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Budgeting for health care expenses
Old 02-15-2011, 12:07 AM   #1
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Budgeting for health care expenses

Hi, I am 50, still working and looking toward RE in 5 years. My DH is 55 and has been out of work for awhile.

My big question mark in retirement finances is how much do I budget for health care expenses? I currently purchase group health insurance for myself and DH through my employer, although I pay the entire premium (it's taken off the top of my salary pre-tax). For 2011, the Blue Cross ppo 500 monthly premium is $1,362 for myself and DH. I live in California.

After I retire, my workplace does not offer retirement health benefits, so I will lose the group rate. I am currently in good health, but my husband takes medications for high blood pressure.

I recently read a Fidelity Investments estimate that a couple who retired now at age 65 should budget $250,000 for future health care expenses, not including long term care. So if I'm planning for 10 years of individual health insurance premiums for myself and 5 years for DH, that would make expenses nearly stratospheric, wouldn't it? One Million? 1.5 million?

I realize that there are so many variables, and with health care legislation looming it really is hard to plan. I would appreciate any thoughts, musings, and estimates.
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Old 02-15-2011, 05:01 AM   #2
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Hi - big topic/concern for us as well. We are currently checking with providers like Aetna etc and doing our best to forecast cost based on our current health (recognizing known issues and factoring those in). Bottom line we are expecting to be able to policies but they will include waivers for preexisting conditions so for those we are budgeting out of pocket expenses to cover them. So the total line item for healthcare in our budget is cost of individual policies+ deductibles (high) + expected out of pocket expenses for non-covered items.

I tell DW that our "real" healthcare plan in retirement is "don't get sick".

Also, open to other ideas.

good luck!
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Old 02-15-2011, 08:42 AM   #3
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Our COBRA is ending in a few months so I've been shopping for healthcare coverage as well. Both my husband and I have pre-existing conditions that disallow qualifying for any individual health insurance plan.

I've been working with an independant HC insurance agent who has been very helpful. Our only option is to let COBRA run out and get into a guaranteed issue policy (HIPPA mandated). We are in Florida, and the agent has recommended a United Health Care policy that will cost a little more than $2,000 month for a $2,500 deductable. There may be an option for a $5,000 deductable plan for $1,600 a month as well. I still need more info on exclusion riders UHC will demand in order to try and decide the value of these policies.

At this point I don't really know what we are going to be able to do. We are considering self-insuring and hoping for the best. It will be seven years until we are both on medicare...which is a looong time.
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Old 02-15-2011, 08:49 AM   #4
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Guesswork.

I suggest first assuring availability and eligibility of health insurance before you FIRE, then worry about price. Annual increases in the 10% range are reasonable, but so many variables make this a very dicey game.
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Old 02-15-2011, 08:59 AM   #5
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I recently read a Fidelity Investments estimate that a couple who retired now at age 65 should budget $250,000 for future health care expenses, not including long term care. So if I'm planning for 10 years of individual health insurance premiums for myself and 5 years for DH, that would make expenses nearly stratospheric, wouldn't it? One Million? 1.5 million?
I don't understand numbers like these. They are so far from what people can afford that they remind me of the housing bubble. You'll have to buy insurance until Medicare starts so maybe start with your current premium and project to 65 with 10% annual increases. What does Medicare cost per year right now?

IMHO 10% annual premium increases are unsustainable and the healthcare industry is in danger of pricing itself out of existence, so costs will flatten out either through legislation or the bubble bursting.
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Old 02-15-2011, 09:20 AM   #6
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Our COBRA is ending in a few months so I've been shopping for healthcare coverage as well. Both my husband and I have pre-existing conditions that disallow qualifying for any individual health insurance plan.

I've been working with an independant HC insurance agent who has been very helpful. Our only option is to let COBRA run out and get into a guaranteed issue policy (HIPPA mandated). We are in Florida, and the agent has recommended a United Health Care policy that will cost a little more than $2,000 month for a $2,500 deductable. There may be an option for a $5,000 deductable plan for $1,600 a month as well. I still need more info on exclusion riders UHC will demand in order to try and decide the value of these policies.

At this point I don't really know what we are going to be able to do. We are considering self-insuring and hoping for the best. It will be seven years until we are both on medicare...which is a looong time.
Expensive! In Minnesota for the HIPPA/risk pool plan I pay $396 a month for a $5000 deductible. This is for the 56-60 age band. It would be $546 for a $2000 deductible plan. The coverage is excellent, a 100% after reaching the $5000 deductible.
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Old 02-15-2011, 09:39 AM   #7
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Yay for MN, I think ;-)

How has the annual rate increase been? 10%?

