If you’re counting on your employer to provide health insurance coverage when you retire, you might want to rethink those plans. A recent report by the Kaiser Foundation shows a huge decline in the number of employers offering health benefits to retirees. This change is going to hit your wallet hard and enforce the need for Medicare supplemental coverage to avoid financial disaster.
According to the report, the percentage of large companies (those with 200+ employees) offering retiree health benefits has fallen from 66 percent to only 28 percent. This isn’t just a problem if you retire at age 65+, it’s a huge problem if you retire before age 65 and don’t quite yet qualify for Medicare. You could be left totally uninsured.
Who is at Risk for Losing Retiree Health Benefits?
Companies are looking for ways to increase their bottom line and decrease their expenditures, and health benefits are typically the most costly item to a company, which puts them at the top of the chopping block.
Many companies have already changed their policies regarding retiree benefits by decreasing company funding, increasing the age required for you to qualify for benefits and requiring that you accrue a greater number of years of service to qualify. Many new hires won’t qualify for benefits at all. As a current employee, you may even receive notification that your benefits have been reduced or cut.
How the Affordable Care Act Has Impacted Retiree Benefits
Before the Affordable Care Act (ACA), you may have been employed by a company that provided retiree health benefits if you retired even before age 65. This was a necessity because you typically can’t qualify for Medicare until age 65.
Now that the ACA provides an insurance alternative if you’re under age 65 and retired, many employers no longer see the need to provide retiree health coverage. This leaves you going to the federal exchange or state marketplace to find your own insurance coverage. Although the ACA requires that rates for older adults be no more than three times the rate of younger adults, this still leaves you flipping the bill.
Cutting retiree health benefits will still cost you a bundle even if you retire at age 65 when you qualify for Medicare. You likely assumed that your employer-based retiree health plan would pick up any expenses left over after Medicare pays their portion. If your employer reduces or cuts your retiree health coverage, this leaves you picking up any out-of-pocket expenses Medicare doesn’t pay.
Medicare out-of-pocket expenses include the Medicare Part A deductible ($1,216 for 2014), Medicare Part B deductible ($147 for 2014), and 20% of all remaining charges. In this case, a Medicare Supplement Plan is a necessity.
Medicare Supplement Plans help cover the costs left behind by Medicare, and there are 10 standardized plans to choose from, which are offered by various insurance carriers. All 10 plans cover the Medicare Part A deductible of $1,216. The remaining benefits vary as you can see on our MediGap Advisors Medicare Supplement Benefits Grid. Plans F, G, N and A are our most popular, especially plan A and the high-deductible plan F due to their extremely low premiums.
It’s important that you stay up to date regarding your retirement benefits so you know how to plan for your future, especially your retirement. How do you feel about employers shifting this financial burden to you? Have your retiree health benefits been affected? We would like to hear your opinion.
Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage. For more information visit www.MediGapAdvisors.com.