(Photo Details: Crossing precarious bamboo bridge in Bali)
A reader recently asked me to address the issue of health insurance and how the experience obtaining health insurance in retirement compares to when I first retired.
As I mentioned in a recent post, travel was the thing I was most excited about when I retired. The thing I was least excited about, or should I say most worried about, was getting health insurance. I was even more worried about that than money in general. With money, you can make adjustments to limit your risk—cut back on expenses, take on a part-time job, downsize your house. Without health insurance, the downside risk could be bankrupting. Without health insurance, no amount of money can make you feel secure. That reality was even more scary to me than having to weather a tumultuous stock market.
Back in 2008 when I retired, the only guaranteed insurance for a retiree younger than 65 was to continue under your employer’s plan under COBRA. Outside of that, insurance companies could turn you down for any reason. And once you had insurance changing plans might be impossible. So if your network changed, you could just be out of luck.
I wrote a post about our dilemma here. COBRA was insanely expensive when I retired, and the insurance broker I was working with told us that no insurance company would cover us because Doug was on three medications (one of which was only for allergies!) I had to do a lot of digging on my own, but eventually I was able to find a policy outside of COBRA that cost a lot less. But it was our ONLY alternative. And I was always worried about the possibility of getting dropped for some reason, if we ever got really sick.
The good news is that anyone can buy insurance now, irrespective of your health issues, irrespective of the number of medications you are taking. So at least you know that you will be able to limit the unlimited downside of not having insurance. That peace of mind is most important to me.
This peace of mind does not come cheap however. We now pay double the premiums we used to pay. The insurance covers more, but I’m not a heavy user of health services anyway, so overall, we pay more. That’s a big downside for many people. While I would love to be paying less I don’t begrudge the changes. I know a lot of people do. But I think guaranteeing insurance to anyone willing to pay for it (and subsidizing insurance for those who truly cannot afford it) is a worthy achievement. So I don’t complain. To me it’s just like paying property taxes for the schools I don’t use because we never had children. It’s to the overall benefit of society, so I’m good with it.
Part of the reason my insurance is more expensive though, is that we selected a plan offered through one of the more expensive carriers because Doug and I really wanted to keep our own doctors. If we were willing to find new doctors, we could have saved significantly on our premiums. Kind of a get-what-you-pay-for issue.
My only complaint about the post-Affordable Care Act environment comes from my experience helping people enroll on the insurance exchange. There is what seems to be a significant hole right in the middle of the affordability scale. People who can afford to buy insurance are guaranteed to be able to get it, that’s great. People at the lowest income level can qualify for Medicaid coverage now (unless of course you live in one of the states that did not expand coverage, in which case you are part of another big hole.) And people on the lower end of the income spectrum are eligible for premium support tax credits on a sliding scale based on income.
But I worked with several people stuck right in the middle of all that. Their incomes were just high enough to disqualify them from premium assistance, yet the cost of insurance would be as high as a quarter of their take-home pay. These folks don’t owe the penalty for not having insurance, because the premiums would exceed 8% of their income. But that’s sorry comfort for a family that actually wants health insurance.
So if you retire before you reach Medicare age, you may take comfort in the fact that you can’t be turned down for coverage, but you should definitely run the numbers before you retire to make sure you can actually afford the coverage!
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