No Retiree Health Coverage Now What?

September 4, 2014 by Staff Report

Another cherished retiree benefit left to the dust heaps of history.

As health care costs continue to increase faster than inflation, many employers are re-evaluating their ability to offer retiree health insurance coverage. In fact, according to human resources consultant Aon Hewitt, the number of large employers providing subsidized retiree health benefits declined from 50 percent in 2004 to 25 percent in 2014.*

How can you help make sure rising health care costs don’t wreck your carefully laid retirement income plans? Here are some health insurance ideas for you to think about:

Consider Obamacare

Before the health insurance marketplace mandated by the Affordable Care Act (a.k.a. Obamacare) opened its virtual doors in 2014, the Consolidated Omnibus Reconciliation Act (COBRA), which allows people to keep their job-based plans for 18 months after employment ends, was the only option — albeit an expensive, temporary one — for guaranteed health coverage.

Now anyone can buy an individual plan through the health insurance marketplace, or “exchange,” and insurers may not turn applicants away for preexisting conditions.

Depending on your household size and income, you may also qualify for tax credits that can lower your monthly premiums.

Since losing health coverage is considered a “qualifying life event,” you may sign up for insurance through the marketplace outside of the annual enrollment period. You normally have 60 days from the qualifying event to do so.

To learn more about the Affordable Care Act and your insurance options, visit healthcare.gov.

Another Option: COBRA

COBRA is a federal law that requires most employers to offer former employees group health insurance for 18 months after termination of employment or retirement.

Although your insurance coverage may be continued at group rates, your monthly premiums may skyrocket since your employer will no longer subsidize them. In most cases, COBRA coverage is considerably more expensive than purchasing a new plan through the health insurance marketplace.

If you elect to continue your group health insurance coverage under COBRA, you should obtain other coverage as soon as possible after COBRA coverage ends. You’ll qualify for a special enrollment period for the health insurance marketplace when your COBRA coverage ends.

If you decide to end COBRA coverage early, however, remember that your timing counts. Under those circumstances, you’ll be allowed to purchase insurance over the marketplace only during the open enrollment period.

Enroll in Medicare at 65 If You’re Retired

Medicare is the primary health insurance provider for most Americans 65 and older. You should visit your local Social Security office three months before your 65th birthday to enroll in Medicare.

Medicare Part A helps cover inpatient care in hospitals. Most people don’t have to pay premiums for Medicare Part A.

Medicare Part B covers doctors’ visits. However, you will have to pay monthly premiums and copayments. You should enroll in Part B when you enroll in Part A unless you or your spouse work beyond age 65 and you have health insurance from your employer. Otherwise, don’t wait.

Medicare Part D is the prescription drug coverage, which requires a monthly premium, which varies by plan, and a yearly deductible for this coverage. You also have to pay part of the cost of your prescriptions, including copayment or coinsurance. Costs will vary depending on which drug plan you choose.

Medigap policies, which you have to purchase, pays Medicare deductibles, copayments, and some other out-of-pocket costs associated with Part A and Part B.

In most states, there are 11 standardized Medigap policies. These policies are standardized across the insurance industry, which means you can compare the same policy across insurance providers based on premiums.

Be sure to sign up for Medigap insurance within six months of enrolling in Medicare Part B to help ensure that your application is accepted.

To learn more about Medicare, visit medicare.gov or call 1-800-MEDICARE, 24 hours a day, seven days a week.

Talk With Your Financial Advisor

Understanding how health care and health insurance costs affect your retirement is essential to putting together a retirement income plan that truly helps meet your needs. Your Financial Advisor can help you make informed and realistic decisions about what lies ahead.

* Employers Will Continue Sponsoring Health Benefits for Employees and Retirees, but Deliver Those Benefits in New Ways. Aon Hewitt Research as reported by prnewswire.com, Feb. 19, 2014.

This article was written by/for Wells Fargo Advisors and provided courtesy of the Financial Advisors in the Chardon Branch at 440-286-2553.

Investments in securities and insurance products are: NOT FDIC-INSURED / NOT BANK-GUARANTEED / MAY LOSE VALUE

Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.