Most Americans get their health insurance coverage through work, and so retirement can be an extremely disruptive event in terms of protecting yourself from the ever-rising cost of healthcare. Health insurance is tricky enough to understand when you're part of an employer's group health plan, but when you're on your own, getting the information you need to figure out your healthcare options can be even more difficult. Although Medicare plays a vital role for most retirees, not everyone who has retired is eligible for Medicare, and even those who do get Medicare coverage sometimes have to navigate some complex provisions to make sure they get all the benefits they need. The following three health insurance facts are especially important for those who've just retired as well as those who've been out of the workplace for a long time.
1. The coverage options that are available for retirees
When most people think of retirement healthcare, they first think of Medicare. Medicare provides healthcare coverage for millions of American retirees, but just because you retire doesn't mean you automatically become eligible for Medicare. Most people qualify for the federal government's healthcare program when they turn 65, so if you've retired early, you might not be able to get Medicare coverage right away.
Regardless of whether you're fortunate enough to be able to plan for retirement or whether it's thrust upon you due to job loss, there are a few helpful hints to keep in mind. The first is that the easiest way to get coverage is if you have a spouse who is still working and has group health coverage. As soon as you lose your own coverage, you can generally use a special enrollment period to get family coverage seamlessly.
Another option for early retirees are within 18 months of their 65th birthday is to use COBRA continuation coverage from their former employer. Coverage is mandated by federal law, but bear in mind that you'll owe the total cost of your insurance coverage plus a small add-on, not just the employee portion.
Apart from COBRA, individual coverage options can be slim. The Affordable Care Act created more access to health insurance for individuals, but the number of choices you have depends greatly on where you live. Non-ACA individual coverage is sometimes available, but prices can be extremely high. Also, check with various membership groups you belong to in order to see if they have group coverage options that you can use.
2. How Medicare interacts with employer-provided coverage
Once you become eligible for Medicare, your options get a lot better. Yet some retirees still have group health plan coverage from a spouse, and the inevitable question comes up about whether they should or need to sign up for Medicare.
The answer typically depends on the size of the employer in question. For companies with 100 or more employees, the group health plan continues to the primary coverage provider, and it's less likely that the employer will require you to sign up for Medicare when you turn 65. For those with fewer than 20 employees, Medicare becomes the primary coverage, and employers are typically able to require workers to sign up for Medicare when eligible. Those with employers with between 20 and 99 employees are in a gray area in which some employers are considered to offer large group health plans and others aren't. Those with large group health plans get primary coverage from them, while those with small group health plans have Medicare as their primary coverage.
The easiest way to find out what's required of you is to talk to the employer in question. You should get guidance about what you need to do to keep the coverage you have or whether switching solely to Medicare makes more sense.
3. Getting added coverage
Many people find that Medicare by itself isn't enough. As an alternative or supplement to traditional Medicare, Medigap supplemental policies or Medicare Advantage plans can give more complete coverage and fill in some gaps that regular Medicare doesn't cover.
Medicare Advantage plans replace traditional Medicare coverage, with private insurers providing all of the benefits of the regular Medicare program. Yet these plans also typically include additional benefits, such as out-of-pocket maximums and lower copayments for additional types of services for which Medicare either has no provision or has less attractive standards.
Medigap policies work in combination with traditional Medicare, with the private insurance product only covering what Medicare doesn't. The net effect is similar, however, in that retirees get benefits from Medigap policies that reduce their out-of-pocket costs compared to what they'd owe if they only had Medicare by itself. With many alternatives, shopping around takes some effort, but it's well worth it for added financial security.
If you've retired, health insurance is of paramount importance. By understanding these key facts, you'll be in a better position to protect your health in your golden years.