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Purchasing Health Insurance for Retirees.

Purchasing Health Insurance for Retirees.

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This article was first posted January 1, 2002, last update July 1, 2008.

[Retire Early]

Getting A Good Deal On Health Insurance

Even for retirees with portfolios large enough to accommodate a less than 4% of assets annual withdrawal rate, health insurance remains a big concern. The odds are very good you will pay far more for health insurance when you retire than when you were employed.

Many employers pay 50% to 90% of the actual cost of their employees' health insurance. Merely picking up the portion of the premium paid by your former employer will greatly increase the monthly cost for many retirees. If you can't obtain health insurance as a member of a group after you retire, being forced to buy an individual health insurance policy can also dramaticaly increase costs. The premiums for individual health insurance policies are often 50% to 100% higher than group plans offering equivalent benefits. Finally, as we age, we tend to spend more money on health care. In health plans that vary the premium by age, a 40-year-old might pay 50% more than a 20-year-old and a 60-year-old would pay more than double the premium of the 40-year-old.

Finding group coverage

Perhaps the best route is to see if you can qualify for group coverage. A business, professional, or trade group might provide a cheaper alternative to an individual policy. The only drawback is that maintaining your professional license and paying dues to organization may cost hundreds or thousands of dollars per year, but you may still realize a savings after adding in these costs when compared to an individual health insurance policy.

If you aspire to the lifestyle of a "perpetual student", you may be able to get low-cost comprehensive health insurance from a college or university. At some institutions, taking as little as one or two courses per semester is enough to show "progress" towards a degree and keep your health coverage in force. Paying in-state tuition at a community or state college is a small price to pay for access to this benefit if you are shut out of other avenues.

Individual health policies

Individual health insurance policies are among the most complicated insurance products out there. They are difficult to shop for and hard to evaluate once you do find one. Your employer probably had a staff of experts handling the search for health insurance when you were working. This task falls to you now that you're retired.

The Internet is a convenient place to start your search. Two web sites http://www.quotesmith.com and http://www.ehealthinsurance.com offer real time quotes for individuals living in many of the 50 states. These sites don't always offer the best quote or the most comprehensive coverage, but they can give you a ballpark price on what to expect.

You should also contact an insurance agent in your area that specializes in individual life and health policies. If you have any pre-existing conditions, your agent may know which companies offer the most favorable rates to individuals with your health history.

Move to another state

Health insurance premiums and regulations vary greatly from state to state. You may be able to decrease your health insurance premiums by moving. This phenomenon applies whether you're healthy or suffer an expensive, complicated medical problem. It's the most visible symptom of the confusing state of the health insurance market in the United States.

For the most current state-by-state health insurance information see the Georgetown University Institute for Health Care Research and Policy at http://www.healthinsuranceinfo.net/ There is also continuously updated information on the Health Insurance forum on Insure.com, see http://www.insure.com

Travel insurance

If you plan to spend a lot of time traveling in foreign countries, vacation or "travel" health insurance may be a palatable option. These policies have all kinds of exclusions and may not cover a dreaded "preexisting condition", but they are generally inexpensive. A diligent shopper may find a bargain here.

Leave the country

There are many developed countries in Europe and Latin America that have socialized medicine and lower health care costs. You may have to marry a native to join the National Health Plan, but if the alternative is bankruptcy in America, maybe that's attractive.

Health Risk Pools

Several states have health risk pools to accomodate residents with pre-existing conditions that are shut out of the standard individual health insurance market. Premiums can be two or three times the cost of a standard individual health insurance policy with equivalent benefits.

For example, here's a link to the Texas Health Risk Pool http://www.txhealthpool.com A non-smoking 40-year-old male in Houston would pay $693/month for a $1,000 deductible policy with a maximum annual out-of-pocket cost of $4,000 per year if he didn't stray beyond the PPO network. The premiums under this plan rise to $951/month for a 50-year-old and a draining $1,380/month for a 60-year-old. (That's probably more than most 60-year-old Texan's monthly mortgage payment.)

Even if you are currently healthly and have inexpensive health insurance provided by your former employer, you may want want to plug these kinds of numbers into your retirement budget and see how much pain it causes. Who knows what the future holds?

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Copyright 2002 John P. Greaney, All rights reserved.

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