Health Care Costs

[BigMike]

Seems to me that one of the keystones of early retirement is obtaining reasonably priced health care insurance (isn't that an oxymoron) until you reach age 65 and become eligible for Medicare. For those of us that do not, or will not have employer provided health insurance provided in retirement, how are you "bridging the gap?" I don't believe going without insurance is an option.......but I'm interested in hearing how others have met this challenge.

This morning I received an email from my employer, and they are forecasting that health care premiums to large corporations for their employees will DOUBLE during the next five years. I work for a Dow 30 company and you would think they would have some ability to negotiate "reasonable" insurance rates. If rates will double for my employer (and go up for me), I wonder what the impact wil be to those that try to purchase individual policies.

....for those that have employer provided insurance in retirement, don't you have a concern that what was once provided free of charge will become very expensive in the future as rates for all increase? How do you budget for that?

Mike

 

[unclemick]

I didn't - I went totally without insurance for 12 years cause it was too expensive.

In my old age(62) bought 5k deductible BC/BS for 178/mo here in MO cause I'm getting old AND can afford it.

Don't recommend it for anyone else though. I'm single.

This topic is an ongoing conern and I know of no easy solution - varies by the individual situation and place of residence.

 

[Momtwo]

....for those that have employer provided insurance in retirement, don't you have a concern that what was once provided free of charge will become very expensive in the future as rates for all increase?  How do you budget for that? 

Mike 

Mike,

We have health insurance partially provided by former employer in retirement. The premium that we have to pay has gone up in the past 5 years to 4 times what it was the when we retired. There is no way to really figure out what this means in the future. We just feel fortunate that we don't have to buy insurance on our own.

Momtwo

 

[Dawg52]

I'm involved with our company's annual negotiations of healthcare premiums. In our case, it seems we always have some major health claim that blows our plan out of the water. We have experienced 25% increases or more each year for the last 5 years. As a result, we always have to water the plan down to lower the rates. This year we bought a very high deductible plan with BC/BS and then bought some deductible insurance from another company that in effect lowered our overall deductible over the previous year. Actually lowered our overall rate as well. Only problem is that the employee has to be sure a claim is filed with both companies. But so far so good.

This is just a temporary fix as the deductible insurance will probably go way up in the future. Controlling rate increases from the employers perspective is very difficult indeed. The retiree has the same problem. Don't know how you can budget for future increases. You just better have a $hit load of money set aside for healthcare.

 

[Nords]

Seems to me that one of the keystones of early retirement is obtaining reasonably priced health care insurance (isn't that an oxymoron) until you reach age 65 and become eligible for Medicare. For those of us that do not, or will not have employer provided health insurance provided in retirement, how are you "bridging the gap?" I don't believe going without insurance is an option.......but I'm interested in hearing how others have met this challenge.

While we're waiting for Martha to chime in, you can search the old threads for the keyword "healthcare". There's a gold mine of info over the last couple months, let alone the last year.

This morning I received an email from my employer, and they are forecasting that health care premiums to large corporations for their employees will DOUBLE during the next five years. I work for a Dow 30 company and you would think they would have some ability to negotiate "reasonable" insurance rates. If rates will double for my employer (and go up for me), I wonder what the impact wil be to those that try to purchase individual policies.

Your employer wouldn't, by any chance, be required to negotiate a salary & benefits contract with a union, would it?

 

[Martha]

You know, I posted on this thread and my post is gone. I think I deleted it by accident instead of modifying it. Oh well.

Big M, you asked what people do if they don't have employer provided health insurance. What your options are depend on a number of factors, including where you live, your age, your health, and if you are coming off of a group plan.
What rights you have in your state are summarized in a Georgetown University publication found at www.healthinsuranceinfo.net.

Health insurance regulations that vary by state include rules regarding access, rating (restricting the ability of insurers to charge higher premiums based on health status or risk of having future claims), and covered benefits.

Because of the state variability, what one person's experience is in one state may be totally irrelevant to another person's experience.

-Little M.

 

[audreyh1]

We bought individual health insurance policies - no other option.

Since purchasing the policies in 2001 (after 18 months of COBRA) they have doubled. We're only 5 years older! We carry high deductibles for the better rates.

So, I guess we can expect another doubling in the next 5 years? Who knows?

That's just one of the serious costs of retiring before age 65. Those who somehow have employer provided insurance after retirement - you are VERY lucky.

Audrey

 

[tangomonster]

Health care is our biggest concern with our 6-week countdown to RE.  I qualified for a BCBS high-deductible (we're talking $10,000) that is only about $120 a month, but DH due to health concerns (all of them resolved or controlled by medication) was turned down.  He can convert his current employer-sponsored insurance to an individual policy with United.  About a $2500 deductible, $2 million cap---and it will be about $680 a month!  So----we'll start off by paying $800 a month for health insurance and still have to pay a lot out of pocket.

We're extremely nervous about paying for health care and health insurance for the next twelve years when (IF!!!)
Medicare kicks in.  To make matters even worse, the representative at United really discouraged DH today when he asked for the application for the conversion, saying it isn't great insurance (can go up each year---but what policy can't and there aren't the negotiated rates for health care providers associated with other insurance).

So we're totally freaked out.  Getting cold feet.  But we do have $4 million and could live on much less than a 2%
withdrawal rate----provided health care costs or health concerns don't escalate to the point where we're doing 10% or more a year.

Need some reassurance, folks, that we're not crazy to do this.  We really need to get out.  Work (we're at the bottom of the food chain at work and get grief from every direction)
is affecting our physical and emotional health.  DH if he went five more years to 57 could then qualify to get his current health insurance (fully paid by us with nothing from the employer, but a better policy at a somewhat lower cost).

