My retiree medical benefit - good deal?

[MuirWannabe]

I'm looking for opinions as to if the partially subsidized medical insurance coverage benefit I will receive upon retiring is in fact a good benefit. To be eligible for this benefit I must wait to retire until age 55. I'm 51 now and can probably retire at age 53 except for this issue.

By waiting to 55 I will recieve a $6500 subsidy to the cost of my medical coverage which my megacorp says is total value of $14,454. So I would pay out of pocket $7954 annually for coverage. This is for a very good healthcare plan. Probably considered a cadillac plan. The subsidy is good for DW as well so all the amounts just double with her included.

So, is this a good deal compared to what your experience is for healthcare coverage if you have gone out to get it on your own? How much more than $7954 might I expect to have to pay for a solid healthcare plan if it was just me on my own obtaining coverage?

I realize ACA may change all of this picture. Not sure if that makes my situation better or worse. But it's not clear to me how or when so I'm not really factoring that into my decision process on retiring at 53 versus 55 as it relates to this. At least not until much more clarity around ACA occurs.

I really appreciate you sharing any of your real life experiences as to what your healthcare coverage actually costs you in order for me to better understand the 'value' of my potential benefit. Thanks.

 

[pb4uski]

Our main reasons for having health insurance is to insure our assets from catastrophic loss should either of us have a major illness and to gain access to the negotiated rates available for health care services.

We're healthy and pay $630/month for a couple for a high-deductible health plan with a deductible of ~$6k each. Given our reasons for buying health insurance, we don't need a cadillac plan and we would not want to pay the additional premium for a cadillac plan.

I expect our premiums to be ~$750ish in 2014 before subsidy, and ~$500/month after ACA subsidies (for the two of us). this is about 1/2 of the $1,000 a month i provided for in my retirement expenses when I did my retirement planning.

 

[Chuckanut]

For what it is worth, I do not get medical coverage as part of my public employee retirement. However, I do get the opportunity to buy into a good (but not a Cadillac) plan offered to state employees. I have to pay 100% of the group rate which is a bit cheaper than the private rates in my area. Also, since i had been continuously insured by another plan, there were no problems with pre-existing conditions. Overall it looks like my group rate is about equal to your subsidy. But, again, it's not a Cadillac plan. More like a Buick. I could have gotten a Chevy plan and paid less, but chose not to do so.

 

[Mulligan]

I'm looking for opinions as to if the partially subsidized medical insurance coverage benefit I will receive upon retiring is in fact a good benefit. To be eligible for this benefit I must wait to retire until age 55. I'm 51 now and can probably retire at age 53 except for this issue.

By waiting to 55 I will recieve a $6500 subsidy to the cost of my medical coverage which my megacorp says is total value of $14,454. So I would pay out of pocket $7954 annually for coverage. This is for a very good healthcare plan. Probably considered a cadillac plan. The subsidy is good for DW as well so all the amounts just double with her included.

So, is this a good deal compared to what your experience is for healthcare coverage if you have gone out to get it on your own? How much more than $7954 might I expect to have to pay for a solid healthcare plan if it was just me on my own obtaining coverage?

I realize ACA may change all of this picture. Not sure if that makes my situation better or worse. But it's not clear to me how or when so I'm not really factoring that into my decision process on retiring at 53 versus 55 as it relates to this. At least not until much more clarity around ACA occurs.

I really appreciate you sharing any of your real life experiences as to what your healthcare coverage actually costs you in order for me to better understand the 'value' of my potential benefit. Thanks.

The good thing is you have two years to figure out how the rates and benefits of Obamacare will compare to the plan you can maintain. The fact that you are getting spousal benefits on top of it will make your plan more compelling. If your plan is truly a "cadillac plan" you may want to study the healthcare act impact on these plans come 2018, I believe. They are going to smack a nice tax on these policies. That may force your companies hand into changing existing program. Like PB (I believe in earlier post) said, I don't like to pay for more insurance than I need. I got my own $5500 HD individual plan so cheaply, I actually netted a $200 yearly profit from purchasing insurance due to HSA tax break and no medical cost the past year. Sadly for me, Obamacare, is putting an end to this nice deal for me starting next year more than likely.

 

[Sue J]

DH is retired from public employment and our health insurance is through his pension plan with a generous subsidy.

At least FOR NOW.

