When people are retiring before reaching age 65, it can be challenging to find affordable health care insurance.
Most companies no longer provide coverage to their retirees. If you do not qualify for a subsidy from the government health exchange, it could cost $800 or more per month. That will break many budgets.
Once you reach age 65, you qualify for Medicare. Medicare is the government health program that most American’s must go on once they reach that age. The only exception to this rule is if you or your spouse is still working for a company with 20 or more employees. Only then can you delay this decision.
Medicare has four parts. Part A covers hospitals and it has no premium if you or your spouse are fully insured under Social Security. You have been paying into this your whole working life.
Part B covers doctors, testing and other items. Currently the cost is $148.50 per month which will be deducted from your Social Security check if you are receiving one. If you are waiting to collect Social Security to earn delayed credits, you will be invoiced quarterly.
Part C is an Advantage Plan. In an Advantage Plan the government pays an insurance company a monthly fee to take over your coverage and often provide extra benefits. You still must pay the $148.50. Part D is prescription coverage. This does not cover all of the cost, but it helps to subsidize this expense.
Medicare is an 80/20 plan where you can be held responsible for 20% of the approved service cost.
There are also a number of deductible and co-pays. Because of this, most people who do not elect to be covered by Part C buy a supplement known as Medigap. Depending on the level of coverage you select, it can cover some or all of the hospital cost. Prescription costs are not usually totally paid for and require purchase of an additional Part D policy.
It can be confusing because Medigap plans are distinguished from each other by letters of the alphabet also. The most comprehensive are Plan F or G. All company Plan Gs cover the exact same things. The only difference is the price. Some policies are much more expensive. Medigap policies allow you to see any doctor in the country who accepts Medicare and is accepting new patients.
The Advantage Plan (Part C) operates a little differently. The government pays your selected insurance company a monthly fee to accept you as a participant. The cost to you each month is usually lower, sometimes even free. You are limited to a network of providers, although some of the networks are pretty big. You may incur some co-pays and out-o- pocket maximum. Advantage Plans often provide additional benefits such as eye care and gym memberships which are not part of traditional Medicare.
Health care expenses often increase as we age. Selecting the right policy is one important step in managing health care expenses. Do your homework and consider all of the choices.
Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”
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