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Health Insurance Solutions for Early Retirees

Try these suggestions to ensure that you receive retiree health benefits

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"Getting health insurance coverage after retirement is the biggest issue facing workers today who have saved enough money to retire early," says economist Paul Zane Pilzer in the following excerpt from his book, The New Health Insurance Solution, reprinted with permission from the author.

Health Insurance Solutions for Early Retirees—Ages 55 to 64
If you are very healthy, or if you already have an individual/family policy, you are in luck. No matter how many medical issues you have had, if you were healthy when you first applied, you are probably still paying the basic premium for a healthy individual of your age. Basic premiums on HSA-qualified health plans range from $158 to $252 a month from top name-brand carriers.

  • $$$ Tip: If you are over 50 and seeking individual/family health insurance, it might be better to separate your family when you apply, especially if your spouse is younger.

    Health insurance for couples and families is sometimes based on the age of the oldest individual, and different carriers have different age-rating bands—one might be 55 to 59 and another 56 to 60—so shop around and try different combinations of family members to find the best deal.

    If you choose a family policy, put the policy in the name of the younger spouse so that person still has coverage when the older spouse switches to Medicare.

  • $$$ Tip: Premiums for individuals age 55 to 64 are so high that in some cases it may actually be cheaper to get state-guaranteed health insurance from a state risk pool as if you were unhealthy—check out the rates in your state.

    As explained in [Pilzer's book], to become eligible for a state risk pool you typically have to first apply and get rejected or uprated by a private carrier, although many state risk pools may accept you with just a letter from a licensed agent stating you would have been uprated or rejected if you had applied.

Negotiating with Your Employer for Early Retirement Health Insurance Expenses
You are probably not the only one age 55 to 64 who would like to retire early and leave your employer-sponsored group health benefits plan—your employer and your coworkers have a great financial incentive for you to do this.

Even if you are not consuming a single dollar in annual medical expenses, based on your age alone, the premium for you is about three times the price of the premium for younger workers.

The total premium for an employer-sponsored group health plan is based on an annual census of the employees, with the premium for an older worker typically three times the premium for a younger one—even if they are both healthy.

Thus, you may have some bargaining power with your employer, who will save a significant amount of money if you leave the company's group plan.

  • $$$ Tip: Never ask your employer to do something for you alone related to its ERISA-governed employee benefits plan—employers are not allowed to do anything for you without offering the same benefit to everyone else. However, there are ways to ask for what you want without violating ERISA.

    For example, suppose you are 62, want to retire early, and want your employer to pay the $250 per month premium on your individual policy until age 65. Go to your employer and offer to quit in return for a $9,000 termination bonus.

    Don't mention that you want the money to pay your healthcare premium or anything connected with the fact that you getting a special deal for retirement.

  • $$$ Tip: Ask your benefits administrator whether your company will soon be offering a retiree medical Health Reimbursement Arrangement (HRA)…and if not, ask for one.

Why are employers reducing retiree health benefits? Pilzer provides some answers on page 1.

Author Paul Zane Pilzer is a former White House advisor, radio commentator, and the cofounder of a company providing individual health benefits to employees of Fortune 500 companies. For more information on Pilzer and his book, see www.tnhis.com.

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