Your healthcare options and costs can basically be divided into two categories: Medicare & Pre-Medicare. If you plan on retiring before 65, you’ll need a health insurance options because you won’t qualify for Medicare just yet. If you won’t retire until age 65 or after, then you can rely upon Medicare.
Early Retirement
If you retire before age 65, you will need some type of health insurance to bridge the gap until Medicare. Your three main options are:
COBRA
ACA
Private Insurance
COBRA
Your first option is COBRA. COBRA will allow you to keep your current employer sponsored group health insurance for a period of up to 18 months. Your spouses and dependents can also keep their coverage. However, COBRA is very cost prohibitive. You can expect to pay at least double what you are currently paying, possibly more.
Marketplace Insurance
Your next option is a marketplace plan. When choosing a marketplace plan, you’ll need to look at monthly premiums, deductibles, coinsurance or copays and out of pocket maximums. If you are retiring early and relying upon savings, you may be able to get a premium tax credit which can help you save thousands of dollars per year. The marketplace only looks at your income, not your savings and assets. If your income is low, you may pay very little for your plan.
There are other costs that you should take into consideration when planning healthcare for your retirement. With an ACA plan, your deductible may be higher than what you’re used to, but there are plenty of basic services that may be covered at no cost even before you’ve met your copay. These are mostly preventative and basic services like vaccinations, screenings and wellness checks.
Private Insurance
If you’re ineligible for a premium tax credit, you may want to look into private insurance, specifically a short term medical plan. A young healthy person can often get a plan for about $100/month. You can tailor your plan to meet your needs with the right benefits and coverage.
Medicare
If you retire after 65, you’ll be eligible for Medicare. With Medicare, you also have a few options.
Original Medicare
Medicare Advantage
Original Medicare + Medigap & Part D
Original Medicare
There are costs associated with each option that can help you plan for healthcare costs in your retirement. Original Medicare is Part A & Part B. Part A is your hospital insurance. Part B is your outpatient insurance. You most likely won’t have to pay for Part A. Part B does have a monthly premium which is based on your income. In 2022, the base premium is $170.10. With Original Medicare alone, there are also deductibles and coinsurance or copays.
There is no out of pocket max. Therefore you cannot calculate the max you would have to pay. This can open you up to large risks if you need major medical care.
For Part B, after you’ve met your deductible, you will have a 20% coinsurance for doctor’s visit and outpatient procedures. Most of these services are far less costly than Part A services. For Part A, after you meet your deductible, you may have to pay coinsurance depending on your length of stay at a hospital or SNF.
Medigap
If you wish to mitigate that risk, you can either choose a Medigap Plan or Medicare Advantage. A Medigap plan will fill in the gaps of Original Medicare. You will pay an additional premium to have your deductibles and copays or coinsurance covered. For example, if you purchased Plan G, you would pay your Part B premium and your Plan G premium and add the once yearly Part B deductible.
Part C
Another option is Medicare Advantage. These plans function more like the group health insurance you’ve had in the past and they are extremely diverse. You will give up access to the Medicare network and you may still have copays or coinsurance but generally the premiums will be lower than a Medigap plan. Additionally, plans may offer prescription drug benefits, dental, vision and more. For these plans, please use a broker.
No matter when you retire, your health care and health insurance will be important. Call or schedule an appointment with us today. Our services are 100% FREE.
Jesse Smedley is the Principal Broker for iHealthBrokers and the founder, president, and CEO of Smedley Insurance Group, Inc. and iHealthBrokers.com. Since the inception of SIG in 2007, Jesse has been dedicated to helping people save money on their health insurance by providing them with resources to educate themselves on all their health insurance options, both under age 65 and Medicare beneficiaries. He is featured in many publications as well as writes regularly for expert columns regarding health insurance and Medicare.
