In the post-COVID-19 scare-de-2020, a fair amount of people found themselves in a situation where their employer was offering early retirement. Some of these people were as young as 60 at the time. Some offered severance and a full pension, some got nothing. The overall common theme with all of these people was no health insurance. Many people were tossed into the very unfamiliar area of health insurance acquisition.
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So, here are a few things to make the process a smidge easier for you when trying to find a plan near retirement. The number one mistake people make is blindly accepting a COBRA package. There are several other options out there that could save you thousands of dollars.
1. Does A COBRA Bite?
Larger companies of over 20 full-time equivalent employees have to provide you with COBRA access as long as you have been there for a year. COBRA is fine because you get to keep your current plan, but you will have to pay the employer portion as well as your own. In 2021, the average cost of COBRA per year for a single person was about $7,739, according to the Kaiser Family Foundation. For most people, that is a large hiss and bite in the rear. The good news is that you don’t have to take it. If you accept a COBRA package, you can cancel it at any time and look for other coverage. You will not be stuck. COBRA is usually the best choice for someone with a chronic condition as some of the options do not allow pre-existing conditions. This leads to…
2. Did You Eat Your Wheaties?
Well, I hope you did because your current health is going to be a factor. Having chronic conditions can significantly lower your access to options as some health insurance providers will not accept chronic or pre-existing conditions. The Centers for Medicare and Medicaid Services lists chronic conditions here.
If you are healthy as a horse, then you may be eligible for policies that are underwritten. When policies are underwritten, they are usually much less expensive because they can be denied based on medical history. This way, the insurance company can limit its costs. An underwritten plan can save you as well.
3. What’s This Underwritten And Short-Term Jazz?
These plans are a bit more strict with acceptance. It’s like high school all over again. Well, not that bad. They are strict but they take all of 8 minutes to enroll. It’s super simple, unlike trigonometry. In most states, these “short-term” plans will give you a full 364 days of coverage (not short-term at all) and have a lot of network flexibility, low deductibles, and benefits. Thought I didn’t notice that extra day missing in the 364-day plan? The plans have to stop just short of a year to be “short-term,” however, if you satisfy all of the underwriting requirements, you can renew on the 365th day with no gap in coverage. If you are not eligible for an underwritten policy because of a chronic condition, you should look at the next option.
4. Can You Get Help From Your Uncle… Sam?
In 2014, the Affordable Care Act gave people access to subsidized health coverage. ACA policies must take pre-existing conditions and pay for preventive care. These subsidies are based mostly on age and income. When you retire, you are usually on the higher end of age and lower end of income. This is where the marketplace can benefit you greatly. A retired couple making about $50,000 in retirement income would be given a subsidy of about $1,500 a month. If your monthly plan is $1,500, you pay $0 out of pocket for your policy — even if you have saved up a million in 401k income. If you make more and are ineligible for subsidies, there are some other options like the underwritten policies above or ACA policies not on the marketplace.
In rare cases, a state Medicaid program may be available if you are in dire straits and have no affordable options. Contact your local state Medicaid program by going to Medicaid.gov.
Sometimes, ACA policies aren’t — well — affordable. You can still get an ACA-compliant policy without using Healthcare.gov, so you can still get preventive care or pre-existing condition coverage with a discount. Policies on the marketplace have an additional 20 percent of taxes on them. So, just by approaching a health insurance company directly, you can sometimes get 20 percent off the unsubsidized premium. Speak with a broker to save yourself some time. They will know which companies offer these plans.
5. Do You Have An HSA, HRA, Or Any Other Valuable Acronyms?
The two most common are the Health Reimbursement Arrangement (HRA) or a Health Savings Account (HSA). Maybe you have both. The HRA, in some companies, is an arrangement where this account will pay your monthly premiums. If you use your HRA, you cannot get a subsidy, forcing you to weigh your options. The HSA is an account you contribute to in retirement if it is financially advantageous. If nothing else you find is affordable, you can get a high deductible HSA-eligible plan and continue to contribute to your account. This is not typical but available. You can always use your HRA or HSA on approved medical expenses in retirement. In most cases, you will no longer be contributing to it but you will have access to offset medical costs.
6. Can You Cut Up The COBRA?
Yes. Most people don’t know this. You do not have to use all of the COBRA package. You can choose what pieces you would like to keep. You can keep the teeth and eyes and get rid of the rest if you want. Dental and vision in a COBRA are usually what we call portable. That means you can elect to keep these items and find a more affordable health insurance policy. With dental, there is most often a waiting period for major services. You can be paying a premium from a provider for 12 months before they will even cover a root canal or a crown. This is why it is important to keep your current policies so you don’t have to deal with waiting periods.
Unfortunately, this is a pretty complicated topic. Hopefully, this clears some of it up for you. I always highly recommend contacting an experienced insurance broker in order to go over all of your options. Every state is different and may have more or less coverage based on active laws. As brokers, we have to go through annual courses to stay up on current changes in the market and laws.
If you do not have access to a broker, you can find a local agent in your area that is certified with marketplace policies. This is a non-sales list. It gives you listings of agents in your area, not the other way around. You do not have to enter your personal information but you will have access to their contact info. Before you grab an agent, make sure you give them a Google search or two and make sure they have a good level of credibility. Most people find me by asking family and friends. Happy searching!
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