Imagine a future where you could retire from your job without ever having to worry about health benefits. Now, this is not some pipe dream; it's an idea that has been around for decades and is now becoming a popular way for soon-to-be retirees to protect their health while avoiding the high costs of traditional coverage.
Healthcare costs are rising in America. In 2010, you can expect to spend $1,831 per person annually on healthcare costs; in 2018, the figure nearly doubled to $3,405.
Although most of us are willing to pay through the nose just for our families to be insured, it's no surprise that the ballooning costs of traditional health insurance are leading many retirees to explore alternatives like health retirement plans.
Health retirement plans, also known as retiree health insurance, can be a good way to protect your healthcare costs and ensure you have coverage throughout your retirement.
The following guide will walk you through the basics of retiree health plans so that you know what they are and how they work before making any major decisions. Of course, there's no better time than now to start planning for your future, so don't wait any longer!
What is a health retirement plan?
A health retirement plan is a type of insurance provided by employers, unions, and trusts to retiring workers and their spouses. It's typically group health insurance that resembles the plans offered to active employees. Each employer's retiree plan has its own set of rules regarding eligibility, enrollment, and coverage.
With healthcare costs and anxiety about future medical bills rising, a health retirement plan is a great initiative for better employee experience and retention. It's no wonder that the best places to work commonly provide retiree health insurance.
How does a health retirement plan work?
Employers who offer health retirement plans will often have an insurance company administer the coverage. Retirees and their spouses can typically choose from the same plans that active employees have, although benefits may be more limited. Coverage usually lasts until the person is Medicare-eligible, although there may be other rules depending on the employer's plan.
A health retirement plan doesn't exclude you from Medicare; some plans require Medicare as a secondary payer. If you retire before your Medicare eligibility, your plan will help bridge the gap between your employer's health coverage and Medicare. However, when you do become eligible for Medicare, your retiree plan may change.
Why do you need a health retirement plan?
You may wonder why you need a health retirement plan when Medicare is available.
While you're working, your employer typically pays a portion of your health insurance premiums. All of the previous expenses paid by your employer will be transferred to you once you retire. This will include (Medical Services Plan) MSP premiums as well as out-of-pocket prescription drug and dental service costs. Because many retirees have no pension benefit coverage or simply receive partial coverage, it's critical to understand what's available before making any decisions.
Remember, a health retirement plan is not the same as traditional Medicare. The government does offer coverage for seniors and those with disabilities, but it's important to understand that MSP only covers a core set of services. For example, prescription drugs are typically your responsibility after retiring from work unless you have retiree insurance through an employer or union. Access to services like vision care or therapists is also not covered by MSP.
If you have a family or expect to incur significant medical expenses after retiring, you may want to consider a health retirement plan.
Is a health retirement plan worth the cost?
It depends on your situation. When you retire, your expenses will likely increase due to the loss of income and high medical bills. Because few retirees have pensions or any other benefits that include prescription drug coverage, it's important to consider what your health retirement plan will cover before deciding whether to stay on an employer-sponsored group plan.
Your employer will likely contribute toward your premium costs when you're retired, which will help keep your costs down. In addition, many health retirement plans don't have lifetime or annual benefit limits like traditional insurance policies do.
Not all employers offer a health retirement plan for their retirees. But some offer retiree plans as part of their overall retirement package, so be sure to ask your HR department what's available. You can also find retiree health plans through private insurers or unions.
Do your research and compare different options before making a final decision. The last thing you want is to be stuck with sky-high healthcare costs in retirement!
As you can see, a health retirement plan is an excellent way to protect your healthcare costs and ensure you have coverage throughout your entire retirement. If this type of insurance appeals to you, now may be the time for you to start shopping around. Don't wait until you're already retired to find out your employer doesn't offer a health retirement plan!
There are many different types of health retirement plans, so it's important to do your research before making any decisions. If you have questions, be sure to speak with an insurance agent or HR representative from your former workplace. They will be able to help you understand your options and choose the best plan for you.