Budgeting for health care expenses

[huusom]

We're in the same boat as you. I can only hope that the same kind of insurance systems in MA can be implemented here in CA. It will definitely make it easier for us to ER.

The health exhange part of the Obamacare which takes effect in 2014 (if the law is not repealed) that provide federal subsidies for low income families is going to be a major factor in our final decision to ER or not.

 

[nun]

We're in the same boat as you. I can only hope that the same kind of insurance systems in MA can be implemented here in CA. It will definitely make it easier for us to ER.

The health exhange part of the Obamacare which takes effect in 2014 (if the law is not repealed) that provide federal subsidies for low income families is going to be a major factor in our final decision to ER or not.

The system that Romney implemented in MA (let's call it Romneycare) is just like the the new federal health care system. So there's a mandate, no pre-existing conditions and and exchange. The exchange is vital as it gives me confidence of what I'll pay and what I'll get. The MA site is well laid out and it's a simple matter for me to compare policies.

 

[Midpack]

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.

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?

No question it's one of the most, if not the most troublesome issue for (early) retirees. May be beside the point, but I don't understand where you're getting "One Million? 1.5 million?."

The FIDO quote was $250K throughout retirement for a 65 yr old couple. I realize you have to cover yourself until you and DW are 65, but that's not going to cost $750K to $1.25M is it? [Without discounting, $75K to $125K/yr for 10 years??] What am I missing?

BTW, if there was a legit provider that would provide DW and I healthcare throughout retirement for $250K - I would sign up tomorrow! I fully expect it to cost more than that unless we're incredibly lucky.

3/25/10 BOSTON -- Fidelity Investments®, a leading provider of employer benefits, today announced the results of its annual Retiree Health Care Costs Estimate that found a 65-year-old couple retiring this year will need a quarter of a million dollars ($250,000) to pay for medical expenses throughout retirement, not including nursing-home care.

 

[swakyaby]

Perhaps I am overestimating on the needed amount, but I don't wish to underbudget on something so important.

Healthcare costs under Medicare are subsidized by the government through your lifelong payroll deductions during your working life. Out of pocket expenses during Medicare are significantly lower than paying the entire cost of individual health insurance (and the higher out of pocket costs) before age 65. Some people have suggested that a logical way to estimate costs is to consider my current group health plan expenses and plan for 10% increases each year. I appreciate that advice . . . yet I can't help but think that would leave me far short of actual costs. An individual insurance plan is usually higher, and recent history has shown that annual increases in premiums (in California, at least) have been higher than 10%.

Two years ago under my group health Blue Cross ppo 500 plan, my husband had an uncomplicated inguinal hernia surgery as an outpatient. After the $500 deductible and copays, and 20% of allowable bills, my out of pocket expenses for surgeon, anesthesiologist, facility fees, preoperative labwork, prescriptions, and family physician medical clearance for the procedure were just under $2000. I'm grateful he wasn't actually ill!

 

[nun]

Two years ago under my group health Blue Cross ppo 500 plan, my husband had an uncomplicated inguinal hernia surgery as an outpatient. After the $500 deductible and copays, and 20% of allowable bills, my out of pocket expenses for surgeon, anesthesiologist, facility fees, preoperative labwork, prescriptions, and family physician medical clearance for the procedure were just under $2000. I'm grateful he wasn't actually ill!

I'd plan for a worst case senario of annual premiums plus out of pocket max with 10% annual premium hikes. Drugs might also be extra. Even when you get Medicare you'll have to buy supplemental insurance if you want to have a reasonable level of insurance for extended hospital stays and drugs. So research Medicare Advantage or Medigap plans.

Of course the difficulty in this is not knowing how ill you'll be. When I think about that it seems strange, isn't insurance supposed to protect you from expensive and unexpected happenings. With the high deductibles it's a bit of a cheek to even call it "health insurance".

So I'd seriously look at what you can get from your state if you are low income and might even consider moving somewhere with better health coverage. I will probably take you some time to become resident, but if you lived in MA and retired at 55 and your husband was 60 there'd be no preexisting condition issues and your premium today would be $1000/month with a $4000 deductible. Not great, but it's something.

 

[swakyaby]

Well, thank you all for your thoughts and advice. I now have a better plan and a better idea of costs. Taking Rich in Tampa's advice, the year before I think I'll be retiring I will check into the availability and eligibility of health ins. for my DH and I before I retire. I'll then have a more realistic idea of cost instead of just guessing. If my savings come up short, I'll go from full-time to part-time just enough to qualify for group insurance rates. Well, that may not sound great to some, but it is okay to me.

I've always felt state sponsored healthcare such as Medicaid was really meant to be a safety net for those who truly could not afford basic medical care, not high income earners like me who are looking for ways to retire early. I'll pay my way . . . just don't want be caught out in the ocean (post retirement) with too small a paddle (retirement savings).

This has been a great community forum!

 

[tmm99]

This thread has been very interesting. I have about a decade left before I retire, but I may need to consider moving to a state where healthcare premium is relatively cheap. Is there a site I can go to that shows the average premium by state?

 

[Corporate ORphan]

Now that we are retired we are planning to relocate also. We are in the process of applying for health insurance to replace COBRA. We are 55 and I hope never to go thru the underwriting process again (and I considered us healthy... who knows what UHC will say when they see our application! Expecting people to remember 10 years worth of medical care. We had some of our records but still. It seems like a scam just so they can say you forgot the hangnail in 2002 so we are not going to pay for your breast cancer treatment!) Sorry for the digression. Now I forgot what I was going to say.

Now I remember: If the Health Care Bill stays intact the exchanges and subsidies should help people with pre-existing conditions so if you can hold on until 2014 it may not be so bad.

 

[nun]

This thread has been very interesting. I have about a decade left before I retire, but I may need to consider moving to a state where healthcare premium is relatively cheap. Is there a site I can go to that shows the average premium by state?

This isn't quite the answer to your question, but it will show you the rates for Massachusetts and how the individual buys health insurance here. This sort of site would be required for all states as part of health care reform. Boston is expensive for insurance as we have so many world class hospitals, but the legislature is looking at ways to control costs. FYI 98% of people in MA have health insurance.

https://www.mahealthconnector.org/portal/site/connector/

 

[Mulligan]

This isn't quite the answer to your question, but it will show you the rates for Massachusetts and how the individual buys health insurance here. This sort of site would be required for all states as part of health care reform. Boston is expensive for insurance as we have so many world class hospitals, but the legislature is looking at ways to control costs. FYI 98% of people in MA have health insurance.

https://www.mahealthconnector.org/portal/site/connector/

Interesting link. I matched up my plan to their plan that is very similar to mine. My current premium is $61, in Massachusetts it would be $286, but their plan would have a doctor visit co-pay and I would have to pay it all under mine. I then moved it to a 60 year old and it would be $200 more a month. Higher, yes, but it wouldnt force me out of retirement to pay it.

 

[observer]

I wonder what our Canadian colleagues have to say about all this (who have no such health care cost worries in retirment). As an American, I say shame on us for allowing the insurance industry free reign on us like this. The recommended $250k all Americans need to set aside is thanks to the insurance lobby and lack of any universal approach that every other modern country has adopted.

 

[figner]

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!

The plan I mentioned here:

http://www.early-retirement.org/forums/f38/sticker-shock-on-group-rate-hi-54407.html

is guaranteed-issue and does not require underwriting according to the phone rep I spoke with. Of course, that's probably why it's so expensive!