Early Retirement Health Insurance Options
Bridging a Coverage Gap Between Retirement and Medicare
Many baby boomers may be toying with the idea of early retirement in the new year. For some in this age group, a lifetime of working means a good pension and benefits after they leave the day-to-day grind, but more and more companies are converting retirement benefits, leaving the boomer generation in the precarious position of finding alternative health insurance coverage. If you are considering early retirement or need to consider retirement health insurance options, the NAIC offers these tips for where to look and what to consider in your decision.
Where to Look
As you age, health care becomes a more important commodity, but health insurance can become harder to obtain and more expensive prior to Medicare eligibility at age 65, if not provided through an employer. If your employer is not offering to extend health insurance coverage beyond your retirement date, here are a few options for finding continuing coverage:
Spouse's Policy - If your spouse is still employed and has access to benefits, see if you can be added to the policy. While your spouse may have to pay more for the coverage, , this is likely your most affordable option. Your spouse will need to speak with the benefits administrator or Human Resources department at work to see if it is possible to add a newly retired spouse to their existing insurance.
COBRA - The Consolidated Omnibus Budget Reconciliation Act (COBRA) lets former employees and their dependents continue their coverage for up to 18 months. While your employer cannot refuse coverage through COBRA, it is unlikely that they will continue to subsidize the premium. They may also charge an administrative fee.
Military - If you are a retired military veteran, you may be eligible to join the Defense Department's Tricare plan. Read more about who is eligible for Tricare and the coverage offered here.
Individual Coverage - These plans can be expensive, especially if you are on medications or have a chronic health condition. In some cases, preexisting conditions may make it difficult to find coverage. Starting in 2014, however, insurers will not be allowed to deny coverage based upon your health status.
Shopping for an individual policy can be challenging. Make sure to compare policies carefully and ask questions about what benefits are included. Make sure you understand your deductibles and coinsurance requirements; and ask about prescription drug coverage. Also, the agent or broker you are working with, as well as the insurance company writing the policy, must be licensed in your state. Be sure to check with your state insurance department to confirm the agent and company before making any payments.
High Risk Pool Plans - These plans were created to help adults with preexisting conditions find individual coverage. In order to be eligible for coverage in one of these subsidized pools, you will need to meet certain qualifications. Contact yourstate insurance department to find out more about these programs.
High Deductible Health Plans (HDHP) - These plans only cover catastrophic health care costs. This means you will be responsible for paying much more of the upfront cost before the policy would pay any benefits for eligible medical expenses. HDHPs have a lower premium to compensate for the higher out-of-pocket costs incurred with these high deductibles. Often these types of plans work with a Health Savings Account (HSA) that allows you to set aside funds for future qualified medical expenses. If you are considering an HDHP, make sure to read the policy form - paying careful attention to the benefits and the limitations of the plan. This consumer alert has more information about how to evaluate an HDHP and HSA.
What to Consider When Comparing Policy Options
Coverages - Make sure that you understand the terms and coverages of the policy. The lowest premium option may not provide the coverages you need for your health status.
- What are the deductibles or coinsurance payments?
- What are the limits on coverage?
- Can you see your current doctor or seek treatment in the same hospitals?
- Is there an annual limit to what the insurance company will pay for any particular coverage?
- Is there a cap on the out-of-pocket amounts you have to pay?
- How often will your policy be reviewed or how often can you expect a premium change?
- Are prescription drugs covered?
Vision, hearing and dental - In most cases, vision, hearing and dental coverages are not included in individual policies. Make sure to ask if these coverages are included or if it is possible to add the coverage.
Discount Health Plans
Discount health plans are not insurance products. These discount programs do not pay claims, have limited regulation and do not offer the same consumer protections. Marketing for discount health plans can be similar to health insurance, making it difficult to distinguish one plan from the other. If an offer seems too good to be true, it probably is. Find out more about the limitations of discount health plans here.
More Information
To protect yourself and your health care investment, STOP before purchasing any type of insurance policy, CALL your state insurance department and CONFIRM that the company and the insurance agent you are working with are licensed in your state.
About the National Association of Insurance Commissioners
As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.