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Expensive! In Minnesota for the HIPPA/risk pool plan I pay $396 a month for a $5000 deductible. This is for the 56-60 age band. It would be $546 for a $2000 deductible plan. The coverage is excellent, a 100% after reaching the $5000 deductible.
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Old 02-15-2011, 10:03 AM   #8
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Yay for MN, I think ;-)

How has the annual rate increase been? 10%?
Last year it was almost exactly 10%. The year before was less, but I can't remember how much. I moved up an age band so with the increase for age plus the 10% increase I moved my deductible up to the $5000 from $2000. So far I have been lucky and haven't come close to the deductible.
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Old 02-15-2011, 10:12 AM   #9
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In MA everyone MUST buy coverage. Costs are pretty high, but the care is great and the state is actively looking at controlling costs. For someone single and age 50 its $300 a month with $2000 deductible and $5000 annual out of pocket max.

I've been looking at Medicare and part A and B seem straight forward, although they co-pays on hospitalization are frightening. Is that why you have Part C or medigap policies. It's ridiculously complicated, no wonder the system costs so much
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Old 02-15-2011, 10:27 AM   #10
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Expensive! In Minnesota for the HIPPA/risk pool plan I pay $396 a month for a $5000 deductible. This is for the 56-60 age band. It would be $546 for a $2000 deductible plan. The coverage is excellent, a 100% after reaching the $5000 deductible.

Florida had a health care plan called "Cover Florida " . It was ridiculously expensive for lousy coverage . I just went to the web site and "Cover Florida " is no more .
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Old 02-15-2011, 10:38 AM   #11
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I'm not even very sure that Medicare will be available in its present form for the present fees, by the time we baby boomers reach Medicare age in huge numbers. The problem of affordable, adequate medical care for seniors is really looming over us right now.

I think it is a very perplexing problem, not just for the OP but for our entire generation. It is a problem that has been on the way for some time and nothing seems to have lessened it. The only solution I was able to find, was to take a federal job and work until I could retire with medical coverage (so I did that). But that solution can't cover everybody and may be less than perfect.
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Old 02-15-2011, 11:53 AM   #12
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I'm not even very sure that Medicare will be available in its present form for the present fees, by the time we baby boomers reach Medicare age in huge numbers. The problem of affordable, adequate medical care for seniors is really looming over us right now.

I think it is a very perplexing problem, not just for the OP but for our entire generation. It is a problem that has been on the way for some time and nothing seems to have lessened it. The only solution I was able to find, was to take a federal job and work until I could retire with medical coverage (so I did that). But that solution can't cover everybody and may be less than perfect.
I agree with you. There will still be Gov sponsored coverage, but either costs and services will have to be slashed or taxes/premiums raised. My option is to go back to the UK where I would have zero to pay as soon as I took up residence, there's no age qualification as NHS covers everyone.

I just looked at Medicare Advantage costs in MA and managed to work things out. Obviously cost for Parts A and B is $96/month, but the co-pays for long term hospitalization etc mean that you really have to purchase supplement insurance. A good plan in MA that covers the holes in Part A and B and provides drug coverage will run between $100 and $150 a month. So looks like costs in MA right now for a single 50 year old are a min of $300/mth and for a 65 year old somewhere around $200 to $250 for part B and a Medicare Advantage program.
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Old 02-15-2011, 11:57 AM   #13
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Our COBRA is ending in a few months so I've been shopping for healthcare coverage as well. Both my husband and I have pre-existing conditions that disallow qualifying for any individual health insurance plan.

I've been working with an independant HC insurance agent who has been very helpful. Our only option is to let COBRA run out and get into a guaranteed issue policy (HIPPA mandated). We are in Florida, and the agent has recommended a United Health Care policy that will cost a little more than $2,000 month for a $2,500 deductable. There may be an option for a $5,000 deductable plan for $1,600 a month as well. I still need more info on exclusion riders UHC will demand in order to try and decide the value of these policies.

At this point I don't really know what we are going to be able to do. We are considering self-insuring and hoping for the best. It will be seven years until we are both on medicare...which is a looong time.
Wow that's terrible. Maybe look into moving to a state with better options. Your thread highlights the issues that health costs pose for many retirees, it's not only the premiums, but also the co-pays, out of pocket charges and uncertainty. I hope that eventually the "single payer" systems like in Canada and the UK will get a little more respect in the US as they address some of the issues you are having. I wonder how many ERers in the US would opt for the UK system if they could. Reading your post, I'm certainly thankful that it's one of my options.
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Old 02-15-2011, 12:07 PM   #14
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[QUOTE=nun;1037315]I don't understand numbers like these. They are so far from what people can afford that they remind me of the housing bubble. You'll have to buy insurance until Medicare starts so maybe start with your current premium and project to 65 with 10% annual increases. What does Medicare cost per year right now?

