Affordable Health Insurance Options for Early Retirees

HealthCare Writer

Updated on January 25th, 2021

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A recent study indicates that more than half of all Americans retire before age 65. If you’re deciding whether to retire early, a key financial consideration is how to maintain adequate health care coverage until your Medicare benefits begin. Since the passage of Obamacare, many early retirees have met their health insurance needs by enrolling in individual coverage purchased through the marketplace exchange. But the U.S. Senate’s proposed health care legislation for replacing Obamacare will have a costly impact for exchange enrollees nearing age 65, making it vital for those Americans to consider affordable health care coverage alternatives, such as short term medical insurance.

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Availability of plans and policy duration vary by state

Short Term Medical – Health Care Coverage Until Medicare Commences

According to the Kaiser Family Foundation, approximately three-fourths of retirees ages 55 to 64 receive health insurance coverage through one of the following sources:

  • A former employer’s group plan
  • Tricare (for military retirees)
  • Medicaid or Medicare (due to being eligible to receive Social Security Disability Insurance)

That means that a whopping 25 percent of all people who retire before age 65 are responsible for purchasing their own coverage until they become eligible to enroll in Medicare. The same survey showed that almost half of this group chose to risk their financial security by forgoing insurance coverage during retirement until turning 65.

The good news for early retirees who must find their own insurance: short term medical care provides you a cost-effective health insurance option to bridge the gap in health care coverage, protecting your retirement savings from the potentially devastating costs of medical emergencies.

Purchase Coverage Up to Nearly a Full Year at a Time

Short term health insurance plans are limited to a minimum of 30-days of coverage and in most states, up to 364-days of coverage. When you first apply for coverage, you’ll provide a brief medical history. The simple application process takes just a short amount of time and may even be completed online either through your phone or computer. You have the flexibility to select a coverage start date anywhere from within 24 hours of applying, or up to 60 days after you complete your application. There’s no penalty to cancel your coverage at any time.

Cost-Effective, Comprehensive Coverage

Plans purchased on the marketplace exchange can be costly. But short term health insurance is very affordable, with some plans available at premium rates under $50 per month, and low coinsurance and copay amounts. You’ll receive up to $1,000,000 in benefits per coverage period, for services such as health care provider visits, emergency care, hospitalizations, lab tests, prescription drugs and more.

Flexibility with Providers and Plan Features

With Pivot Health’s short term health insurance, you may select varying deductible amounts and out-of-pocket maximums, so that your plan works well for your health care needs and budget. In addition, there are no provider network restrictions, so you are free to visit any health care providers that you prefer.

Valuable Non-Insurance Benefits

Pivot Health’s short term medical offers you discounts on vision care services and products, a prescription drug savings card good at thousands of pharmacies across the country, and 24/7 telemedicine consultations, enabling you to connect with a doctor at your convenience for a low-cost fee.

In comparison to exchange plans, short term health insurance offers early retirees lower costs, greater flexibility in plan design, and the freedom to choose the health care providers you want.

Proposed Senate Bill’s Costly Impact on Older Americans’ Health Insurance

The Senate’s Better Care Reconciliation Action (BCRA) bill, which continues to be amended and debated even before being brought to the Senate floor for a vote, has been roundly criticized by many consumer advocacy groups over some of its key provisions. There are several aspects of the bill which appear to disproportionally impact older Americans enrolled in marketplace exchange plans. For early retirees, these proposed plan provisions are important to consider when choosing a health insurance plan to provide you coverage until your Medicare benefits begin.

Tightened Income Eligibility Guidelines for Premium Tax Credits

Under Obamacare regulations, if exchange plan enrollees have earned income up to 400 percent of the federal poverty limit, they are eligible to receive premium tax credits from the federal government to help cover their cost of insurance. The eligibility guidelines help ensure that your exchange premium expenses are capped at just under 10 percent of your income, regardless of your age. However, starting in 2020 under the Senate plan, the income eligibility criteria narrows, only allowing those earning up to 350 percent of the federal poverty limit to qualify. Many exchange enrollees with modest incomes, such as early retirees on a limited budget, will find themselves no longer eligible to receive premium tax credits.

