Health care costs are a big concern for many people approaching retirement. But the exact amount that you may spend on health care in retirement depends on a variety of factors, including how much you save or have saved, what type of coverage you have and how long you remain in retirement, and what types of supplemental health insurance you purchase. Fortunately, there are ways to minimize your out-of-pocket expenses in retirement and beyond.
Understandably, retirees may not be as familiar with their health coverage options as those still working or in school. Many large firms offer health benefits to retiring employees, and retirees typically can keep the plan they had with their employer as a supplemental policy in retirement. These retiree plans are often similar to a Medigap policy and can fill in some of Medicare’s gaps, such as coinsurance and deductibles.
Retirees who don’t have access to a health plan through their former employer can also enroll in an individual health insurance plan through the ACA marketplace, which offers a wide range of plans from various insurers. Retirees who wish to receive financial assistance in the marketplace must determine if they are eligible by calculating their modified adjusted gross income (MAGI), which is based on different rules than the normal MAGI used for federal tax purposes.
In addition, some retirees have private health care plans available to them that are not offered through the ACA marketplace. These plans can be a good option for retirees with preexisting conditions or other issues that make it difficult to obtain a regular health insurance plan. These private health insurance plans can cost more than traditional ACA marketplace policies but are usually less expensive than Medicare Part D prescription drug premiums.
Some states allow retired workers to continue to contribute to their state’s healthcare premium for a limited period of time. These contributions are often a percentage of the current rate paid by active employees, and they can help cover the gaps in Medicare Part D coverage. Other states, such as Oregon, Utah, and West Virginia, do not offer Explore now option for retirees.
It’s important for retirees to regularly evaluate their health insurance coverage throughout the year, particularly during open enrollment each fall. Since costs and benefits can change from year to year, retirees should be proactive in making sure they are getting the best coverage for the money. It’s also important for retirees to take advantage of opportunities to reduce their costs, such as by pairing a high-deductible health insurance plan with a health savings account (HSA). By doing so, they can potentially save thousands of dollars over the course of their lifetime. For more information, contact a licensed Medicare expert today.