Retiree Insurance: What's The Plan?

When it comes to insurance, retirees have a number of options to consider. These include life insurance, which can help cover final expenses, pay off debts and estate taxes, fund charitable contributions, or leave an inheritance. Additionally, health insurance is an important consideration for retirees, especially in countries like the United States, where healthcare is tied to employment. In the US, retirees can explore options such as Medicare, Medicaid, COBRA, health sharing plans, or private insurance through the Health Insurance Marketplace.

Medicare eligibility and enrolment

Medicare is health insurance for people aged 65 or older. However, you may be eligible for Medicare earlier if you have a disability, End-Stage Renal Disease (ESRD), or ALS (also known as Lou Gehrig's disease).

Eligibility

Most people are eligible to sign up for Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) when they turn 65. This is called the Initial Enrollment Period (IEP) and lasts for 7 months, starting 3 months before you turn 65 and ending 3 months after you turn 65.

If you have a disability, you are eligible for Medicare after receiving disability benefits for 24 months. If your disability is ALS, there is no waiting period, and you are entitled to Part A the first month you are entitled to disability cash benefits.

If you have ESRD, you are eligible for premium-free Part A if you meet one of the following conditions:

• You receive regular dialysis treatments or a kidney transplant, have filed an application for Medicare, and
• You have worked the required amount of time under Social Security, the Railroad Retirement Board (RRB), or as a government employee.
• You are getting or are eligible for Social Security or RRB benefits.
• You are the spouse or dependent child of someone who has worked the required amount of time under Social Security, the RRB, or as a government employee, or you are receiving these benefits.

Enrollment

If you are already receiving Social Security or RRB benefits at least 4 months before becoming eligible for Medicare and you reside in the United States (except for Puerto Rico), you will be automatically enrolled in both premium-free Part A and Part B. If you do not wish to keep Part B coverage, you can refuse it. If you live in Puerto Rico, you will only be enrolled in premium-free Part A, and you must actively enroll in Part B if you want this coverage.

If you are not receiving Social Security or RRB benefits, you are not automatically enrolled, and you must actively enroll in Medicare. You can sign up for Part A and Part B when you are first eligible, during your Initial Enrollment Period. If you miss this period, you will have to wait to sign up, and you may have to pay a monthly late enrollment penalty for as long as you have Part B. The penalty increases the longer you wait.

If you miss your Initial Enrollment Period, you might qualify for a Special Enrollment Period, which is available for certain situations. For example, if you missed the chance to sign up because you were impacted by a natural disaster or emergency, you could sign up during the Special Enrollment Period without paying a late fee.

Employer-sponsored insurance

When it comes to employer-sponsored insurance, retirees have a few options to consider. Firstly, it's important to understand how retiree coverage works in conjunction with Medicare. Speaking to a job's benefits administrator is crucial to gain clarity on the specifics of the retiree coverage offered by the employer. This includes understanding if the current benefits for the retiree and their family will change, if the employer offers creditable drug coverage, and if they provide supplemental coverage compatible with Medicare.

In most cases, when becoming eligible for Medicare, retirees may need to enrol in both Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) to maximise their benefits from their retiree coverage. It is important to note that there is a limited time frame to sign up for Medicare without incurring a penalty. Additionally, retiree coverage may not cover medical costs during periods when an individual was eligible for Medicare but did not enrol.

Retiree coverage can sometimes include additional benefits, such as extended hospital stays. However, it is also important to understand the limitations of the coverage. Employers may set caps on their financial contributions, for example, only covering out-of-pocket costs once they reach a certain amount.

If a retiree has both Medicare and retiree coverage from their former employer, Medicare typically pays for healthcare bills first, with any remaining amounts being submitted to the retiree's plan. This coordination between Medicare and retiree coverage is an important aspect to consider when planning for insurance during retirement.

Some employers may also offer Medicare Advantage Plans or group Medigap policies for their retirees. These plans often integrate Medicare and retiree health benefits. In certain cases, employers may require enrolment in their sponsored Medicare Advantage Plan for retirees to continue receiving health benefits. However, retirees always have the option to decline their employer's coverage and instead opt for Original Medicare or an alternative Medicare Advantage Plan. It is worth noting that once declined, the option to enrol in the employer's plan at a later date may not be available.

To summarise, employer-sponsored insurance for retirees can vary, and it is important to carefully review the specifics of the coverage offered. By understanding how the retiree coverage interacts with Medicare, individuals can make informed decisions about their healthcare options during retirement.

COBRA insurance

COBRA, or the Consolidated Omnibus Budget Reconciliation Act, is a federal law that allows workers and their families to continue their employer-provided health insurance after specific life events, such as job loss or reduced work hours, for a limited time. This temporary extension of health coverage is called continuation coverage.

