Navigating your health insurance options is one of the most daunting aspects of retirement. But ignoring this costly issue could prove extremely damaging to your finances and quality of life.
Paying for health insurance has become a huge financial drag for American employers, so very few companies still offer retiree benefits. Relying on Medicare? Medicare is generally for those who are 65 and older, or those who meet other eligibility criteria. If you retire before you’re eligible for Medicare, you’ll most likely have to find an alternative source of coverage.
The Frightening Figures
The amount of money a typical couple retiring at age 65 can expect to spend on healthcare over the rest of their lives could come as an unwelcome surprise for most Americans.
According to Fidelity, a 65-year old couple retiring in 2021 can expect to spend $295,000 in healthcare and medical expenses throughout retirement, compared with $285,000 in 2019. And that is excluding long-term care.
So where does a retiree’s healthcare money actually go? Fidelity found:
- 19% goes to “Generics, branded drugs and specialty drugs”.
- 39% goes to “Medicare Part B and Part D premiums: Doctor appointments and hospital visits.
- 42% goes to “Other medical expenses including: co-payments, co-insurance, and deductibles for doctor and hospital visits.
There’s an additional reason for soaring health care costs too, and it concerns our lifestyles. More than two in five Americans were obese in 2017-2018, and one in 11 were severely obese, according to the Centers for Disease Control. This translates into everything from diabetes to heart disease and other maladies, all of which help drive up spending. So keeping fit, eating well and reducing stress could aid in driving some costs down.
The Role of Medicare
In most cases in the State of Iowa, as long as you’ve worked at least 10 years and paid Medicare taxes during those years, you’re eligible for Medicare starting at age 65. If you have certain disabilities, you can qualify for Medicare before age 65 and you are eligible at any age with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant).
(Note: If you retire before you’re 65 and lose your job-based health plan when you do, you can use the Health Insurance Marketplace® to buy a plan.)
Medicare has the following parts:
- Part A covers inpatient hospital care, limited care in a skilled nursing facility, hospice care, and some home health care.
- Part B covers other aspects of health care, including outpatient care, doctor care, and durable medical equipment. You pay a monthly premium for Part B.
- Part D covers prescriptions, and its benefits are accessed by purchasing Part D plans through private insurance companies.
On its own, Medicare has significant gaps, so many retirees opt for additional coverage…
As a result of Medicare not covering all (or even most) of retirees’ health care expenses, many Iowans may need to purchase supplemental insurance. The two main options include:
Medigap Plans: A Medicare Supplement Insurance (Medigap) policy can help pay some of the remaining health care costs, like:
Medicare Advantage plans: Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by Medicare-approved private companies that must follow rules set by Medicare. Most Medicare Advantage Plans include drug coverage (Part D).
Health Plans Available to Medicare-Eligible Retirees
As per the Iowa Department of Administrative Services website, the State offers retirees the following health plans.
- Iowa Choice
- National Choice
- Group Program F
- Group Program N
Information about these plans is available at Retiree Health Insurance.
Iowa Choice/National Choice and Medicare
As per Iowa Department of Administrative Services website, “You can continue coverage with Iowa Choice or National Choice when you become eligible for Medicare. The benefit design of Iowa Choice and National Choice is the same as the benefit design offered prior to becoming Medicare-eligible except Medicare becomes the primary payer on your claims and Iowa Choice or National Choice is the secondary payer.
If you have covered dependents who are not eligible for Medicare, Iowa Choice or National Choice will continue to be primary on their health claims.
Iowa Choice or National Choice fills in the gap, if any, between what Medicare paid and what the options would have paid if you were not on Medicare. Wellmark computes what it would have paid for your treatment as your primary insurer (including any unpaid deductible and co-pay). Wellmark then subtracts the amount Medicare paid. If the results are positive (that is, Medicare paid less than Wellmark would have), then Wellmark pays the difference. If the result is equal to or greater than the amount Wellmark would have paid, they do not pay.”
Review Your Plans
A retirement plan needs regular care to keep it operating effectively. Your plan’s care should include a regular review of your plan’s basic operations with your retirement income advisor. This also rings true for your retirement insurance plans.
Whether over or under age 65, once you’ve secured health insurance in retirement, you should be proactive about evaluating it by conducting an annual review of your coverage options during open enrollment each fall. Benefits and costs change, and it’s possible a new plan may offer you better coverage at a lower price.
Maintaining health insurance when you retire could be essential for your financial stability since your health needs typically increase as you age. Without insurance, you may be on the hook for thousands in medical bills.
Staying fit and active, being proactive in your retirement planning and knowing your insurance options will all help aid a happy and healthy retirement.
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