I’m going to stray from the playbook this week. I’m going to talk about health insurance.
After all, even a healthy 65-year-old couple will need at least $500,000 for health care in 2018, according to the Employee Benefit Research Institute. So yeah, that’s a huge retirement factor. And with McKinsey’s bombshell lingering, it’s no wonder the topic of health coverage has trickled into retirement forums and mainstream media in the past few weeks.
In fact, a CNN Money article Tuesday cited findings from Towers Watson that 42 percent of employers that offer retiree health insurance said "they're considering terminating early retiree plans and will encourage workers to consider buying health insurance through ‘health exchanges’ instead.”
Merge that figure with McKinsey’s, and you’re looking at a 72 percent likelihood employers are going to drop some form of health insurance and point workers to the exchange pools. (For the record, this figure is not intended as a predictive economic analysis of the impact of the Affordable Care Act.)
All things considered, it makes sense retiree coverage would be first to go before current employee coverage, but it’s still another variable resting on the economics of health care, the quality of exchange benefits, and whether employers still want to attract talent. Or, companies can go the 3M Co. route, which, Reuters reports, is giving its retirees fixed benefits to use in the open market in 2015.
Moving past the speculation and rhetoric, fact is, the issue isn't going away anytime soon — even though the gap between early retirement and Medicare eligibility was taken care of, it seemed, by a $5 billion early retiree reinsurance program set up through health care reform. The money allocated for this program is supposed to help employers by reimbursing them for part of their early retiree health benefits costs, which will help sustain those benefits until 2014 when retirees have the option to purchase affordable coverage in the exchanges.
But here we are, three years before exchanges and that money is nearly half gone, according to the Centers for Medicare & Medicaid Services. What's more, the Department of Health and Human Services isn’t accepting any more applications.
So there goes that option. Now what?
I don’t have to tell advisors health care is top-of-mind to prospective retirees. It's a significant motivator that'll keep older Americans at work 'til they die, or at least until they can see how health reform is going to play out.
Four possibilities for getting medical coverage between retirement and age 65 (according to CBS MoneyWatch Contributor Steve Vernon):
- Retiree medical insurance through your employer or spouse’s employer. “Not many employers offer this insurance, but it’s worth your time to inquire,” Vernon says. If it’s offered, make sure you qualify for eligibility, and it’s still possible you can’t afford the monthly premiums.
- COBRA coverage. But premiums are usually high and last only 18 months. You can pull it off at age 63-1/2, Vernon says, if you’re “prepared in all other areas.”
- Work for an employer that offers medical coverage for part-time workers. You can still be semi-retired, Vernon says.
- Purchase retiree medical coverage on your own, “provided you don’t have a pre-existing medical condition that excludes you from coverage.”