Ask the Medicare Specialist
QUESTION:
From Bob: Do you consult with couples in their early 60s doing financial retirement planning for health care costs until we reach Medicare at 65? I want to budget those costs for the next few years and get an idea of what we can expect to pay for Medicare and a Supplement or Advantage Plan as well. Can you work with us by phone and if so, what are your costs for say one hour?
Before I answer, I need to clarify a statement I made in last week’s column regarding the HOP Enhanced Prescription plan. I wrote there was “no reason anyone should take it. None.” I should not have used those words. There are indeed a handful of people who may find themselves taking oral Chemo or other drugs that cost $4,000 per month or more who would benefit. To be clear, I still never recommend choosing the HOP Enhanced Prescription plan out of fear that you might need to take one of those medications in the future. Those who opt for a Stand-Alone Part D Plan can move back to a HOP prescription plan any Annual Election Period.
ANSWER:
Yes, we do help people in your position go over options if you plan on retiring before turning 65. And we never charge for consultations, even in the case where you’re starting to think about costs and enrollment that may be a year or more away. When it comes to bridging the gap to Medicare, it’s wise to plan early.
Although there are a couple alternatives to the ACA (Obamacare), we generally advise taking one of two routes, COBRA or an ACA plan. COBRA is an extension of the plan you receive from your employer with the same deductibles, co-pays, and Maximum Out of Pocket (MOOP) costs, only you pay the full premium, which can be anywhere from $450 on the low end to as much as $1,200 or more per person depending on how rich the benefits are and who the employer is. I’d say about 50% of the people we meet in Bob’s situation are best to choose COBRA. Be advised it only lasts 18 months. Which brings to why I stated it’s wise to plan ahead. Some may want to retire 18 months prior to their 65th birthday to bridge the gap perfectly with COBRA. When it comes to an ACA plan, which can be very tricky and full of “trap doors” if not careful, it’s often best to coincide retirement so the plan can start on January 1st. Let me explain. First, ACA deductibles and MOOP are based on a calendar year. It would sting to start a plan in July or August, meet your deductible and MOOP in four or five months and then have them reset the following January. In addition, the number one factor in determining ACA premiums is income. Working part of the year can really have a negative effect on costs. There is one more important consideration that also takes careful planning. How much money from taxable investments those retiring early will need to supplement their income, or if putting off Social Security until 65 may be prudent? If you don’t qualify for a subsidy, aka tax credit, ACA premiums can be expensive. In Allegheny County the lowest cost plan for a 62-year-old is $535/month for a Bronze Plan with a $7,900 deductible to $787/month for a Gold Plan with a $900 deductible we often advise people to consider. Outside of Allegheny County prices are higher for the same plans. Networks, especially in Allegheny County, can be quite restrictive as well. These kind of prices and network restrictions may get people searching for alternatives to either COBRA or the ACA. Indemnity and Medi-Share/Faith Based Plans are available. However, I have chosen not to offer them at The Health Insurance Store due to what I perceive as too much unknown and potential risk for very large out of pocket costs.
Indemnity plans ARE NOT considered Major Medical and not the same as employer sponsored health insurance. Indemnity plans pay claims on a schedule or a set amount for certain medical services. For example, depending on the company and plan, the insurance company might pay $1,000/day towards a claim for a hospitalization or Chemo treatment, $150 for an Emergency Room visit, $100 for a CT Scan or MRI, etc. I was approached to sell these plans and the commissions are very generous, far more than any other plan we have ever offered. After doing some research, again, I decided there was far too much risk for clients to end up with tens of thousands of dollars in bills if someone would be diagnosed with a serious form of Cancer, had a surgery with complications, or other expensive medial services. Medi-Share or Faith Based Plans have a concept where everyone’s premiums go into a pot to be used to pay claims. My online research came up with many conflicting accounts regarding their legitimacy and effectiveness. I have met a couple people who bought one of these plans but never had to make any claims for more than a routine doctor visit. I just don’t have enough experience to be comfortable offering them. With both these and Indemnity Plans, my advice is buyer beware.
I would like to remind everyone The Health Insurances Store is open for business although we are not able to meet anyone face to face. However, we are doing that via phone and Zoom meetings. Please call if you would like to make an appointment or have questions. Don’t forget to tune into my radio show the 1st and 3rd Monday of every month on WMBS Uniontown 590am and 101.1fm from 1:15 to 3. You can listen live on their website, wmbs590.com, or catch the replay on our website where you can also find archived podcasts and columns.