By Kathleen Kingsbury
March 19 At 54, Steven Eisen knows he's pretty
lucky to be considering
retirement from his Nashville law firm within the next year. But
beyond the usual financial considerations, he has another
advantage unavailable to most workers today: guaranteed
employer-sponsored health benefits until he turns 65.
"Health coverage is extremely critical to my wife and me
since we both have chronic illnesses," Eisen says. "We probably
would have difficulty obtaining coverage elsewhere at a
That is the big challenge facing early retirees such as
Eisen and the larger number of older workers who might be facing
retirement before they are ready. Workers 45 and older make up a
disproportionate share of the long-term unemployed, according to
the Bureau of Labor Statistics and they have a hard time finding
affordable health insurance.
Employees who leave work before age 65 aren't eligible for
Medicare, nor can they rely on receiving health benefits from
former employers. In 2010, about 17 percent of workers were
employed by firms offering health coverage to early retirees,
according to the Employee Benefit Research Institute (EBRI),
compared with 28 percent in 1997.
"People are forced to go out on to the open market and try
to navigate an expensive, complicated landscape," says AARP's
Nicole Duritz. "And there is no guarantee right now that they
will find coverage, affordable or at all."
Policyholders aged 55 to 64 will pay an average of $588 per
month for comprehensive coverage for a single person in 2013,
according to a survey by eHealth, Inc. That's more than double
the $279 monthly premium that is average for all age groups.
Older people are charged more because they typically use
more medical care and are more likely to have pre-existing
conditions, said Duritz.
Some of these obstacles will go away under the Patient
Protection and Affordable Care Act, as public health exchanges
and new rules go into effect on January 1, 2014. That law will
prohibit the use of pre-existing conditions as a basis for
higher premiums or denial of coverage. And the amount of extra
premium that can be charged based on age will be limited.
But for older people on their own, that still leaves nine
months between now and then to fill with some kind of health
insurance and the prospects of continuing to buy their own
coverage next year. Here are some tips:
- Analyze your actual needs. Newly emancipated employees
might not be accustomed to choosing their own healthcare
policies. Before buying a plan, consider a variety of factors,
such as how often you go to the doctor, what medications you
take and whether you are going to stay in the same geographic
locale for the whole year, or live in more than one place.
"Most people are going to buy the cheapest, most bare-bones
plan available, but that's rarely the best value for their
money," says Bryce Williams, chief executive officer of Extend
Health, a San Mateo health insurance exchange run by benefits
consultancy Towers Watson.
- Reduce costs with a healthcare savings account (HSA).
Paired with high-deductible health plans, HSAs are the
property of the employee and funds roll over year-to-year, even
though employers will frequently make contributions to the
account as well.
So, if you are still employed and planning early retirement,
sock as much money as possible into your HSA, recommends Patrick
Haraden, a Boston-based benefits consultant. You will be able to
use that money to pay your premiums in the future.
In 2013, individuals can save up to $3,250 in an HSA, with
an extra $1,000 allowed for HSA holders who are now 55 or older.
The HSA contribution limit for families is $6,450.
"That takes a dent out of premiums down the road," Haraden
A high-deductible plan typically will cost less than a
low-deductible plan, so this option is worth investigating, even
if you're buying your own coverage. You can save on premiums and
put extra money into the HSA for current or future healthcare
- Investigate private exchanges. More and more employers are
turning to what are known as private insurance exchanges to
manage their retiree health benefits. Two of the largest private
exchanges are operated by the human-resources consultancies Aon
Hewitt and Towers Watson & Co. Both offer policy seekers dozens
of plans to choose from in a retail experience not dissimilar to
buying a airline ticket online from Travelocity or a book
from Amazon.com, Inc.
The first step is to ask if your former employer has
partnered with a private exchange and if you can use it. Some
companies still pick up a portion of the cost of plans bought
through private exchanges; others simply offer access to their
- Get extra advice.
"We've already logged some 18 million minutes of phone calls
helping to enroll people in the right plan for them," said
Other health exchanges and Web comparison sites, such as
ehealthinsurance.com will help consumers sift through plans. The
AARP directs those 50 and older to personalized and local
resources through its health law guide at.
- Explore affinity groups. Some early retirees might be able
to join a group plan as members of a trade or professional
association such as the National Association of Female
Executives, the Freelancers Union or the Small Business Service
- Take COBRA, if you can afford it. Most separated workers
can fill in by paying privately for the coverage they used to
have at work under the provisions described in the Combined
Omnibus Budget Resolution Act of 1986. But it's not cheap.
Without the employers' subsidy it can be quite costly. The
average cost of employer-sponsored health plans in 2012 was
$5,615 for singles and $15,745 for families, according to a
survey by the Kaiser Family Foundation.
- Fill gaps with short-term policies. On January 1, it's a
whole new ballgame, so you might only have to fill the nine
months between now and then. The most affordable fit might be a
short term policy. These plans typically run for three-month
increments and cost an average of $151 a month for people ages
55 to 64, according to eHealth data. But these policies are
rarely comprehensive, warns eHealth's Carrie McLean.
"These plans will mean at least some out-of-pocket expenses,
such as for a routine doctor's visit," McLean says. But, for
most, she adds: "It will at least get them through this gap
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