Insurance

Retirement and Health Insurance

Health insurance is very important when you retire because staying healthy may mean more visits to the doctor for preventive tests and routine checkups. Health insurance premiums and out-of-pocket expenses could be a major cost during your retirement years.

Retirement after age 65 - Automatic Entitlement to Medicare

Most Americans automatically become entitled to Medicare when they turn 65. Medicare is a Health Insurance Program for people age 65 or older, some disabled people under age 65 and people of all ages with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant). Medicare is a federal program designed to provide benefits that reduce the cost of healthcare for those who have reached full retirement age or who have other covered disabilities. Medicare is offered by the federal government to replace the loss of health insurance that people with a company-sponsored health insurance plan give up when they retire.

Entitlement is automatic if you have already applied to receive monthly retirement benefits from Social Security or the Railroad Retirement Board. If you have not applied for retirement benefits, an application must be filed to receive Medicare benefits.

Medicare won't cover all of your health-care expenses. For some types of care, you'll have to satisfy a deductible and make co-payments, so you may want to purchase a Medigap policy to cover those expenses. Medigap is specifically designed to fill the gaps in your Medicare coverage.

Retirement before Age 65 - Transitioning to Medicare

If you retire before age 65 and you do not have a disability, you'll need some way to pay for your health care until Medicare kicks in. Some employers may offer health insurance coverage to their retiring employees, but this is the exception rather than the rule. If you retire before you reach age 65 and your employer doesn't extend health benefits to you, you may need to buy a private health insurance policy or extend your employer-sponsored coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA).

To be eligible for COBRA coverage, you must have been enrolled in your employer's health plan when you worked and the health plan must continue to be in effect for active employees. Even if your company doesn't offer retiree health benefits, it still must allow you to keep your insurance for 18 months after you leave work under the federal COBRA law. COBRA gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, such as retirement. Businesses with fewer than 20 employees are exempt from this law.

COBRA is not always the most affordable option, because you need to pay the entire bill for health insurance premiums. The benefit of COBRA is that you are guaranteed coverage, and your coverage will remain at the group rates offered to your employer. So long as you continue paying your premiums, you'll receive guaranteed COBRA insurance until the term expires.

Questions for Your Attorney

  • Does Medicaid pay for long-term care?
  • How does Medicare interact with COBRA?
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