By: Chuck Henrich
There are many people out there that are in a financial position to retire, but one thing is holding them back. It’s Health Insurance, especially if they are under the age of 65 when Medicare enters the equation.
According to recent data from the Kaiser Family Foundation (KFF), about 156 million Americans, or around 49 percent of the country’s total population, receive employer-sponsored health insurance (group health insurance). So, it’s understandable why some people are a little concerned about retiring before they hit the age of 65 and losing their health insurance that will cover many of the routine and catastrophic health care expenses. We all have had our healthcare issues or events that would have cost us tens of thousands of dollars, if not hundreds of thousands, if we had to pay for those health events or surgeries out of our own pockets. With those type of experiences, it is very easy to understand why so many people feel as though they have to wait until age 65 to retire to make sure they avoid spending down a large amount of their nest egg in case a health crisis were to impact them before becoming eligible for Medicare.
There are many different health care plans that are offered by quality health insurance brokers ranging from the smaller local health insurance companies to the large national outfits like Aetna or United Healthcare. Those plans are pretty straight forward and are very popular because we tend to know that type of health insurance plan and are very comfortable knowing it will take care of a large percentage of any healthcare costs we might incur before being covered by Medicare. Let’s take a look at some alternative options to these types of “standard” health insurance plans.
- COBRA – COBRA insurance stands for the Consolidated Omnibus Reconciliation Act and is the most expensive of the “alternative” options. I wanted to include it as an alternative because many people love their health insurance and don’t want to give it up before retiring or turning age 65. The way COBRA works is that any time an employee voluntarily or involuntarily terminates their employment (other than gross misconduct) that person is eligible to continue their health care plan via the COBRA program. Both the employee and their spouse can elect to continue the exact same coverage for a maximum of 18 months, BUT the entire monthly health insurance premium becomes their responsibility. For a couple in their late 50’s or early 60’s, that can be a total monthly premium in the range of $1,800 to $2,000. With the 18-month time limit, if you are within 18 months of turning age 65, this could be a simple, but costly alternative.
- Primary Care Memberships – Also called Concierge Doctors, this is a new trend that is slowly expanding across the country and it’s built on the premise that primary care is getting too expensive and complicated. Because the price for routine healthcare is getting so high, many people are choosing to NOT seek out help for their ailments and watching their health deteriorate sometimes to the point of hospitalization, all because they couldn’t afford to go to the doctor.
Primary Care Memberships charge a low flat fee, typically in the $100 – $200 per month range, and provides you with same day visits, longer visits with your primary care doctor, and the ability to see the doctor as many times per month without any additional costs above the monthly flat fee. These plans are typically paired with a high-deductible health care plan or a Health Savings Account (HSA) as hospitalizations, surgeries, and lab tests are usually not part of the primary care services. It’s strictly for primary care services.
- Medical Cost Sharing Programs – Just as it sounds, this type of health care coverage is based upon participants paying a monthly fee that creates a pool of money to help cover each member’s medical expenses. After the member pays a “copay” for their health care visit, the pool will pick up the rest of the expense. Being that most people are not visiting the doctor each and every month, the collective sum of money in the pool continues to grow larger. These programs often negotiate lower prices with health care providers keeping the monthly fees at a very reasonable rate.
Many programs have different levels of protection and have caps on a per illness basis. Make sure you read the fine print to get a strong understanding of what your financial exposure could potentially be with a catastrophic event like a car accident or a stroke.
- Health Savings Accounts (HSA) – these are not really an alternative health care plan, per se, but they can be utilized prior to age 65 as a vehicle to pay for future medical, retirement, COBRA or long-term care expenses. These are funded with pre-tax dollars, invested, and when withdrawn to pay for eligible expenses, come out tax-free. Balances roll over from one year to another without a need to “use it or lose it”.
To be able to fund a Health Savings Account, one must currently be covered by a high-deductible health plan (deductible not less than $1,400 for an individual; deductible not less than $2,800 for an individual with family coverage). There are several different business owner scenarios that will allow a person to contribute to an HSA as well.
As far as contributions to an HSA are concerned, the IRS restricts how much a person can put into the HSA in any given year. For an individual, the 2021 contribution limit is $3,600 and am individual with family coverage can contribute up to $7,200. For people age 55 an older, a $1,000 additional “catch-up” contribution is allowed.
- Medical Services Discount Card – Many people are not aware that there is a “cash business” side in the world of health care. All health care providers and facilities have a different cost scale for those who pay cash. By utilizing Medical Services Discount Cards, it is possible to save up to 80% or more off of certain physician and hospital services, prescriptions, laboratory expenses and even dental.
To participate with these programs involves an annual or monthly fee. The fees may include services that you might not even need, so make sure you look at the different options that are available with each Discount Card. There are also restrictions on where the cards can be used, very similar to a physicians’ network or PPO healthcare plan. Again, it is wise to check first which providers and facilities will accept the Medical Services Discount Card.
- Part-time employment – this is an option for those that can possibly keep their old job, but cut it back to a couple days per week AND be able to keep your health care insurance. To do this, some companies will ask the part-time employee to pay more of the monthly health care premium, but in the end, it’s still a lot less than paying the whole amount out of your own pocket. Plus, you know what type of coverage you’re getting since you have used that health care insurance already.
For others, getting a part-time job might be an opportunity to work a job that they have always wanted to do, like at a retail store to get the employee discount on clothing or a job working at the golf course to be outside and get discounted greens fees. Whatever the reason, there are many companies who are looking for “seasoned” employees and willing to offer health insurance, even if the employee is a part-time one.
There is one more type of health care plan out there, but it is one to avoid. They are called Short-term Health Care Plans. The reason to stay away from them is because they do not have to follow the minimum requirements set forth by the Affordable Care Act (ACA). These plans can cap coverage with hospitalizations putting you on the hook for the remaining balance, don’t have to cover pre-existing conditions, and can have life-time reimbursement limits. So, although these Short-term Plans are inexpensive and enticing, their coverage usually falls way short for what a person in their late 50’s or early 60’s would be looking for with a full health insurance plan.
