How To Get Health Insurance At Retirement


Retirement Insurance QuestionLast week I was asked a very good question.  Someone asked me, “Where do you get health insurance when you retire.”

As I considered how to answer I realized something.  The answer to this straight forward question is not a straight forward one.

Unlike politicians who can lie with a clear conscience, I am an insurance professional.  I know that insurance rules do not change just because I speak louder than others.  My answers have to be correct.

It all depends on how old you were when you retired.

EARLY RETIREMENT

If you retired prior to your 65th birthday you have two options.

If you are still in good to average health, you may be able to get an individual major medical policy through a private insurance company.  You can do that on-line, if you are comfortable on the internet.  If you are not comfortable using the internet or want help during the underwriting process, use an insurance agent you can trust.

All major medical plans have holes.  If you are healthy enough to qualify for an individual major medical plan, you may wish to plug those holes with one of the many health insurance supplements.

Health insurance supplements are not the same as major medical health insurance.  They are much less expensive but only cover specific risks.  There are many types of supplements that are available.  You will need to consult with your insurance professional to see what is available to you.

Of all the health insurance supplements that exist, my experience has shown that Critical Illness is the most important.  It pays a lump sum of cash directly to the insured in the event of a diagnosis of cancer, heart attack, stroke, Alzheimers disease or any of the other critical illnesses that are named in the policy.

The money from the Critical Illness policy can be used to pay for anything.  For people who have not yet retired, the money can be used to supplement their lost income while they are recovering and unable to work.

For people who have retired, the money can be used to pay for medical bills that you health insurance does not pay (i.e. deductibles, co-insurance and pharmacy limitations).

If you cannot medically qualify for private insurance, the Patient’s Protection and Affordable Care Act assures that there is a High Risk Health Insurance Pool in your state.  In many states, that pool is run by the state department of insurance.  All you need to do is contact them and they can send you in the right direction.

If your state does not sponsor a high risk pool, there is one available to you that is managed by the federal government.  Call your local Department of Health and Human Services to see how you can enroll.

RETIREMENT AT 65

If you waited until you were 65 or older to retire, you have few, if any choices.  In 1965, the Social Security Act was amended with Title XVIII.  It created a government monopoly for health insurance for people over the age of 65.  That monopoly is called Medicare.

Throughout your working years you have been paying premiums into the plan through your payroll taxes.  Now that you are 65, you will be covered by Medicare.  If you want to see what Medicare covers, read “Medicare and You.”

Medicare has similar holes to the major medical health insurance you had before you turned 65.  It requires you to pay deductibles and co-insurance.

The biggest difference is in its limits.  Private major medical health insurance has an out-of-pocket limit for co-insurance.  After you have paid a stated amount, it will normally pay all of your medical bills for the rest of the term or calendar year.

Medicare has no out-of-pocket limit for co-insurance.  You will be responsible to pay $ 1 for every $ 4 Medicare pays for Part B medical bills.  (You can read more about it in the book, “Understanding Medigap”)

HAVE YOU CONSIDERED?

It is not my intention to sound like a pesky sales person.  However, if you are making plans for insurance during your retirement, there is a form of health insurance that is often over-looked.  Long Term Care insurance pays the bills that Medicare and Medigap does not.

Medicare pays only for medically necessary treatment.  Medigap only pays for things that Medicare does.  If the limitations of older age infect your body, Medicare will not pay for you to hire help with the Activities of Daily Living that you used to take for granted when you were younger.

For people who need care-giving, those expenses often are more than the costs of medical bills to doctors and hospitals.  Without Long Term Care insurance your only options to hire home health care are to qualify for Medicaid or pay for your help from your retirement funds.

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