Younger
than 65 but not insured through a job? Here's how to find quality coverage at a
price you can afford
by Walecia Konrad | July 25, 2018
Losing access to
health insurance through work in your fifties or early sixties, when good
coverage is critical but you’re still too young to qualify for Medicare, can
feel like a nightmarish scenario.
Whether you’re
retiring early, have been laid off, or you’re no longer working for a company
that provides coverage, the dilemma is the same: You’ll likely face sharply
higher premiums buying an individual policy at precisely the same time as your
healthcare needs and costs are probably increasing.
In fact, some people
toying with the idea of early retirement, decide to stay put after calculating
the costs of individual health insurance, says Karen Pollitz, a senior fellow
working on health reform and private insurance at the Kaiser Family Foundation.
The 2018 PwC Employee Financial Wellness survey backs this up: In
it, 32% of baby boomers said needing to keep healthcare coverage was the reason
they delayed retirement—the first time that healthcare concerns ranked higher
than simply wanting to continue working.
32%
of boomers say they’ve delayed retirement to keep their health insurance
Employee
Financial Wellness Survey PwC, 2018
Many people don’t have
a choice. More than half of the respondents in a Fidelity survey last year who had retired before age 65 said
they’d stopped working earlier than planned, many because of a health issue or
work event outside of their control.
Whatever the reason
you’re transitioning from workplace insurance to the individual market, finding
solid, affordable coverage is now job Number One.
If you’re able to
switch to a spouse’s plan, that’s likely your best bet. Not an option? Take
these steps to find a plan that’s right for you.
Price coverage on
your state’s health exchange
If your new
circumstances mean you will be earning less money going forward, a policy on
the government
health insurance exchange created by the Affordable Care Act (ACA)
may be your most affordable option. That’s because you probably have a good
shot at qualifying for federal subsidies that can dramatically reduce the cost
of coverage.
The limits change
slightly every year but use this year as a gauge: In 2018 subsidies were
available to single people earning up to $48,240, couples who make up to
$64,960, and families of four with household income of as much as $98,400.
The difference in
cost is huge. A couple with one spouse who is 60 and the other age 55 with
$55,000 in annual household income, for example, would pay an average of $438 a
month for a mid-level benefit “silver” plan, according to the Kaiser Family
Foundation.
If they didn’t
qualify for a subsidy, their monthly premium would jump to $1,857. (You can
estimate your costs here.)
With or without subsidies,
you’ll pay considerably more than younger healthcare consumers. Insurers
selling policies on the ACA marketplace are allowed to charge customers 50 and
older up to three times more than younger policy holders.
Insurers
are allowed to charge people 50 and older up to three times more than younger customers.
There are some
caveats to keep in mind when shopping for a policy on the government exchange.
For one thing, most
of these plans have fairly restrictive provider networks that may not include
your doctors. Relatively few policies (possibly none in your state) include
out-of-network coverage, and the ones that do typically are very expensive.
Also, if you’ve had a
big change in income that makes you eligible for a subsidy, clarifying this to
the government can be a bit of a headache.
When you apply for
coverage, Pollitz warns, your estimate of future income will be reviewed but so
will your most recent tax return. A big difference between the two figures will
be flagged.
You will then have 90
days to document why the inconsistency exists, then should get an all-clear
notice from the government. Be sure to follow up if you don’t receive approval,
Pollitz advises.
Don’t qualify for a
subsidy? Look at COBRA
Only 6% of early
retirees get insurance through COBRA, an acronym for the law that allows you to
continue to purchase coverage on your employer’s health plan for up to 18
months after you leave your job.
The chief reason:
It’s expensive because you are now paying the full cost of your insurance
premiums, vs. the 20% to 30% you’d typically as an employee, with your company
picking up the rest of the tab.
Only
6% of early retirees get health insurance through a former employer via COBRA
because it’s so expensive.
“Bridging
the Gap to Medicare” 2018 survey, Fidelity Investments
The difference can
cause some well-justified sticker shock. But if you don’t qualify for an ACA
subsidy, you may find that your COBRA payments don’t look so bad after all.
They may even be lower than some unsubsidized exchange plans, especially if you
need family coverage.
What’s more, you may
have the added benefit of staying with your network of health care providers or
receiving some coverage for out-of-network providers. If remaining with your
doctors is important to you, as it may be for people in the midst of treating a
health condition, you may find COBRA is worth the price, Pollitz says.
Check if you qualify
for retiree coverage at an old job
About one-quarter of
large companies offer retiree health benefits to long-time former employees,
down from 66% in 1988. Most of those that provide this benefit extend coverage
to people younger than 65.
About one-quarter of
large companies offer retiree health coverage to former employees.
If you’re fortunate
enough to have worked for one of them, and you’re eligible for coverage, it can
be a good value. Often the insurance is less restrictive than an ACA plan,
similar to COBRA except that it costs a lot less because the company usually
still subsidizes part of the cost.
That’s probably why more
than a third of early retirees elected to get health insurance through their
previous employer, according to Fidelity. If you spend many years with the same
company, particularly if it’s a big one, check with human resources to see if
they offer coverage and, if so, whether you qualify.
Beware of really
cheap alternatives
The Trump
Administration recently issued a ruling that allows associations to market
health plans to small groups and individuals. Billed as a more affordable option
than the exchanges, premiums for these plans are projected to be $9,700 less
per year than premiums in the individual market, according to a 2018 analysis
from health care consultants Avalere.
The tradeoff for
lower costs: less coverage. For instance, these plans are not required to
provide the 10 essential health benefits required under the ACA, which means
that you may not be covered for things like prescription drugs, mental health,
and substance abuse services.
In addition, the
administration has passed a new short-term coverage rule that would allow plans
that provide insurance for up to three years to be exempt from any ACA
requirements.
“Cheap insurance is
cheap for a reason,” says Pollitz. “These plans are less expensive because they
offer you less protection.
“Cheap
insurance is cheap for a reason. These plans offer you less protection.”
Karen
Pollitz, senior fellow, Kaiser Family Foundation
Of particular note to
anyone with a health issue: Although these insurers are still required to sell
plans to patients with pre-existing conditions at the same premium rate as
healthy people, under the administration’s proposed rule, they would not have to
cover treatment for those conditions, Pollitz says.
In addition, she
worries that coverage for hospitalization, chronic diseases, and other ailments
could be severely limited or not covered at all.
“When you get to be
our age,” says Pollitz, who is about to turn 60, “things can go south health
wise. You want good coverage because chances are you’re going to need good
coverage.”
https://considerable.com/how-to-bridge-the-gap-between-health-coverage-at-work-and-medicare/
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