Submitted by Pam Deaton, PD Benefits
Retirement brings newfound freedom and opportunities, but it also presents important decisions—especially when it comes to health insurance. For many, employer-sponsored health coverage ends at retirement, leaving a gap that must be filled to avoid unexpected medical expenses. Navigating health insurance post-retirement requires careful planning, especially since healthcare needs often increase with age.
When you retire before age 65, you won’t yet qualify for Medicare, and you’ll need to find interim coverage. If you’re 65 or older at retirement, Medicare becomes your primary insurer. Either way, losing your employer’s group health insurance triggers a special enrollment period, so you won’t have to wait for the regular open enrollment period to get new coverage.
Here are your main options depending on your age:
If You’re Under 65: Coverage Options Before Medicare
COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to temporarily continue your employer’s group health plan for up to 18 months (sometimes longer in specific cases). The catch? You’ll pay the full premium—plus a 2% administrative fee—without any employer contribution. For some, this can be expensive, but it ensures continuity of care if you’re undergoing treatment or managing chronic conditions.
Affordable Care Act (ACA) Marketplace
Another option is purchasing a plan through the Health Insurance Marketplace. These plans are guaranteed issue, meaning they can’t deny coverage based on preexisting conditions. You may also qualify for income-based subsidies that significantly reduce premiums. Comparing plans on healthcare.gov or your state exchange can help you find the right balance of cost and coverage.
Spouse’s Employer Plan
If your spouse is still working and has access to employer-sponsored health insurance, you may be able to join their plan. This is often one of the most affordable and convenient options available to retirees under 65.
If You’re 65 or Older: Enroll in Medicare
At age 65, you become eligible for Medicare. If you’re retiring at this age, it’s important to enroll during your Initial Enrollment Period (three months before to three months after your 65th birthday). If you delay enrolling without having equivalent coverage (like from a working spouse), you could face penalties. But be forewarned! Enrolling in Medicare can be an overwhelming process that is difficult for even the savviest consumer. There are numerous options, complicated enrollment rules, confusing terminology, and a plethora of other details that can cost you a bundle if you choose the wrong plan.
Medicare consists of different parts:
- Part A (Hospital Insurance): Usually premium-free, covers hospital stays and some skilled nursing care.
- Part B (Medical Insurance): Covers outpatient care, doctor visits, and preventive services. It has a monthly premium.
- Part D (Prescription Drug Coverage): Covers medications. You must choose a standalone plan or a Medicare Advantage plan that includes drug coverage.
- Medicare Advantage (Part C): An alternative to traditional Medicare, these plans often bundle Parts A, B, and D and may include extra benefits like vision or dental.
Filling the Gaps: Supplemental Coverage
Traditional Medicare doesn’t cover everything. That’s why many retirees purchase Medigap policies—private insurance plans that help pay for out-of-pocket costs like deductibles, copays, and coinsurance. There are several standardized plans to choose from, each offering different levels of coverage.
Medigap plans are only available to those who choose Original Medicare (not Medicare Advantage). Enrollment is best during the Medigap Open Enrollment Period (the six months after you turn 65 and enroll in Part B), when insurers must accept you regardless of health status.
Health Savings Accounts (HSAs)
If you contributed to an HSA while working, you can use those funds tax-free for qualified medical expenses in retirement. While you can no longer contribute after enrolling in Medicare, the savings can help pay for premiums, prescriptions, and other costs not covered by Medicare.
Budgeting for Healthcare in Retirement
Healthcare is one of the biggest expenses in retirement. According to Fidelity, a 65-year-old couple retiring today may need over $300,000 to cover healthcare costs in retirement. It’s crucial to factor this into your retirement planning and consider long-term care insurance or other financial tools to protect against large expenses.
Losing employer-sponsored health insurance at retirement can feel overwhelming, but there are solid options available. Whether through COBRA, the ACA marketplace, Medicare, or Medigap, it’s possible to tailor a healthcare plan that meets both your medical needs and your budget. Navigating the complexities of Medicare or other health insurance plans is not easy. Some people muddle through the information on their own, trying to make sense of the confusing language and crossing their fingers that they have done everything right and aren’t paying too much for what they need. But the smart thing to do is work with a health insurance professional who can explain everything in plain English, hook you up with the perfect plan that fits just right for you and your family—no more head-scratching over complex policies or shelling out cash for things you don’t really need. It’s like having a personal shopper, but for your health coverage.
With the right strategy, you can retire with peace of mind—knowing your health is covered, no matter what the future holds.
For information on any health insurance, including Medicare, call Pam Deaton at 309-287-3518 or visit her online at www.pamdeaton.com. PD Benefits is located at 202 South Eldorado Road, Suite B2, in Bloomington, Illinois. There is no charge for Pam’s services. She works with many different insurance companies to help you review all your options and select the right insurance solution for your budget and specific family needs.