Healthcare Costs: How much to budget?

[Shabber2]

Currently get 100% of Healthcare Insurance paid by my wifes employer, which is great. When I FIRE in 2 years, I will still be covered until she retires in 8 years. I am trying to budget what that expense will look like for us. Where can I see rates?

We will be paying our own healthcare from age 50 forward. This is one expense I have absolutly no clue about how to budget. Is it $500 a month or $1000?

 

[retiringby50]

Yeah, I'd like to know this too... I'm afraid the number is going to be very high.

 

[megacorp-firee]

My COBRA is costing the two of us $685 a month. That will take us to the end of the year when we can go to the megacorp retiree plan for about $900 a month for the two of us. I will be looking into lower cost plans for my DW from private (BCBS type) insurers. The 1st time through, she was denied for some BS reason. Will be working on that.

If you are in reasonable good health then you may be able to get insured for about $300 per month per person for a relatively high deductible policy.

If you are not in good health and have existing conditions, you may not be able to get a policy from anyone except a state pool if that exists.

Good luck

 

[Notmuchlonger]

"If you are in reasonable good health then you may be able to get insured for about $300 per month per person for a relatively high deductible policy."

That seems to be a bit higher than what I have been pricing. I don't know what you consider reasonable good health though.

 

[chinaco]

I will take a stab... but admit that I have not done close analysis and projections. (off the cuff) I would assume something like $12k/yr (today's cost) in premium for 2 adults. Assuming Medicare will be around for you at 65, you would need about 15 years of premiums. Put back a reserve of $200k for insurance premiums invested in a 50/50 portfolio (conservative). There is risk on the portfolio is that medical inflation might out pace it.

Of course your medical expense will be more due to copays and yearly deductibles.

 

[dm]

We are able to stay on my wifes group plan. Even that is $800 a month. I am budgeting $1,000 per month.

 

[REWahoo]

Based on my experience, I'd start with $1,000/month and increase that by 10+%/year.

http://www.early-retirement.org/forums/f38/2008-health-ins-premium-increases-33623.html#post623359

 

[W2R]

There's always the possibility that we may have some sort of national health plan in place by that time.

It's hard to count on something like that so many years in the future, though. What if it isn't in place? What if you are diagnosed with something chronic and expensive in the meantime? What if Medicare becomes insolvent before you turn 65? I have no answers to these very serious questions.

 

[Rich_by_the_Bay]

There is no reliable method. I believe it's best to determine the entire premium being paid on your behalf the year before FIRE, then factor in 11% inflation on that based on historic trends.

There are dozens of ways in which that can change dramatically but it's a start. Also, investigate whether there are PPO, high deductible, or HMO options rather than assuming you'll just continue the status quo. Termination from employment is usually a "qualifying event" where you can adjust your options.

I'll be in the same boat in the future. My plan is to estimate as above, then do a "present value" calculation and set aside those funds in one fell swoop in a MM or short-term bond fund, and just let it burn down annually. I'd rather have the pain all at once than get stabbed every month or year.

 

[LOL!]

You mean no one has clicked on all the health insurance ads on this forum to see what kind of quote you would get?

 

[W2R]

You mean no one has clicked on all the health insurance ads on this forum to see what kind of quote you would get?

Hadn't noticed them! I usually just skip over the ads and do not read them, and I honestly wasn't aware of any health insurance ads at all. To me, ads on a website are just obstacles that make the website harder to navigate - - I do not actually read them. I also throw away junk mail, delete spam, put myself on the do-not-call list, and mute the TV during ads. I have never once bought one single thing due to reading about it in an ad. I am Madison Avenue's worse enemy!

 

[kaudrey]

I'm not retiring for another 14 years or so, but I use $1,000 a month (in today's $) until age 65.

Then, I took $215K and spread it out over the rest of my years (the amount Fidelity says it will cost people for healthcare even after they are on Medicare until they die).

In future $, this 215K is more like $400K.

 

[RockOn]

There is no good news in this area. Here in Colorado, a full HMO plan with $20 copays and no deductible is about $1200 a month for a couple right now. You can get a lower rate but then deductibles kick in and to compare apples to apples one would have to plan for those costs. I will likely buy a cheaper plan (a HSA) when I have to and take my chances. That is medical only, no dental. After putting 10% on for inflation as some suggest (10 years in my case until medicare), it scares the ***p out of me. I don't see how anybody can be budgeting less than $50k for retirement with those kind of expenses. Don't forget dental also, our older teeth can cost a huge amount to fix. My wife is looking at a $13k problem right now, we have dental insurance but since pulling the teeth would fix the problem, they will not pay for the repairs. She may have to go toothless.

 

[Poundkey]

DW and I (ages 57 and 59) just got our coverage with BCBS for $425/mo. total. Note that this is high deductible ($5000), has a prescription drug card but a cap on prescriptions paid out, pays only 25% on office visits, and doesn't cover my pre-existing condition (BPH). Besides having us list all medical conditions for the last 10 years, they also asked for a phone "interview".
We were lucky enough to have a niece who is an insurance broker. Having her walk us through the process was a huge help. She submitted pre-screens to several different insurers and BCBS offered the best for the least in our opinion. Under COBRA we were paying $440 with Aetna. Better coverage, same deductible.
As Rich points out....lots of variables so shop around.

One other point...The pre-screen also showed that one insurance company (Aetna) refused to cover me because of pre-existing conditions. Since it was done during a pre-screen, we didn't have to admit on the application to BCBS that I had been denied coverage. My niece seemed to think pre-screening was a good idea.

 

[youbet]

Based on my experience, I'd start with $1,000/month and increase that by 10+%/year.

http://www.early-retirement.org/forums/f38/2008-health-ins-premium-increases-33623.html#post623359

I think that's about as good a guess as any.

