Keeping or gaining access to health insurance coverage and being able to afford it can be a big concern for people who retire early. The cost of maintaining coverage through a former employer’s health plan can be high. And it may be several years before an early retiree is eligible for Medicare coverage.
According to ThirdAge, less than half of people age 55 to 64 work full-time, but they spend about 50 percent more on health care than people in the 45 to 54 age bracket. And the number of companies that provide health care coverage to early retirees has decreased from 66 percent in 1988 to 31 percent in 2008. The high cost of individual coverage and/or preexisting conditions can often leave early retirees without health coverage.
But some relief may be available as a result of the health reform legislation passed in 2010. The Affordable Care Act of 2010 set up a $5 billion fund to help employers finance the cost of providing coverage to retired employees age 55 or older. According to the Democratic Policy Committee, this fund could provide relief of up to $1,200 in insurance premiums for families covered by insurance through employers who take advantage of this fund. This is a temporary program that is scheduled to go into effect on June 23, 2010 and will extend until January 1, 2014, or until the funds run out. After that date, early retirees will be able to choose health care coverage options available in the health insurance exchanges.
The fund will be a reinsurance plan that reimburses the company’s group health plan for retirees age 55 or older who aren’t eligible for Medicare coverage. Up to 80 percent of the costs for an early retiree would be covered if the costs are between $15,000 and $90,000. The employer’s health care plan provider can use the reimbursement to lower premiums, copayments and deductibles. Health care costs eligible for this reimbursement include medical, hospital, and surgical costs as well as prescription medications. This assistance will be available to early retirees and their spouses, surviving spouses, and dependents.
Employers and unions that offer health plans must submit an application to the Department of Health and Human Services to participate in this reinsurance plan. Once they are approved, the employer or union health care plan submits paid claims to the Department of Health and Human Services for reimbursement from the reinsurance fund.
As Steve Vernon advises in a CBS Money Watch article, many employers will take advantage of this program, and others may need some encouragement from their older workers. So you may need to follow up with your employer to see the benefits of this initiative.
Bringing Down Health Care Costs for America’s Businesses and Seniors – HealthReform.gov
Fact Sheet: Early Benefits from the Affordable Care Act of 2010 Reinsurance Program for Early Retirees – The White House
Health Care Bill and Early Retirement Plans – ThirdAge
Health Reform for Early Retirees – Democratic Policy Committee
Steve Vernon, “Health Care Reform Encourages Employers to Help Early Retirees” – CBS Money Watch