Health Insurance Survival Guide for Retirees and Baby Boomers

Posted in Health Insurance

November 4th, 2009

Dealing with the high costs associated with health care can be difficult for retirees. According to recent research conducted by the Center for Retirement Research at Boston College, 60 percent of retirees will likely be unable to maintain the lifestyle they were accustomed to before retirement due to rising health care costs. With Baby Boomers reaching retirement age at a rate of 10,000 per day, experts predict that the senior population will double in coming decades. This means even more seniors will require necessary information about ways to finance their health insurance.

The Problems Retirees Encounter with Health Insurance

When workers reach retirement age, many have a difficult time keeping up with costs associated with health care. One reason, according to David Blank, deputy director of communications with Alliance of Retired Americans (ARA), is that retired workers are often stuck in between qualifying for COBRA (an extension to employer health insurance after termination) and Medicare, which provides health benefits to seniors starting at age 65. “We call this the bridge group,” he said. “We find that those in the 55- to 64-year-old group struggle the most.”

By fitting into a category where no affordable insurance is available, seniors often take on extremely expensive private plans – that is, if the insurers will cover them. According to Karen Gilgoff, assistant director at AFSCME Retirees, “some insurance companies won’t provide seniors with insurance due to preexisting health conditions.” Having few options to lean on, many retirees turn to alternate coverage options like catastrophic insurance, which does not cover doctor’s visits or medication. Or they’re forced to go without coverage. “This is the worst case scenario,” said Blank. “But it does happen.”

Tips for Health Insurance Cost Survival

With health insurance costs increasing by the year, many retirees need help with ways to pay for coverage. A few available options include:

1. Turning to Your State Insurance Commissioner Department for Help

According to Gilgoff, “each state insurance commissioners department helps with providing options to retirees,” she said. “They can provide direction by helping to find local counseling.” For instance, the Washington State Office of the Insurance Commissioner advertises free health care coverage counseling and ways to help save on costs.

2. Surviving On the Coverage You Have as Long as Possible

Some employers provide health insurance to workers during retirement; however, this number is declining. According to the Kaiser Family Foundation’s Employer Health Benefits 2009 Annual Survey, 29 percent of large firms that offer health benefits to their employees also offered retiree coverage in 2009. This number fell dramatically from 66 percent in 1988. If you’re employer does not offer this option, you will likely be eligible for COBRA upon retirement to help stretch out your benefits; however, this will only last for 18 months and is expensive.

3. Postponing Retirement

According to the Center for Retirement Research at Boston College, the required annuity to cover annual medical expenses out-of-pocket in 2010 will be roughly $102,000. For many retirees, the money just isn’t there. Choosing to work past the average retirement age of 63 for many is a necessity, not just to maintain coverage, but also to continue contributing to retirement plans like the 401(k). This sentiment mirrors a 2009 Pew Research Center Publication report showing that 52 percent of fulltime workers between the ages of 50 and 64 plan to delay retirement, largely because of the recession and lost investments. If you’re not sure whether postponing retirement is for you, AARP offers a worksheet on their site to help you decide.

Long-Term Care (and Its Costs)

Long-term care (nursing home or in-house) is another major expense for retirees. Data from the Genworth Financial 2009 Cost of Care Survey shows that the national average median monthly rate for a private bedroom in an assisted living facility is $2,825.25. One-third of all 65-year-olds are predicted to enter a nursing home for at least three months, which is why it’s good to designated funds for long-term care prior to Medicare eligibility age. If you don’t have insurance that covers this care, two options to consider are long-term care insurance and longevity insurance. But before choosing a policy, it’s a good idea to check up on the company with your state’s insurance commissioner department.

While utilizing tips on ways to survive health care is ideal for retirees looking to manage excessive costs, Blank offers an even larger proposal. “Our best advice is to have better health care reform,” he said. Gilgoff agreed and remained hopeful that the new health care reform, which will include a Health Insurance Exchange to allow the uninsured to select affordable plans, as well as subsidies for retirees, will be passed sooner than later. “It’s so important that the new health care reform passes,” she said. “Because as health care stands now, a lot of seniors will continue going without proper care.”

To learn more about affordable health insurance options for retirees, visit Go Insurance Rates.