Retirement Planning - Thinking About Health Insurance

Approaching retirement requires planning. Next to your income, health insurance is the most important issue to explore because you certainly do not want to have a period in your life when you are not insured for medical care. Your options for health insurance depend upon your age.

Under 65

If you are under the age of 65 and planning to retire, you should first check with your employer to see if you are eligible to stay on the group health insurance plan; that is usually the least expensive way to obtain coverage. Depending on the employer and your years of service, you may be eligible to stay on the plan until your 65th birthday. Or, you may be eligible to continue your benefits under the COBRA law for 18 months. If this is not the case, and your employer tells you there is no health insurance coverage once you retire, you may wish to check with your spouse. If your spouse is employed you may be able to be added to that insurance plan.

If not, your only alternative is to purchase an individual health insurance policy to carry you through until you reach the age of 65. Individual health insurance is expensive. Premiums can range from $460 to well over a thousand dollars per month, depending on the type of coverage you select.

Approaching 65
If you plan to retire in the month in which you turn 65, you will be eligible for Medicare. Your employer may allow you to continue on the group plan, which will be secondary to Medicare. If your employer tells you that you cannot continue on the group health insurance plan, you must choose a Medicare supplement (also known as Medigap) to fill in the gaps and pick up where Medicare leaves off.

Depending on the Medicare supplement (also known as Medigap) you will have one 100 percent coverage. Or, when a person becomes eligible for Medicare, you may choose a Medicare Advantage plan in lieu of the traditional Medicare plan. This is good for a small group of citizens. With a Medicare Advantage plan, you usually have a copayment, you might have deductibles and you must go to providers who participate in the plan.

If you have a spouse, and your spouse is actively employed by a company with more than 20 employees, you may be able to continue health insurance benefits under your spouse's plan. If you do this, and if your spouse works for a company with more than 20 employees, you should refuse Part B Medicare until your spouse also retires.

If you will be 65 and not actively at work on a full-time basis, do not choose COBRA in lieu of signing up for Medicare Part B. I cannot emphasize this enough. COBRA does not count as creditable coverage when applying for Part B. If you have COBRA for 18 months and now you go to Social Security to sign up for Part B, they will tell you that you have to wait for open enrollment which is January through March and your Part B will become effective the following July. This is not good at all. Seek professional advice; without it you may end up paying a penalty for Part B Medicare.

Over 65
If you have been working since your 65th birthday and are now getting up in years and decide to retire, you have a few choices. If you have been actively employed by a company with more than 20 employees chances are you are on the group health insurance plan and Medicare is secondary or you have refused Part B Medicare. This is known as TEFRA. The TEFRA law simply stated, means that if you are 65 or over and actively employed by a company with more than 20 employees, your group insurance is primary and Medicare is secondary.

Many people that fall into this category find that they do not need Part B Medicare until they retire. The same holds true if you are eligible for benefits under the plan that your spouse has because your spouse is still working. When you receive benefits beyond age 65 under your spouse's plan, it is known as the DEFRA law. So, if you don't have a spouse, and you are now getting ready to retire, well beyond your 65th birthday, you will have to make sure that you get enrolled in the Medicare program if you were TEFRA eligible. Find out if your employer will allow you to stay on the group plan as secondary to Medicare.

If not, you will have to purchase a Medicare supplement. It is very important that you get a certificate of insurance if you are on the group plan to prove that you were continuously insured and that you are no longer eligible to remain on the group plan. With a certificate of insurance (a document from the insurance company showing the dates you were covered) you will be able to purchase a Medicare supplement from any company selling them with no waiting period for pre-existing conditions.

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