back

Want to support Global Action on Aging?

Click below:

Thanks!

Getting Ready for the Bills

By Julie Connelly

The New York Times, March 18, 2003

People who are thinking about early retirement can benefit by examining the most recent copy of their employer's benefits statement to see what health coverage they will get and what it will cost.

"You may wind up saying to yourself, `I better not retire before I'm eligible for Medicare,' " said Joseph Martingale, a senior executive at Watson Wyatt Worldwide, an employee benefits consultancy.

Few companies are actually discontinuing plans for current retirees. But the Kaiser Family Foundation/Hewitt Associates 2002 Retiree Health Survey found that 22 percent of companies employing 1,000 or more workers say they are most likely to eliminate coverage for current employees who will retire within the next three years, and 13 percent already have. Between now and 2006, retirees will cover more of the insurance premium at 82 percent of the companies that were polled in the survey and will foot a higher prescription drug co-payment at 85 percent of those companies.

To help workers figure out what their health-care expenses will be in retirement, the Employee Benefit Research Institute has created the Retiree Health Savings Calculator, which is at www.choosetosave.org. Everyone's situation is different, of course, but Paul Fromstin, the institute's director of health-research programs, has calculated that if you retire at 55 with employer benefits, you will need $75,000 to cover premiums and out-of-pocket expenses, assuming a 7 percent annual increase in premiums, until you become eligible for Medicare at 65.

If you have to buy individual health coverage, Mr. Fromstin figures that with a 7 percent annual premium increase, you will need $140,000. And if a pre-existing condition forces you into more expensive coverage under the Health Insurance Portability and Accountability Act of 1996, known as Hipaa, it will cost $234,000 to see you through to Medicare.

"People need to know this," Mr. Fromstin said. "But the problem is, they may not believe how expensive it is going to be."

Fortis Health is a Milwaukee insurer that specializes in offering individual health policies. Prices vary by locality. For example, a broker in northern Virginia who sells Fortis coverage said that a couple in that region who are both 55 and in good health might pay $641 a month ($7,692 a year) for a traditional preferred provider plan with a $500 deductible, a 10 percent co-payment on generic drugs and 25 percent on brands.

For quotes on health insurance from providers in your area, go to www.quotesmith.com.

Any insurer can deny coverage for a pre-existing condition — the industry's tactful term is "subject to underwriting" — or can impose waiting periods before coverage begins. If you are turned down, log on to www.cms.hhs.gov/hipaa to find out if you are eligible for coverage under Hipaa, which guarantees that if you meet its requirements you can buy some type of individual coverage without any pre-existing condition exclusion. Hipaa policies are expensive, however; premiums can run $1,000 or more a month.

Professional organizations like bar associations sometimes offer group coverage to their members; a useful source of information is AARP's Web site, www.aarp.org — click on health plans.