One of the biggest questions faced when considering early retirement is what to do about obtaining health insurance coverage for yourself and your loved ones. Living without health insurance is risking financial devastation. A single accident or illness can result in bills in the six-figure range, wiping out any funds that you have saved for your retirement. Americans generally cannot apply for Medicare until after they have turned 65 and most employers will not provide health benefits to retirees. So what are your options?
High-Deductible Insurance Policies
Some early retirees that are in relatively good health are able to obtain individual health insurance coverage through a high-deductible insurance policy. However, high-deductible policies can be expensive and leave big gaps in your health coverage. High-deductible insurance policies have you pay most of your health-care costs out of pocket, but they will protect you against catastrophic expenses resulting from an accident or illness.
Many early retirees combine a high-deductible policy with a health savings account. A health savings account allows you to put aside pretax money to pay for medical costs incurred during the year. These funds can be used to pay for everything from bandages to insurance co-pays. Unfortunately, any money left in the account at the end of the plan year is lost so plan your doctor’s visits and medical purchases carefully to use the entire amount deposited before the funds expire.
Group Plan Options
If you are considering early retirement, spend some time researching your options. Some trade and professional associations offer group plans to their members. If you run a small business, you also may be able to get a group plan without exclusions. You may also want to consider consulting an experienced insurance broker to help you evaluate your options and guide you through the application process.
You will also want to research your state’s health-insurance coverage laws. Some states require insurers to offer small-group plans to the self-employed. One state, Vermont, requires insurers to offer coverage to individuals who do not qualify for group-health plans and also has laws requiring insurers to charge everyone the same premiums.
Most states do not have any laws to force insurers to cover individuals outside of employer or group plans. This can make it very difficult for someone with relatively minor health problems to get coverage, and those with major health problems may be completely out of luck. Some states have government-run coverage of last resort for those individuals that are unable to find private insurance.