For many Americans, health insurance continues to be a topic of concern, especially as it pertains to retirement. As a financial advisor in Greenville, SC, we get a lot of questions about rising costs, eligibility and options when you’re no longer covered by an employer plan. With COVID-19 fast-tracking retirement for many people, there is also a lot of fear lately about coverage when facing an unexpected early retirement.
Of course, while working, many people rely on their company’s health insurance plan, but as COVID-19 has proved, employment circumstances can change quickly. With the last of the Baby Boomers nearing retirement, many people are looking for answers regarding health insurance.
At Global View, we have the answers, and as a financial advisor in Greenville, SC, we wanted to address a few of the more common questions we are asked about retirement health insurance. If you have a question that isn’t mentioned here or would like to discuss your specific situation in more detail, schedule a no-obligation conversation with the Global View team to see how we can help.
Q: How Does Medicare Work?
Medicare is health insurance for folks who are age 65 and older. You can sign up three months before reaching age 65 but may be eligible earlier if you have certain medical conditions.
Contrary to popular belief, Medicare is not free. Medicare costs include monthly insurance premiums, deductibles (out-of-pocket expenses), copays (your share of your medical bill, usually a flat fee that kicks in after you meet the deductible) and coinsurance (a percentage of costs you pay after meeting your deductible).
Medicare is composed of the following parts:
- Part A Hospital Insurance: Medicare Part A helps cover the costs of hospital inpatient care, as well as home health care, skilled nursing facility care and hospice care. Most enrollees qualify for premium-free coverage, but if you don’t, the monthly premiums in 2021 are either $259 or $471, depending on your (and your spouse’s, if applicable) work record. Failure to sign up for Part A when you are first eligible for Medicare may result in a penalty. The deductible is $1,484 per benefit period. Copays kick in after Day 60, beginning at $371/day.
- Part B Medical Insurance: Medicare Part B helps pay for the services of physicians and other healthcare providers. Part B also helps cover outpatient care, home health care, durable medical equipment and preventive services. The 2021 cost is $148.50 per month, but late enrollment penalties apply. The deductible is $203, and you’ll usually pay 20 percent of the cost for each covered service.
- Part C Medicare Advantage: Alternative private coverage that is Medicare-approved can also help with costs. These plans usually bundle the other parts of Medicare into a single package.
- Part D Drug Coverage: Medicare Part D helps cover prescription drug costs. You can sign up for Part D through Medicare or via a private Medicare Advantage Plan.
- Medigap Supplemental Insurance: Optional additional coverage is available to help cover costs as well, and are purchased from a private company. These can be confusing, both in understanding what you need and what plans will cover. Discuss your options with a fiduciary financial advisor who has a legal responsibility to put your best interests first and has no incentive to push a certain plan.
Q: What If I’m Not Eligible for Medicare When I Retire?
You must be at least age 65 and paid Medicare taxes for a sufficient period (usually 10 years) to receive Medicare. If you don’t meet this criteria, you do have options:
- You may be eligible to join your spouse’s company plan.
- You can enroll in an ACA Marketplace plan.
- You might be eligible through COBRA to continue your company plan after you separate. You will be responsible for the entire premium, which can be expensive. Coverage lasts for 18 or 36 months.
- You can tap into your Health Savings Account (HSA) and/or your Flexible Spending Account (FSA), if available (see below).
Costs and benefits vary, depending on which options you choose. Talk to a financial advisor to see what makes the most sense for you.
Q: How Does My HSA Work?
A Health Savings Account allows you to put aside pre-tax money to pay for qualified medical expenses, including deductibles, copayments and coinsurance. The pre-tax nature of your contributions may reduce your overall costs of healthcare.
You can contribute to an HSA only if you have a High Deductible Health Plan (HDHP), which covers only preventive services before the deductible. The HDHP minimum deductible is $1,400 for an individual and $2,800 for a family. Many people combine their HDHP with an HSA.
For 2022, you can contribute up to $3,650 for individual coverage or $7,300 for family coverage. Anyone 55 or older can add up to $1,000 in catch-up contributions. Earnings in the account are not taxable. You can roll over your HSA balance year to year. Others can contribute to your account, subject to IRS limits. Most states do not tax HSA contributions.
You can deduct any after-tax contributions you make to your HSA up to the annual limits. Withdrawals are tax-free when used for qualified medical expenses. HSAs are fully portable, even if you change jobs, change health insurance plans or retire. You usually get a debit card from your HSA to make payments more convenient. Many medical expenses qualify for HSA payment.
These accounts do have a few downsides to be aware of. The required HDHPs can be expensive. Also, you may be hesitant to get the healthcare you need because you are “spending your own money.” If this is a particular struggle for you, let’s talk. As a financial advisor in Greenville, SC, we can help you understand how your plan works and the goals for the money in your account.
Q: How Does My FSA Work?
A Flexible Spending Account can help pay for deductibles, copayments, some prescription drugs and other healthcare costs. FSAs are designed to work with your job’s health plan. Your contributions to an FSA are pre-tax and may be supplemented by employer contributions.
You pay for medical expenses by filing a claim with your FSA administrator at work. You may have to provide proof of out-of-pocket medical expenses.
You can contribute up to $2,750 per year per employer. Your spouse can contribute to his or her employer’s plan as well. You, your spouse and your dependents can use your FSA funds for medical, dental, medical equipment and prescription drug expenses, but not insurance premiums.
Generally, you must use your FSA money within the plan year, but your employer may provide options.
Q: How Can a Financial Advisor Help with Healthcare?
The costs of healthcare continue to rise. At Global View, our team of fiduciary financial advisors in Greenville, SC is well-versed in healthcare options and can help you select a plan that makes sense for your individual needs. We can also help you budget for these costs and examine different scenarios and how they’ll affect your overall financial plan.
If you have questions, don’t be afraid to ask! A seemingly simple decision can have long-lasting effects for both you and your loved ones.