Most employees depend on their employers for health insurance today. It is possible to go into the open market and buy an individual health insurance policy under the Affordable Care Act, but these policies tend to be expensive. Premium subsidies are available, but only if you meet asset and income limitations. Of the insurance options available to working people under age 65, their own employer plan—or a spouse’s plan if available—is likely to be the best choice.
If a client retires before age 65, they will have to find different insurance to take effect immediately after the employer insurance ends. If the client’s former employer offers retiree insurance to tide them over to Medicare age, great. Or, if the spouse is still working, the client may be able to get on the spouse’s plan. If neither of these options is available, the client may go onto COBRA, which will keep the employer insurance in force at full cost to the client. As a last resort the client will need to go into the open market and buy an individual policy to last until Medicare starts at 65. The cost of this pre-65 insurance will, of course, need to be figured into the post-retirement budget, and the client would need to be confident about covering the costs before making the decision to retire.
Once a client turns 65, the Medicare option becomes available. If a retiree has an ACA plan, they will leap at the chance to get into Medicare in order to lower their costs. If they have a retiree plan, they will be forced to have Medicare, either because the retiree plan ends at 65 or shifts to secondary payer status (serving as supplemental insurance) with Medicare as the primary payer. If they are on a spouse’s plan, and if the plan covers 20 or more employees, they may be able to stay on the spouse’s plan. But take note: Some plans specify that dependent spouses must enroll in Medicare upon turning 65. So if a client turns 65 while on a spouse’s plan they will need to check with the plan to see if Medicare enrollment is a requirement. (An over-20 plan can’t require an employee to enroll in Medicare, but it can require it of a dependent spouse.)
Related: Original Medicare vs. Medicare Advantage
Once Medicare becomes an option, by virtue of the client turning 65, health insurance should be reevaluated. Even if a client is still working and staying on an over-20 employer plan, or retired and staying on a spouse’s plan, the existing plan should be compared to Medicare, either traditional A and B with a drug plan and supplemental insurance, or a Medicare Advantage plan. Overall, employer insurance isn’t what it used to be: deductibles are up, cost-sharing is up, and certain specialist services may be hard to get. Clients should not assume that their employer insurance is better than Medicare paired with a good supplemental policy. It may be, but they don’t know that until they’ve compared benefits and potential out-of-pocket costs of both plans under their expected health care usage.
And that’s another thing that might change along with the passing of the client’s 65th birthday: they may need more health care services as they age. Employer plans are designed for younger, healthier populations. Deductibles can be high because employees don’t expect to get sick; in fact high deductibles are welcome if they keep premiums low. But high deductibles can be devastating for people who do get sick, or who contract conditions requiring expensive prescription drugs. Then you want a plan designed for more frequent and expensive health care usage. That’s Medicare, along with a supplemental policy and prescription drug plan or a Medicare Advantage plan.
Source: Horsesmouth, LLC
Horsesmouth, LLC is not affiliated with Lane Hipple or any of its affiliates.