Many people dream of retiring early, a possibility that frees a person from the requirements of running the rat race. Unfortunately, medical insurance costs can make this difficult, forcing people to delay this option. Individuals who retire before the age of 65 will not be eligible for Medicare, and will be forced to find another way to pay for their medical costs.
A major obstacle to early retirement is the fact that individual insurance plans cost more than group health plans, and many employers do not include insurance for retirees in their retirement plans. The options available include buying an individual plan, buying coverage through COBRA, employee-sponsored health insurance, and the Early Retiree Reinsurance Program.
The first option is to look at individual plans. In some cases people may get turned away because of a preexisting condition. The recent healthcare bill will change this in 2014, but if somebody were to retire before this time individual plans may not be an option. They can look into Pre-existing Condition Insurance Plans, which offer insurance from the federal and state governments if they are denied based on a medical condition.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, allows people to continue the benefits that they received from their employer for a period of 18 months. In many cases, this options is cheaper than buying an individual plan, even though it still tends to be slightly higher than the group rate that they were paying through their employer.
There are some employers who continue to offer benefits to their retirees in some capacity. It is important to understand that the quality of these benefits can vary quite drastically depending on an individual's employer. Generally, to be eligible people will need to be of a certain age. Deductibles, copayments, and coverage can also vary quite dramatically. Some employers will pay for some of the costs of the premium, while others will not. It is important to investigate the fine print to determine exactly how the payments work. Some employers will cover a percentage of the premium, while others will cover a set dollar amount. If it is based on a set dollar amount, the percentage will shrink over time as a result of inflation.
The Early Retiree Reinsurance Program now allows retirees below the age of 65 to continue using their employer-sponsored insurance. Employers are reimbursed under the program for retirees between the ages of 55 and 65. Not all employers are signed up for the program, however, which is voluntary.
Finally, if none of the above works for somebody, it is possible that they will be eligible for Medicaid. This option, however, requires that they do not have enough assets to cover their medical costs on their own.
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