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10 Options for Medical Coverage in Retirement

Copyright © 2014 AARP. All rights reserved.

Unless you'll receive retiree health benefits from an employer or union, you need to consider what medical coverage you can get if you retire before or after age 65.

Here are your options before age 65:

  • Spousal benefits: If your spouse is working and has employer health insurance, you may be able to transfer to his or her plan for your coverage. Your spouse should contact the benefits administrator and add you to his or her coverage no later than 30 days after your own insurance ends. (Otherwise, you'll have to wait until the employer's open enrollment period near the end of the year.)

  • Veterans' benefits: If you served in the armed forces, you may qualify for the health care program run by the Department of Veterans Affairs. This program doesn't cover dependents. For more information, go to the VA's health benefits website, or call the VA Health Benefits Service Center toll-free at 877-222-8387.

  • COBRA temporary insurance: If you receive health insurance from your current employer, you may qualify to have it extended after retirement. The COBRA law allows people who've left or lost a job to continue the same group insurance coverage for themselves and their families for up to 18 months by paying the full premiums. Go to the U.S. Department of Labor's website for more information.

  • Individual health insurance: You can purchase non-group insurance for yourself and any dependents. But your options change significantly from January 1, 2014, when the main provisions of the Affordable Care Act (ACA) kick in.

    • Until December 31, 2013: Before this date, insurance companies can refuse to cover you or ask you to pay a higher premium if you have preexisting health conditions. However, if you've had group or COBRA insurance for at least 18 months (and with no break in coverage longer than 63 days), you may have the right to buy individual insurance that doesn't exclude or limit coverage for preexisting conditions. For general information about this program, available under a law called HIPAA, go to the U.S. Department of Labor's guidance for consumers. For specific details on your rights and to find companies that sell in insurance in your area, contact your state department of insurance; visit www.naic.org/state_web_map.htm for the phone number.

    • After January 1, 2014: Under the ACA, you can buy individual health coverage for yourself and any dependents — regardless of health or pre-existing medical conditions — through health insurance exchanges set up in each state. These exchanges are marketplaces where you can choose from a menu of health plans offering different benefits and costs. If your income is under a certain level, you qualify for government subsidies. Plan details are posted online from October 1, 2013; the first enrollment period is from October 1 to March 31, 2014. To see details of plans in your own state, go to www.healthcare.gov.

  • Medicaid: If your income is limited, you may qualify for medical assistance under the federal-state Medicaid program. (This program has a different name in some states, such as MediCal in California, MassHealth in Massachusetts, and TennCare in Tennessee.) To qualify, you must meet income and savings limits required by your state. For a quick way to see whether you're eligible for this and other government programs, go to www.benefitscheckup.org. For help in applying for Medicaid, contact a counselor at your State Health Insurance Assistance Program (SHIP). To find the phone number of your SHIP, visit www.shiptalk.org or call 800-677-1116.

Here are your options at age 65 or older:

  • If you're a U.S. citizen or permanent legal resident (green card holder), you qualify for Medicare when you or your spouse has earned 40 work credits (usually after paying Medicare payroll taxes during about 10 years of work). For example, if you chalk up 28 credits by age 60, you can meet full Medicare eligibility by working three extra years and earning 12 more credits. However, you still can't receive Medicare benefits under age 65 (unless you qualify at a younger age through disability, as explained at www.aarp.org/health/medicare-insurance/info-06-2008/ask_ms__medicare_10.html).

  • If you don't have enough work credits at age 65, you can buy into Medicare by paying monthly premiums for Part A hospital insurance (which mainly covers hospital stays), as explained at www.aarp.org/health/medicare-insurance/info-04-2008/ask_ms__medicare_9.html. With fewer than 30 work credits, you pay the premium's full cost ($441 per month in 2013). With 30 to 39 credits, you pay a reduced amount ($243 per month in 2013).

  • You can buy Medicare Part B insurance (for doctors and outpatient services) regardless of whether you have sufficient work credits, even if you're not enrolled in Part A. For most people, the standard Part B premium in 2013 is $104.90 a month, and more if your income is over a certain level. Be aware that if you don't enroll in Part B at the right time, you risk being hit with late penalties even if you don't have enough work credits to qualify for premium-free Part A benefits. (For more information on this little-known rule, see www.aarp.org/health/medicare-insurance/info-04-2010/ms_medicare_can_you_be_penalized_for_not_enrolling.html.)

  • You can enroll in a Medicare Part D plan (prescription drug coverage), usually for an additional premium, if you have Part A, Part B, or both. (See AARP's consumer guide to Part D.)

  • You have a guaranteed right to purchase private Medigap supplementary insurance, for an additional premium, if you do so within six months of enrolling in Part B. Depending on the kind of policy, Medigap insurance pays some or most out-of-pocket expenses, such as deductibles and co-payments (but not premiums), in the traditional Medicare program. But be aware that you can't use Medigap insurance if you're enrolled in a private Medicare health plan (such as an HMO). Find more information at www.aarp.org/health/medicare-insurance/info-04-2009/ask_ms__medicare_q18.html.

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