Health Insurance Early Retirement (65) Before Medicare

A wave of early retirements is being triggered by the economic and health crisis. Some older Americans have been laid off or decided that it was not worth taking the COVID-19 risk at work.

Unexpected retirement can cause many financial problems. One of them is finding affordable insurance that covers you until you reach 65. There are options to help you bridge the gap in your health coverage so that you can reach Medicare. However, each option has its own pros and cons.

Tap Retiree Health Benefits before Medicare Eligibility

It’s an increasingly rare perk. However, 28% of large corporations, according to a 2019 Kaiser Family Foundation Survey, offer retired employees health benefits. You may be eligible to continue coverage under the company’s group plan if your employer is one of them. Your primary insurance will be the retiree health plan. It will cover pre-existing conditions until you are eligible for Medicare. The plan will then function as secondary insurance to complement Medicare.

Steve Parrish, codirector of the Center for Retirement Income, at the American College of Financial Services, warns that retiree health benefits may not be the same as those you received as employees. Employers may offer different benefits to their retirees or a higher premium than their employees.

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To determine if you are eligible, he suggests that you review the rules of the company. How does the company define quitting and retiring? Does it affect your health insurance coverage? If you give notice for two weeks, is it considered quitting and you will lose coverage?

COBRA is an option before signing up for Medicare

Consolidated Omnibus Budget Reconciliation Act allows you to keep your health insurance and coverage for pre-existing condition coverage through an ex-employer. The law applies to businesses with more than 20 employees. However, you will be responsible for paying up to 102% (premium plus an administration fee) of the cost.

COBRA coverage normally lasts 18 months. However, these are not ordinary times. Last March’s legislation temporarily extended COBRA coverage to 60 days after the end of a national emergency. This has caused confusion. Is the national emergency over? Parrish says, “I wouldn’t say so.” “Cobra coverage could be extended beyond the 18-month period, depending on future government pronouncements. However, it is not clear how this will work.

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Use State and Federal Health Exchanges before you’re eligible for Medicare

The Affordable Care Act was created to provide individual health coverage. All plans sold through the exchanges must cover pre-existing conditions. The ACA offers an annual open enrollment. In 2020, it falls between Nov. 1, and Dec. 15. However, if you lose your job or leave the company, you have 60 days to sign up for insurance during a special enrollment period.

Go to Health Insurance Exchange to apply for coverage. The cost of ACA plans varies depending on their premium, provider network, and out-of pocket costs such as deductibles or copayments. You can choose from a variety of colors, including platinum, silver, gold, and gold. As you progress up the color spectrum, your premiums will be higher and out-of-pocket expenses will be lower.

Nancy Damato is the director of group benefits at RDA Benefits Services, Marlton, N.J. She says that ACA premiums are age-based so they are not affordable for people over 60. Rates vary depending on where you live. Damato states that a 62 year-old man from southern New Jersey would pay $690 per month for a health insurance plan with a $3.450 annual deductible and a restricted provider network. A plan with a larger network, including out-of-state physicians, could cost as high as $1.940 per month with a $1.500 annual deductible.

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You may be eligible for government subsidies depending on your income or household size to lower premiums and out-of-pocket costs. A two-person household is eligible for government subsidies if its income is between $17.240 and $68,960 in 2020. You will receive more support if your income is lower than the minimum. You will need to calculate your 2020 income in order to apply for the subsidy. This can be done using documents such as a last pay stub, Social Security benefits letters, pension statement, or the tax return from the previous year.

Damato states that all ACA plans include preventive and wellness coverage 100%. These services would include routine mammograms, routine bloodwork, and routine colonoscopies. There is no out-of-pocket cost. It may be a good idea to have a high-deductible ACA policy with lower premiums, until you can get Medicare.

The Spouse’s Workplace Insurance may cover you before Medicare Signup

A spouse may also be eligible to join the workplace plan. While they are not required to, some employer-provided plans cover employees’ family members. You can apply for special enrollment if you lose your coverage. However, the costs may not be as high as that of your spouse because employers do not have to pay anything towards the coverage for a family member.

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Short-Term health insurance may fill the Medicare gap

A short-term plan can be sufficient to cover the gap until you are eligible for Medicare if you are healthy. The state may offer short-term insurance that lasts for a few months or less than a year. If you are in good health, the plans usually have lower premiums than ACA. However, there are some downsides.

Damato states that short-term insurance plans for health include underwriting. They would not cover preexisting conditions and could deny you for health reasons. They are not ACA-compliant.

If your state has a tax penalty for you not having minimum essential coverage, it would still be due even if you have short-term insurance.

These plans can also limit renewals. The company might stop you renewing your coverage for less than a year after the expiration of your short-term coverage.

You may wish to talk with a financial advisor, broker, or health insurance agent as you consider your options. Damato says that meeting with a broker can be beneficial because they can help you sell all plans in your area. They don’t represent one company. Use the online search engine of National Association of Health Underwriters to find a local broker or agent.

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Financial planners take into account the entire financial picture of a client to help them find ways to make healthcare more affordable. Tyler Lerman, a certified Financial Planner in York, Pa. did this for his clients. He was a married couple who were both 62 and wanted to retire early. He says, “We reviewed their savings and budget.” “We concluded that they were best to delay receiving Social Security benefits and to structure their investments to temporarily lower their taxable income. They were then eligible for a tax credit to help them with their ACA plans.