Health insurance can be a huge expense for seniors, especially those who retire early. Although Social Security benefits can be collected as early as 62, Medicare does not kick in until 65. This leaves retirees to explore other options for bridging the gap in coverage. These options include COBRA, short-term retirement insurance plans and marketplace insurance plans. Some retirees may also be able to enroll as dependents in their spouse’s employer-sponsored plan. For those who aren’t able to afford private plans, Medicaid may be available in some states.
Various studies have shown declining rates of employer-sponsored health insurance for retirees, with the trend most pronounced among large firms. These trends are a result of both economic pressures to reduce costs and regulatory requirements such as SFAS 106. While the results from different studies differ slightly, they generally indicate that a growing number of retirees will need to pay directly for medical services and, due to declines in medigap coverage, may also need to turn to publicly-sponsored insurance programs or go without healthcare.
The types of health care plans that companies offer are another important factor to consider. The majority of retirees enrolled in employer-sponsored health care plans are enrolled in indemnity or conventional plans, while only 8 percent are enrolled in managed care plans. These findings are consistent with those found by the U.S. General Accounting Office and other reports.
Depending on your circumstances, it may be more cost effective Explore the content for you to keep your employer-sponsored health care until you are eligible for Medicare. Then, you can switch to a Marketplace insurance plan or a Medicare Advantage plan that fits your needs.
A health savings account can be used to help cover the cost of a high-deductible health plan, and it is available to anyone. An HSA allows you to make tax-free contributions from your paycheck into an interest-bearing account, and withdrawals can be made for qualified medical expenses at any time. If you decide to opt for a high-deductible health plan, it can be coupled with an HSA to provide a tax-advantaged solution for paying for your health care in retirement.
If you need assistance finding a plan, contact a health insurance professional or your state’s SHIP program, which provides volunteers to assist with enrollment. Remember, Medicare open enrollment is from October 15 through December 7 each year. This is a great time to review your options and make changes if necessary. A professional can conduct a health insurance analysis to determine your best options. You can also find a Marketplace insurance plan during this period, or you can apply for a special enrollment to enroll if you lose your job-based health insurance. You can learn more about comparing Marketplace options in our article, Comparing Health Insurance for Retirees Aged 65 and Above: A Comprehensive Guide.