Qualifying for COBRA

Certain events trigger your eligibility for COBRA insurance, including voluntary or involuntary job loss, transition between jobs, reduction in work hours, death, divorce, and other life events. In addition to a qualifying event, continuation of the health plan depends on the size of the employer. The business must have had 20 or more employees in the previous year.

Applying for COBRA

When your job health insurance stops, you are allowed a special open enrollment period to select new health insurance. One option is to choose COBRA. Your employer is required to inform you about the availability of COBRA benefits and how to access them following a qualifying event. You will be sent a notification within 45 days to continue your employer coverage, and you will have 60 days to respond to the election notice and apply for COBRA.

COBRA Coverage

Under COBRA, you can generally continue your employer-sponsored health insurance for a limited time, typically 18 to 36 months. The specific length of your COBRA coverage will depend on the qualifying event. COBRA coverage is retroactive, meaning it covers medical expenses that occurred after your old coverage ended but before COBRA began.

Cost of COBRA

The cost of COBRA coverage can range from $400 to $700 per month, per individual. When choosing to continue your health insurance coverage through COBRA, you will be responsible for paying the full premium yourself, which can be up to 102% of the cost to the plan. As a result, the premiums for COBRA coverage are generally higher than what you paid while employed.

Cancelling COBRA

To cancel COBRA benefits, the primary beneficiary must notify the plan administrator in writing that they wish to terminate the plan.

Spouse's insurance

When it comes to insurance for spouses in retirement, there are a few key considerations. Firstly, it's important to understand the difference between employer-sponsored insurance and Medicare, as well as the options available when one spouse transitions to Medicare while the other is still below the eligibility age.

Employer-Sponsored Insurance:

If one spouse is still working and receiving health insurance through their employer, the other spouse can usually be covered as a dependent. However, it's important to check with the employer's benefits administrator to understand the specific terms of the coverage, including any age restrictions or changes in benefits upon retirement.

Transitioning to Medicare:

When a spouse retires and becomes eligible for Medicare, the working spouse may be able to continue their employer-sponsored coverage. In some cases, employers provide retiree health benefits that serve as supplementary coverage for Medicare, but these plans may or may not offer spousal benefits. It's crucial to review the terms of the retiree coverage to determine if spousal benefits are included.

Options for the Non-Medicare Spouse:

If the working spouse's insurance was covering the couple, the non-Medicare spouse has several options to consider:

• Job-Based Health Insurance: If the non-Medicare spouse has access to health insurance through their own job, they can take advantage of a special enrollment period when losing spousal coverage. This allows them to enrol in their workplace plan outside of the regular open enrolment period.
• COBRA Continuation Coverage: If the retired spouse's health plan is subject to the COBRA law, the non-Medicare spouse may be able to continue their current health plan for a limited time, typically 18 months, or up to 36 months under certain circumstances. However, this option can be expensive as the individual will need to pay the full monthly premiums plus an administrative fee.
• Health Insurance Marketplace: The non-Medicare spouse can purchase an individual health insurance policy on their state's health insurance marketplace, either on or off the exchange. Losing spousal coverage qualifies as a special enrolment event, allowing them to purchase a plan outside the regular open enrolment period. They may also be eligible for subsidised coverage based on their income and household size.
• Private Health Insurance: Purchasing an individual health insurance policy outside of the state's health insurance marketplace is another option. However, subsidised coverage is typically not available unless the plan is purchased through the state exchange.

Additional Considerations:

In addition to health insurance, there are other types of insurance that spouses may want to consider during retirement. Life insurance, for example, can be useful to cover final expenses, pay off debts, fund charitable contributions, or leave an inheritance. It is important for spouses to assess their financial situation, including any outstanding debts, income sources, and family circumstances, to determine if life insurance is necessary in retirement.

Health Sharing plans

• Lower costs: Monthly costs are usually much lower than insurance premiums.
• Choice of provider: There are no network requirements, and members can use their health sharing card as coverage. If a doctor does not accept the plan, members can pay out-of-pocket and be reimbursed.
• No annual or lifetime limits on medical expenses.
• No need to wait for open enrollment: Members can sign up at any time.

However, there are also some disadvantages to Health Sharing plans. They are usually restricted to people who are generally in good health and do not have pre-existing conditions. Most Health Sharing plans are also faith-based and require members to agree to live by a moral and healthy lifestyle. Additionally, Health Sharing plans do not typically cover essential health benefits like wellness exams or mental health counselling.

Some popular Health Sharing ministries include Liberty HealthShare, Christian Healthcare Ministries, Samaritan Ministries, Medi-Share, Altrua HealthShare, AlieraCare, and Sedera.

Frequently asked questions