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WHEN I ANNOUNCED I’d be retiring at age 55, the most frequent question I received from friends was about how I’d pay for health insurance. They knew I wouldn’t be eligible to receive Medicare for a decade. They also knew paying for 10 years of premiums would likely leave a large crack in my nest egg.
Fortunately, I was able to take advantage of a health insurance benefit provided by my former employer. As an early retiree, I’m eligible to receive health care coverage for the rest of my life. It’s a benefit no longer offered to new employees.
I maximized the benefit by retiring on my 55th birthday—the first day I was eligible to receive it. For the next 10 years, my former employer will pay a sizable portion of my health insurance premiums. Once I become eligible to receive Medicare, my old employer will provide me with a monthly stipend to purchase whatever supplemental coverage I want.
In 2023, my former employer will pay a total of $8,790 toward the cost of my health care coverage. That’s equivalent to two months of my take-home pay at the time I retired. I have to pick up a portion of the premium cost. Starting in January, my share will be $173 a month.
In October, I received my open enrollment information. Since my husband and I relocated to Arizona after I retired, I’m limited to one option for insurance coverage. But that option allows me to receive care from any provider within the U.S.
Out of curiosity, I wanted to see how the plan I have compares to those available through the health care exchange set up under the Affordable Care Act (ACA). I discovered there were no ACA plans with a $1,000 deductible, which is what my current plan has. Looking at plans with a $2,000 deductible, there were three options. The least expensive of those would cost me $1,354 a month. That plan came with an annual out-of-pocket maximum of $8,700. My current plan has a $3,000 maximum.
It wasn’t clear to me if the ACA plan would allow visits to the hospital and clinics located in the retirement community where I live. Having the ability to see providers—whose offices are less than two miles from my home—is a convenience I can’t put a price on.
This isn’t going to be a popular tip, but you can just travel internationally for healthcare as needed. Example: LASIK is $8,000-$10,000 in the US. A week in Cancun at a luxury hotel including flights for 2 will cost you about $2,000. Lasik in Cancun cost me $800 (both eyes). You’d end up $5,000 ahead, and much more if you travel solo and skip the luxury hotel. Then you could try a cash pay doctor for the US.
My wife retired earlier this year at 55, and I’m still two years away from Medicare. Like most people retiring from the private sector now and in the future, neither of us has a pension or retirement medical coverage, so initially I was budgeting $25,000 per year to cover medical insurance and co-pays etc.
Then I started playing around with the ACA calculator and realized that was way more than it will cost us. In January we start our first full year of no earned income, which has a huge effect on the ACA subsidy we’ll be eligible for. As a result, our premium for Bronze plan with a high deductible will be – wait for it – zero. Nothing. Zip.
Of course, we’ll have to pay out of pocket for every non-preventative office visit, test, image, prescription etc. On the other hand, we won’t be spending $5,000-10,000 per year in premiums that a lower deductible plan would cost. Since we’re both in good health and have a pretty good handle on how many times we’ll need to see a doc during the year, we decided to roll the dice and go with the higher deductible plan. It’s sort of a way of self-insuring.
By savings $5000 per year in premiums, we basically can afford to max out our family out of pockets once every three years. This would only occur if one or both of us had something pretty serious happen. So fingers crossed.
I’ve never used the ACA for insurance but I know a few years ago people were finding it difficult to find physicians and hospitals that even accepted it. Do you know if this is still the case? I’ve always appreciated the fact that my health insurance allows me the freedom to see any physician and be able to go to any hospital. https://www.wsj.com/articles/obamacare-can-be-worse-than-medicaid-1530052891