Retiring Early? Three Ways to Keep Covered
Many people know the Medicare milestone age of 65 well. People anticipate this age as they’re approaching it (and maybe even many years before) and start thinking about all the pieces of Medicare they’ll need to sign up for, the potential premiums to expect, and how coverage and doctors might change. The AARP brochures that have been showing up since age 50 (or maybe even before that just to rub it in even more!) start sharing more about Medicare, friends and family members start sharing their stories of enrollment or what they are reading and preparing to do, and it makes many people think it’s time to start thinking about what they’ll do. Luckily, we are here to help you with the transition to Medicare and have found it really can be easier and more successful than it may seem.
If you are a Client, six months before you turn 65 you will receive a detailed email from us outlining the pieces of Medicare you need to consider and the timelines within which you can enroll. If you’re curious what kind of information it will include, you can read more here in Making Medicare Make Sense.
But what if you retire before 65? Maybe it’s a year before, maybe it’s 10. What do you do about health insurance coverage until that big day you turn 65? Fortunately, you have a few options and we’ll help you through this process in the same way. You can consider COBRA coverage, coverage through your spouse’s employer plan (if applicable), or a health insurance plan through the Affordable Care Act (ACA).
Oftentimes, the plan of action may include two or all three of these options depending on the length of time until age 65. Considering the coverages available, your preferred doctors, and the cost structure of each option is important to determining what is best for your particular situation.
The Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, allows you to extend the coverage you had through your employer for 18-36 months (and you can continue to include any dependents you had covered on your plan while employed). It is most likely that if you are retiring and looking for coverage prior to Medicare at 65 you will be able to extend your coverage for up to 18 months.
If you elect COBRA coverage, you will be responsible for 100% of the plan premium, of which you were only previously paying a portion (your employer paid the other portion). There is an additional 2% administrative fee in most cases, too, so you will be paying a maximum of 102% of the total cost of your insurance from when you were employed. Your employer has 45 days to send you the COBRA election paperwork and you have a 60-day enrollment window (which means your window for action may be as short as 15 days if they take the full 45 days to send you the information). Once elected, your COBRA coverage will be retroactive to the day you separated from service with your employer (when you coverage would have stopped).
You can ask your HR department to let you know when to expect the paperwork (and it might be wise to ask them prior to your actual retirement date; they may be able to provide you with the details then and there).
A few notes for awareness:
- Not all companies are required to offer COBRA – only those with 20 or more employees are required (and some states have requirements for companies with fewer employees and potentially different enrollment periods). Clearly, as you prepare to retire, it will be important to know if your company offers COBRA and the details you’ll need to make an informed decision.
- Your COBRA coverage may or may not include dental and vision coverages (so you’ll need to plan for additional coverage if COBRA doesn’t cover these items).
If you are married and your spouse is going to remain employed, another option is for your spouse to add you as a dependent on their employer-sponsored health insurance (and you can often be added as a dependent for vision and dental insurance coverages, too). While there are annual Open Enrollment Periods during which changes can be made to employer plans (and ACA plans that we’ll discuss next), there are also Qualifying Life Events that allow for changes to an employee’s coverage during a Special Enrollment Period; your loss of coverage as the spouse is one of them. The special enrollment period is generally 30-60 days.
The first step is for your spouse to contact the HR department to request the employee benefits booklet (or find it online where benefits are managed). This booklet will include information on the per paycheck premiums your spouse will pay to add you to these plans (health, dental, vision). Then, your spouse will need to contact HR to inform them that you will soon be losing your coverage (by way of retirement) and ask for information on how to enroll you in the plan(s) during the Special Enrollment Period (and how long the period lasts).
Affordable Care Act
Another option you have is to enroll in a health insurance plan through the Affordable Care Act (ACA, also known as Obamacare). There are varying levels of plans (bronze, silver, gold, and platinum) that have varying levels of deductibles and monthly premiums. Many states have their own health insurance exchange on which you can research plans available to you. As with employer plans, the ACA has Open Enrollment from November 1 – December 15 each year (some states allow for a longer open enrollment period). Losing your employer-sponsored coverage, however, is a Qualifying Life Event that allows you to enroll in coverage during a Special Enrollment Period of 60 days. You can apply for coverage up to 60 days prior to losing your coverage, too.
To get started, go to https://www.healthcare.gov/get-coverage/ and select your State. If it offers to direct you to your state’s exchange, click the link. Once there, find an option to see or compare plans (versus an option to apply – you do not want to do that until you’ve chosen which plan you’ll purchase). On the Covered California website, for example, find the Shop and Compare option.
If your state does not have a specific exchange website (Virginia falls into this category), on the Healtchare.gov website choose See Plans & Prices and enter your zip code and family details (you only need to enter information for the person(s) needing coverage).
If you have specific doctors you want to use, be sure to confirm they are within the network or accept the plan you ultimately choose through the ACA.
While there are three coverage options explained above, the best course of action may include one, two, or all three of them throughout the years you need coverage prior to age 65. If you retire at age 60, for example, the most cost effective and appealing coverage plan may be one that includes COBRA coverage for 18 months then an ACA plan. Or maybe the best combination is COBRA followed by coverage on your spouse’s plan. Perhaps your spouse’s plan is more affordable than COBRA coverage and you get covered on their plan for the duration of time until age 65. Or perhaps the ACA plans provide the best coverage and costs and you go directly to one there. We have seen all of these scenarios play out based on coverages, cost structures, and preferences and we’re here to help you determine the best path for you and your family.