What happened since he retired in 2010 is that his pension plan has made changes that basically made the health insurance much more expensive (even with the subsidy) for the retiree and there is a transition period coming that eliminates the subsidy and eventually access to coverage for spouses and lowers the subsidy (increasing the cost) for the retiree.

Our costs have increased by $400/mo in the last year and next year looks like another $98/mo increase. They used to offer 3 plans with varying deductibles vs. coverage and now there is only the high cost plan. This is far better coverage than we'd ever want to pay for. I preferred the lower cost plan with less coverage and higher deductibles.

We're coping this year and considering ACA for 2014 or 2015.

My warning is to check your pension plan documents and understand if your coverage is a guaranteed benefit. Is it subject to change and what factors will cause a change? Do you have access to coverage through your wife's employment or her retirement?

I've been learning all I can about ACA. My state does not have much info available but watching other states and using online calculators has been helpful.

Understand that your ACA cost vs. subsidy is determined by your income where your retiree medical cost are determined by your plan and may be subject to large increases in cost or large decreases in coverage.

As for the retiree plan costs, in 2013 it's $814/mo per person (no family coverage options). For 2013 it's increasing to $909/mo per person. We still have the subsidies so our costs are less than that.

 

[MuirWannabe]

My warning is to check your pension plan documents and understand if your coverage is a guaranteed benefit. Is it subject to change and what factors will cause a change? Do you have access to coverage through your wife's employment or her retirement?

The benefit is not guaranteed indefinitly. It is subject to change each year at megacorp's discretion based upon their total projected plan costs. Their annual calculations will no doubt lead to increases in my annual payment amount while the subsidy amount remains the same. DW is SAHM so no other coverage options are available except to go it on my own. If I ever elect to not participate in this plan either at retirement or later then I am not eligible to re-enter this plan.

Again, have no idea how ACA may impact this plan other than the fact it most certainly will. Makes this aspect of retirement planning more difficult.

Thanks for your reply!

 

[Katsmeow]

What happens with this plan if premiums increase. Is the subsidy a fixed amount or does it increase with premium increases? DH has a retiree plan with a subsidy (I and kids are also eligible under it). However, increases in premium cost are only paid partially. I think about 5% increases per year. This year our premium cost increased over 200%! That said, we are only paying $475 or so a month for family coverage so even with the increase it isn't bad.

I also don't think you can just ignore ACA as the real benefit of most retiree plans have been to provide guaranteed insurance so that you don't have to worry about a carrier not giving you coverage or trying to rescind after you get sick. What kept people from retiring before Medicare was often the unavailability of insurance coverage at any price.

And, of course, for the early retiree, the ACA removes that from the equation making many retiree plans unappealing.

If coverage under your retiree plan is over $7k per year per person then that doesn't sound great although I'm not sure how much of a cadillac plan you are talking about. When DH retired we switched from the low deductible plan to a high deductible plan and reduced premiums by about 2/3.

Do you have any options in your retiree plan for a higher deductible plan to reduce what seems like an awfully high premium cost?

 

[MuirWannabe]

What happens with this plan if premiums increase. Is the subsidy a fixed amount or does it increase with premium increases? DH has a retiree plan with a subsidy (I and kids are also eligible under it). However, increases in premium cost are only paid partially. I think about 5% increases per year. This year our premium cost increased over 200%! That said, we are only paying $475 or so a month for family coverage so even with the increase it isn't bad.

I also don't think you can just ignore ACA as the real benefit of most retiree plans have been to provide guaranteed insurance so that you don't have to worry about a carrier not giving you coverage or trying to rescind after you get sick. What kept people from retiring before Medicare was often the unavailability of insurance coverage at any price.

And, of course, for the early retiree, the ACA removes that from the equation making many retiree plans unappealing.

If coverage under your retiree plan is over $7k per year per person then that doesn't sound great although I'm not sure how much of a cadillac plan you are talking about. When DH retired we switched from the low deductible plan to a high deductible plan and reduced premiums by about 2/3.

Do you have any options in your retiree plan for a higher deductible plan to reduce what seems like an awfully high premium cost?

In answer to your questions.

I suppose the subsidy could increase but suspect it would just be on me to make up the difference for overall increases. I don't have any other options for another plan that could be high deductible. It's use this benefit as is or lose it and be on my own. But being own my own may not be that bad based upon some of these replies. That also opens the door towards retiring before 55 maybe.

Thanks Katsmeow.