Some retirees delay enrolling in Part B if they have access to coverage through a working spouse. You may have to answer health questions and go through medical underwriting after your open enrollment period expires. You might be offered a higher-priced plan or be denied coverage. You can enroll or change plans in the fall of each year if you want to purchase a Medicare Advantage plan. You can also switch Medicare Advantage plans from January 1 to March 31 each year. You can shop for both types of plans through your state’s Health Insurance Marketplace. You’ll receive a handbook called “Medicare & You” each year you’re eligible for Medicare. The handbook reviews how Medicare works and provides in-depth information on any changes. You can also download the handbook or opt to be sent an electronic copy each year.
Talk To an Agent
An experienced health insurance agent can help you navigate your retirement health insurance options. They can conduct a complete analysis of your options by asking you about your existing doctors and medications and then tell you which plans will provide the most cost-effective benefits based on your personal medical situation. Another option is to find your state’s State Health Insurance Assistance Program (SHIP), which will provide volunteers to help you understand your options and assist you with enrollment.
Review Plan Choices Each Year
Once you’ve secured health insurance in retirement, you should be proactive about evaluating it regardless of your age. Conduct an annual review of your coverage options during open enrollment each fall. Benefits and costs change, and it’s possible that a new plan may offer you better coverage at a lower price. You won’t know unless you look. Once again, you may want to talk with an experienced agent or contact your state’s SHIP to ensure that your plan change will benefit you.
