10 Options for Medical Coverage in Retirement
Copyright © 2015 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 — regardless of health or pre-existing medical conditions — through the health insurance exchanges set up in 2014 under the Affordable Care Act (ObamaCare). 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 to reduce the cost of premiums. Plan details are posted online at www.healthcare.gov. You may qualify for a special enrollment period (SEP) to sign up with one of these plans if your circumstances have changed within the previous 60 days — for example, if you lost other health insurance; if you arrived from a foreign country; or if you married or divorced, were widowed, or had a child. If you’re not eligible for a SEP, you must sign up with a plan during open enrollment, which runs from November 15 to January 31.
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.shiptacenter.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 ($407 per month in 2015). With 30 to 39 credits, you pay a reduced amount ($224 per month in 2015).
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 2015 is $104.90 a month, or 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 supplemental 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 or PPO). Find more information at www.aarp.org/health/medicare-insurance/info-04-2009/ask_ms__medicare_q18.html.