Affordable Health Insurance Options If You Retire Early
Leaving a productive career presents early retirees with a number of weighty considerations. One of the first: early retirement health insurance. Individuals who retire prior to age 65, when Medicare eligibility begins, need to find another option to cover medical and prescription drug costs. And that is no small issue.
YOUR MOST LIKELY OPTIONS ARE:
- The optimal early retirement health insurance situation is a continuation of coverage offered by your last employer where you are typically responsible for the entire cost of benefits
- If you retire before you’re 65 and lose your employer-based health plan when you do, you can buy a plan on the Health Insurance Marketplace during a Special Enrollment Period
- The least preferable health insurance option due to its high cost is health coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA)
If you are not eligible to participate in Group Pre-65 Retiree Coverage from your last employer, The Health Benefit Alliance (HBA) has some of the nation’s most competitive Pre-65 Group Retiree Healthcare Solutions.
The HBA provides pre-65 retirees with group medical & Rx plans that include Bronze, Silver & Gold benefit equivalents and are fully ACA compliant.
The plans include premiums that are usually far less costly to members and employers than what is found in the traditional commercial markets, on Federal or State Exchanges and COBRA continuance programs.
Health insurance premiums can eat up a considerable chunk of post-retirement income. Consequently, pre- 65 retirees must examine all reasonable sources for coverage, balancing cost against benefits, provider networks, and plan design.
Up until now, the top three options for health insurance for retirees under 65 are:
- Group Retiree Coverage
- Federal Exchanges (the Health Insurance Marketplace)
Group Retiree Coverage
With respect to health insurance, the optimal situation for a retiree is a continuation of coverage offered by the employer with whom the individual was last employed. While rare, many private employers and government entities offer health insurance options to early retirees.
Essentially, the retired individual remains grouped with the actively employed population. Common practice includes an offer of coverage to individual retirees for a fixed time period or until the former employee becomes Medicare-eligible.
The cost of insurance stands out as the primary advantage. Many public and private sector employers heavily subsidize premium payments or premium equivalent rates to attract and retain key employees. As part of a negotiated or collectively bargained retirement package, pre-65 retiree coverage typically continues the same contribution levels to which the employee was accustomed.
A married, pre-65 retiree frequently has the option of remaining on a working spouse’s employer-sponsored health plan. While spousal coverage is not federally mandated, some employers retain spousal options with reasonably priced contribution levels.
In 2010, the Affordable Care Act (ACA) created the Health Insurance Marketplace. This provides health insurance options that deliver a threshold of minimum value and affordability levels tied to income. A pre-65 retiree can sign up for coverage through designated State Exchanges or the government’s website 60 days prior to, or 60 days after, the effective date of retirement.
Annual premium increases are common, but exchange options are still a more affordable means of coverage than obtaining an individually rated policy that was previously subject to pre-existing conditions and limited lifetime maximums.
Generally, the least preferable health insurance option for a retiree is a benefit of the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA mandates that employers offer coverage identical to the benefit plans in which a terminated employee was enrolled prior to the separation of service. While coverage remains the same, employers rarely subsidize COBRA premiums, which can equal the full premium paid by the employer to the insurance carrier.
Self-funded employers are allowed to charge an actuarially established premium equivalent rate, plus a 2% administrative fee. Along with being prohibitively expensive, COBRA provisions only last 18 months in most cases. The short-term solution necessitates that an early retiree more than a year and a half from age 65 seek other coverage once COBRA benefits are exhausted.