The current premium I pay right now is group rate based, but after employment I will pay individual rates which, in my state of California, is significantly higher than group rates. Even my current group premium has been increasing 15% annually for the past 4 years I have been with this employer. My employer has been shopping around for better rates (around 150 employees), but this is the best group rates and choices he said we could get. The story for individual rates is much scarier. For the past 3 years, some big health insurers in California have proposed rate increases as high as 35% and 62% for individuals! These rate increases were immediately challenged by our state insurance commissioner, but one health insurance declared it would proceed with the huge rate hike next month, because legally it could.

I appreciate everyone's thoughts so far. I'm just trying to get a better idea how to budget for health care costs before Medicare. Please continue to share your comments.
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Old 02-15-2011, 01:13 PM   #15
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Originally Posted by swakyaby View Post
Hi, I am 50, still working and looking toward RE in 5 years. My DH is 55 and has been out of work for awhile.

My big question mark in retirement finances is how much do I budget for health care expenses? I currently purchase group health insurance for myself and DH through my employer, although I pay the entire premium (it's taken off the top of my salary pre-tax). For 2011, the Blue Cross ppo 500 monthly premium is $1,362 for myself and DH. I live in California.

After I retire, my workplace does not offer retirement health benefits, so I will lose the group rate. I am currently in good health, but my husband takes medications for high blood pressure.

I recently read a Fidelity Investments estimate that a couple who retired now at age 65 should budget $250,000 for future health care expenses, not including long term care. So if I'm planning for 10 years of individual health insurance premiums for myself and 5 years for DH, that would make expenses nearly stratospheric, wouldn't it? One Million? 1.5 million?

I realize that there are so many variables, and with health care legislation looming it really is hard to plan. I would appreciate any thoughts, musings, and estimates.
In reading this thread you may want to check out what type of group rates that could be available to you thru any association you may be affiliated with or may want to be affiliated with. Try googling Association Group Health Care Insurance to learn more about this. From what I undersatand this is a way for people to buy group insurance. My folks were self employed and remained active in their retirement with their professional associations so they could take advantage of the group health care plans.

On HC inflation FIDA uses a 7% per annum increase when retirement planning.
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Old 02-15-2011, 01:19 PM   #16
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In reading this thread you may want to check out what type of group rates that could be available to you thru any association you may be affiliated with or may want to be affiliated with. Try googling Association Group Health Care Insurance to learn more about this. From what I undersatand this is a way for people to buy group insurance. My folks were self employed and remained active in their retirement with their professional associations so they could take advantage of the group health care plans.

On HC inflation FIDA uses a 7% per annum increase when retirement planning.
Every current "association" plan that is legitimate health insurance than that I am aware of does individual underwriting. If you are aware of any that do not please post!
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Old 02-15-2011, 01:21 PM   #17
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FIDA uses a 7% per annum increase when retirement planning.
Do you mean "FIDO"?...
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Old 02-15-2011, 01:33 PM   #18
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Florida had a health care plan called "Cover Florida " . It was ridiculously expensive for lousy coverage . I just went to the web site and "Cover Florida " is no more .
Yes....the indepedant agent told me that Florida's high risk pool is "not up and running" but would have cost the same as UHC regardless.


We haven't actually considered moving to try and get health insurance coverage....maybe we should.
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Old 02-15-2011, 01:34 PM   #19
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Do you mean "FIDO"?...

Fidelity Investments
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Old 02-15-2011, 01:38 PM   #20
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In reading this thread you may want to check out what type of group rates that could be available to you thru any association you may be affiliated with or may want to be affiliated with. Try googling Association Group Health Care Insurance to learn more about this. From what I undersatand this is a way for people to buy group insurance. My folks were self employed and remained active in their retirement with their professional associations so they could take advantage of the group health care plans.

On HC inflation FIDA uses a 7% per annum increase when retirement planning.
Also if your income is blow some small multiplier of the national poverty level you might qualify for state sponsored health care. In MA you can qualify for the state subsidized "Commonwealth Care" if you income is below $32k a year (it'll be $48k in a couple of years).
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