DW and I are covered by so-called employer subsidized retiree plans and together pay over $600 monthly........ and are delighted to have the coverage! We'd be over $1,000 without the employer subsidization.

Keep in mind....

1. Your health might be very different a decade from now when you retire than it is today. Don't assume you'll qualify for a low premium, high deductible plan aimed at the never-a-claim healthy crowd. Assume you might have to pay for a states's high risk plan, and that you'll be glad to get that.

2. If health care premiums are going to be a significant percentage of your retirement income, the impact of increases beyond your plan could deal a real blow to your planned lifestyle. That is, folks planning to RE on a very frugal budget need to be extra careful about allowing for health care costs.

3. Post 65 premiums, Medicare premiums + supplement + out of pocket expenses that will depend on the extensiveness of your supplement, might be higher than you anticipate. Hitting 65 hardly means the end of health care premiums/expenses.

4. Implementation of some sort of national health care plan may occur. Or, it may not. I'd be conservative and assume that ten years from now we're still going along as-is only with annual 10% increases between now and then.

 

[Notmuchlonger]

DW and I (ages 57 and 59) just got our coverage with BCBS for $425/mo. total. Note that this is high deductible ($5000), has a prescription drug card but a cap on prescriptions paid out, pays only 25% on office visits, and doesn't cover my pre-existing condition (BPH). Besides having us list all medical conditions for the last 10 years, they also asked for a phone "interview".
We were lucky enough to have a niece who is an insurance broker. Having her walk us through the process was a huge help. She submitted pre-screens to several different insurers and BCBS offered the best for the least in our opinion. Under COBRA we were paying $440 with Aetna. Better coverage, same deductible.
As Rich points out....lots of variables so shop around.

One other point...The pre-screen also showed that one insurance company (Aetna) refused to cover me because of pre-existing conditions. Since it was done during a pre-screen, we didn't have to admit on the application to BCBS that I had been denied coverage. My niece seemed to think pre-screening was a good idea.

That similar to what Ive priced. Evetually they will price a great majority out of health care and half the nation will be without it.

 

[CuppaJoe]

That similar to what Ive priced. Evetually they will price a great majority out of health care and half the nation will be without it.

I wonder how that compares to my grandparents era when I remember the expression, "saving for your final illness."

 

[Kronk]

Isn't there a limit that we'll hit? I mean, say you've got an $80,000 income and pay $10,000 in health insurance premiums ($830+ per month). If wage growth is around 4%, but health insurance grows at 10% per year, then...

...that 12.5% of gross income going to health insurance increases to:
20% of gross income in 10 years
30% in 17 years
50% in 26 years
100% in 39 years

I mean, these gains aren't sustainable. Something will have to flatten out eventually. Maybe it is sustainable for 10 years, but not for the duration of many retirements.

I certainly don't know where it'll flatten out, though...

 

[ziggy29]

That's like asking how much the 800-pound gorilla will weigh in 8 years. All I know is that one way or another, "a lot more than 800 pounds" is probably the right answer.

 

[youbet]

Isn't there a limit that we'll hit? I mean, say you've got an $80,000 income and pay $10,000 in health insurance premiums ($830+ per month). If wage growth is around 4%, but health insurance grows at 10% per year, then...

...that 12.5% of gross income going to health insurance increases to:
20% of gross income in 10 years
30% in 17 years
50% in 26 years
100% in 39 years

I mean, these gains aren't sustainable. Something will have to flatten out eventually. Maybe it is sustainable for 10 years, but not for the duration of many retirements.

I certainly don't know where it'll flatten out, though...

Good point Krock! Still, with OP asking about eight years out from now, and with premium inflation currently being greater than 10% for many folks (like me!), I'd go with 10% just as a swag. If it's too high, or if the govt finds a way to provide health care cheap, the extra budget could be spent on unhealthy extracirricular activities.

 

[M Paquette]

(off the cuff) I would assume something like $12k/yr (today's cost) in premium for 2 adults.

Accurate cuff. That's what I'm looking at for my first year, and I'm allowing for a 7% annual increase (ouch!) up til age 65, where most plans I've seen throw you to Medicare + a supplement plan.

 

[CuppaJoe]

Accurate cuff. That's what I'm looking at for my first year, and I'm allowing for a 7% annual increase (ouch!) up til age 65, where most plans I've seen throw you to Medicare + a supplement plan.

This is where I scratch my head: Medicare/"Kaiser Advantage" plan; what would the cost be: maybe 1/3 or less than the 60-65 age monthly premium?

 

[Midpack]

You MUST go get your own numbers!!! DW and I are in very good health and I intend to get a high deductible plan, well below $1,000 per month. However, I have an employee who is 58, has already bought (mortgage) a retirement home near Phoenix and has a net worth of just over $1 million. A few months ago he went to his financial advisor (Prudential) to put together numbers with every intention of retiring then and there. He and his wife are both in poor physical condition (overweight, high cholesterol, heart problems, etc.) and the estimate for them (he didn't tell me what the coverage was) was $3,600 per month. Needless to say, he's still working and probably will be for years to come...

 

[chinaco]

You MUST go get your own numbers!!!

Yep! YMMV

 

[unclemick]

Hmmm-don't anyone be a knothead like me. Do the right thing!

I went 12 yrs without insurance in LA cause I couldn't afford it 1993 to 2005.

$158/mo BC/BS for 10k deduct in MO - age 64. $450 per month for 5k deduct was the cheapest I remember in 93. Cobra was 728/mo.

Huge variation by State it would seem.

heh heh heh - note the SO had full coverage through her union (UAW). I had a valid Passport and a bad attitude toward getting sick. .