Termination of Cost-Sharing Subsidies

The Senate plan proposes eliminating cost-sharing subsidies starting in 2019. A different form of financial assistance than premium tax credits, the subsidies are payments made by the federal government directly to exchange insurers on behalf of low-income individuals and families. These payments reduce the deductibles, coinsurance and copayments for qualifying enrollees, to help them afford exchange coverage.

For consumers receiving federal assistance with their exchange plan coverage, the current median deductible is $850 per year, according to the Centers for Medicare and Medicaid Services. The Senate’s proposed benchmark plan would have annual deductibles starting at more than $6,000. With the elimination of cost-sharing subsidies, this would be a significant increase in out-of-pocket expenses that exchange enrollees – who currently receive government assistance to reduce their cost of coverage – would be required to cover on their own. For early retirees on a fixed income, absorbing this cost increase could be financially devastating.

Higher Premiums for Older Enrollees

Current Obamacare rules allow exchange insurers to structure premiums based on tobacco usage and age, with insurers enabled to charge older enrollees up to three times more than younger enrollees. The proposed Senate legislation changes the premium structure calculations, allowing insurers to factor age, income and cost of coverage when determining premium rates.

The Senate plan also widens the age-band factor, enabling insurers to charge up to five times more for older enrollees. The changing premium structure means that enrollees in their 50s and 60s with modest income will undoubtedly pay much more for exchange coverage. One estimate projects that 50-year-olds would pay up to 15.8 percent of their income towards premiums, while exchange enrollees in their 60s would pay up to 16.2 percent of their income.

Medicaid Expansion Eliminated

Following its scoring of the proposed Senate plan, the Congressional Budget Office projected that 22 million people would lose their health care coverage. The plan’s Medicaid funding cuts would terminate the Obamacare Medicaid expansion by 2023, expelling many expansion enrollees from the program. Low-income early retirees who may have qualified for Medicaid under the program expansion will lose this coverage option.

Projected Cost Impact of the Bill’s Provisions

With the reduced eligibility guidelines for premium tax credits and the elimination of cost-sharing subsidies, some analysts project that by 2026, the average marketplace enrollee will see their costs for health care increase by nearly $2,300. Due to the age tax, older enrollees will pay even more. One estimate indicates that by 2026, the average enrollee aged 60 to 64, with an income of 375 percent of the federal poverty level, would see net premiums increase by $10,253, with their total annual costs rising by $11,704.

It’s clear to see that the proposed Senate health care bill may make it much more financially challenging for early retirees to rely on exchange plans for health care coverage until they become eligible for Medicare. Comparing alternative insurance options, such as short term medical, can help early retirees make informed choices about which type of health insurance coverage to select.

Senator Cruz Proposes Amendment to Facilitate Bill’s Passage

In a bid to bring the Senate bill to vote, Senator Ted Cruz (R-Texas) has proposed a new provision to make the bill more appealing to conservative Senators. The amendment allows low-income exchange enrollees who already qualify for premium tax credits to use those credits towards purchasing catastrophic health insurance plans on the exchange. Under Obamacare, premium tax credits may not be used to pay for catastrophic plans sold on the exchange. The downside of catastrophic plans is their very high deductible amounts (over $6,000 for an individual, and more than $12,000 for families). Early retirees considering catastrophic coverage should consider that they would need to pay nearly all their health care expenses out-of-pocket before meeting the plan’s deductible.

The amendment also enables health insurers which offer plans that meet Obamacare’s essential benefits requirements to sell insurance plans with more narrow coverage at premium rates lower than the traditional exchange plans. Critics warn that this amendment could severely restrict access to coverage for sick patients.

Short Term Medical – Affordable Coverage to Protect Your Savings

If you’re an early retiree, you’ve worked hard to accumulate your retirement nest egg. Don’t risk your savings by going without health insurance to protect you from expensive medical bills. Short term medical can provide you the health care coverage you need until you reach 65 and may enroll in Medicare, at significant cost savings over what you pay for exchange coverage.

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