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For those of us who want to retire prior to going on Medicare, is there a better time of the year to do that? What do people need to be aware of prior to making this move?Can you help me find a health plan that will get me to my 65th birthday?
The time of the year you retire absolutely needs to be considered. This is especially important for those who may need an ACA (Obamacare) plan. Household income for the calendar year is the biggest factor in what premiums are for Obamacare plans. If a person works part of the year, we must include that income in the ACA application.
Let’s use an example of two 62-year-olds who aren’t married, are retiring in 2020, are making the same $80,000 salary, and will receive $2,000 per month in Social Security once they stop working. Jim plans on retiring on February 1st and Jenny on July 1st. Again, remember, we must calculate and enter what both will earn in 2020 when applying for Obamacare. Kevin’s gross pay was $6,666 in January from his job and he will receive another $22,000 in Social Security for a total of $28,666. He’s going to use some money he has in a savings account, which doesn’t need to be included on the application to Supplement his income. His ACA premiums on plans I would have him consider would be $1.91 (that is correct, 1 dollar and 91 cents) for a catastrophic plan with a deductible of $7,400, or $216/month for a plan with a $900 deductible.
Jenny, on the other hand, made $39,996 from her employer and will receive $12,000 in Social Security benefits in 2020, bringing her total income to just under $52,000. Her premiums for the same exact plans would be $571 and $787 per month respectively. Crazy right? Welcome to the ACA. You see, Kevin qualified for a premium subsidy. Jenny did not, and therefore will have to the pay full cost for and ACA plan.
There are many issues those retiring pre-65 need to be aware of. First, premiums for ACA plans can be ridiculously expensive for those who qualify for little or no premium subsidy. In addition, it’s my opinion benefits aren’t in line with costs for those who get little or no subsidy. I would describe Jenny’s higher priced option as mediocre at best.
COBRA, which is the continuation of your employer plan benefits, also must be considered. I estimate that at least 75% of people who retire early are better off going with that route due to lower premiums, deductibles, and out of pocket costs. However, it generally can only be purchased for 18 months. So, retiring a year and a half before the month one’s Medicare A and B go into effect is quite often a good game plan.
Another issue with ACA plans is the networks are very restrictive, especially in Allegheny County. You can pay extra money to have access to more doctors, but it’s extremely cost prohibitive and a mistake in my opinion. Lastly, what people need to be most aware if is that Highmark and UPMC are the only companies in Western PA selling true Major Medical health insurance. Only Major Medical plans limit what you can be billed in a calendar year, known as the Maximum Out of Pocket, or MOOP. In other words, even someone who received $300,000 or more in medical care and prescriptions could be billed no more than their MOOP, which generally runs between $5,000 and $8,000 on ACA plans.
If you are looking at, or someone is attempting to sell you, a policy from any company other than Highmark or UPMC, it’s likely what is known as an Indemnity Plan that pays claims based on a schedule. For example, you might get reimbursed $250 to $1,000 per day for an inpatient hospitalization, $75 to $250 for an Emergency Room visit, $500 to 1,500 per Chemo treatment, $125 for an MRI, etc. With these plans there is no limit on the amount of bills one may have to pay. Chemo can be $10,000 or more per treatment. James Conner, Steelers running back, needed 12 during his bout with Cancer.
Do the math on how much he would have owed if he had one of these Indemnity policies and needed $120,000 worth of Chemo. Most of these plans cover little or no prescription costs as well. If one needed expensive brand name meds, which can cost $400 to $800 per month, the entire cost would be incurred for those on Indemnity plans. As ACA plans continued to become more expensive, I took a hard look at offering them as an alternative to Obamacare. In the end, I simply wasn’t comfortable selling a product that could leave clients holding the bag for tens of thousands of dollars in medical bills.
The agents who sell these policies often don’t live locally and do business over the phone or internet. They can be very convincing and attempt to have people believe they’re a no-risk, affordable option to an ACA plan. Commissions paid to salespeople for these plans are enormous, as much as ten times more than what agents are paid to sell ACA policies. Unfortunately, this type of financial incentive can cloud one’s judgement. I would almost never advise someone to go with an Indemnity Plan.
To answer the last part of today’s question, The Health Insurance Store does help people transition from employer plans to those that can bridge the gap to Medicare. There is no cost for consultations to assess your medical needs and advise if COBRA or an ACA plan is the better value as well as go over deductibles, co-pays, and other out of pocket costs before walking you through the application process and what to expect.
Please call one of our offices or email me directly with questions regarding this or any other column topic. Feel free to go to our website or Facebook page to read prior columns and listen to the replay of my most recent radio broadcasts.
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