So---even if we go through several hundred thousand dollars for health care costs, it still seems like we have enough of a reserve and that the freedom would be worth it.  Do you agree?

 

[Martha]

Conversion policies often are not the best deal--expensive and may have less coverage.  Did you read the guide at www.healthinsuranceinfo.net for your state?  There may be other options for your husband when coming off of a group plan that are better than the conversion option. 

Edit: I agree with Dog51.

 

[Dawg52]

So---even if we go through several hundred thousand dollars for health care costs, it still seems like we have enough of a reserve and that the freedom would be worth it.  Do you agree?

I think 4 million qualifies as a $hit load. Enjoy retirement. 

 

[tangomonster]

Thanks, Dog. Sometimes we lose perspective about our net worth----it's sort of an abstract idea that doesn't feel real since we don't touch the money. And we live so imply, it wouldn't seem to be a problem. But then I'll read in a paper about a person who is 111 y.o. and I get scared about outliving our money....

Martha, thanks for the link. For some reason, my state (Georgia) is no longer on it. Looked up Florida just to see
what was on it. Didn't seem to offer much more than the conversion policies. We just don't have a lot of options because insurance actuaries view DH as high-risk (when in actuality, he really is healthier and has a lower-risk lifetsyle than most people).

 

[PortlandDiehard]

IMO, those that are 15-20 years from retirement have the least to worry about. Health care is very inefficient right now, with escalting treatment costs not showing comparible benefit to overall health.

I expect that within 15-20 years, we'll see a tiered health care system where if loaded, one can use the "botique" system. If not, one can use outsourced care, or commoditized care from lesser skilled professionals.

Insurance is also currently mispriced. My employer spends $250/mo for my medical and dental. We have excellent coverage. It would cost me 2-3 times that on the open market. Why?

25% increases in health premiums seem like they'll go on forever. They won't.

Look at the political pressure $3/gal gas is creating. Eventually, we'll wake up and apply the same pressure to the $500 doctor visit or the $200K artery clean-out.

On Fidelity's recent study that one should plan to spend $200K total on health care: My immediate response was "how much better am I going to feel than if I only spent $100K". Will I feel enough better that I would devote another 5 years of my ever-shrinking time on this Earth to pay for it? Maybe. Maybe not...

Jon

 

[audreyh1]

Excellent post PortlandDiehard!!!

Maybe after 10-15 years these drug companies will have learned a lesson. Maybe the market won't bear chemo drugs that cost $100K a year!

Audrey

 

[youbet]

Insurance is also currently mispriced.  My employer spends $250/mo for my medical and dental.  We have excellent coverage.  It would cost me 2-3 times that on the open market.  Why?

Jon, is the cobra rate for your employers insurance $250/mo plus about 1% admin cost? Cobra rate is supposed to be employers actual cost plus an admin fee. If your employer is able to do a comprehensive medical/dental plan for $250 (family coverage), that is outstanding. Costs my employer about a kilobuck.

 

[PortlandDiehard]

We're a 45 person high-tech company in Oregon. Our insurance has a $500/year deductible, pays 80% of most stuff, has a lifetime cap of $2M and a yearly out-of-pocket cap of around $5,000.

The premium I quoted is from a sheet I receive each year that shows the total costs of keeping me around (salary + employer's FICA + health insurance + value of vacation, etc.). The number is consistent with what I've heard.

Keep in mind this cost is for one person. If I wanted to cover a spouse or dependent, I would be responsible for those costs myself.

Audrey, you're right - eventually, some of this will be commodotized. Getting a stent won't be like getting an oil change, but you might have options other than forking over 3 years salary for a 3 hour operation. For best results, I would confine any sickness to common ailments!

 

[Telly]

... For those of us that do not, or will not have employer provided health insurance provided in retirement, how are you "bridging the gap?"  I don't believe going without insurance is an option.......but I'm interested in hearing how others have met this challenge.

..........for those that have employer provided insurance in retirement, don't you have a concern that what was once provided free of charge will become very expensive in the future as rates for all increase?  How do you budget for that? 

Mike 

I went to Golden Rule for an individual policy.  $2500 deductible with some drug coverage.  Premiums for the first 12 mos, well, ok considering it WAS an individual policy.  After 12 mos. was up, a big increase.  9 mos. later, another big increase. 9 mos, ANOTHER big increase.  On and on.  I learned about "introductory pricing" all right! 
Just as an example, in one 12 mo. period, the premiums went up by 24%.  Only 1 claim ever, for $200 for teenager at an emergency care place, which was less than 1/10th of the deductible.
My health, which is very very good (knock on wood!), has nothing to do with it.  I am classed in a group with other individuals in Texas.  They look at expenses across the group.

I suspect that many in individual health insurance are "dead ducks".  With most of the small ER community that are actually Er'd excepted, why would someone be in an individual policy rather than a group policy?  Because they could not hold a job due to illness or whatever?  Because they are in a low-paying job that does not have health benefits, and they have a family?
What I'm getting at is that I am classed in with a group of people that aren't doing too good (and I realize, of course, that for the grace of God, go I).  As this group needs more and more services and runs up the bills, people in good health like me find another way to cover health insurance, and bail out of the individual policy.  Which leaves the group behind even sicker.  So the costs go up even faster.

All the HIPPA mumbo-jumbo is fine, if you have real health problems and need SOMEONE to insure you.  But the costs are enormous.

So now as a lower-cost route we are paying extra to be added to DW's group policy where she works most of the year now.  This is not a good long-term solution, because I'd rather she not work all the way to 65!

About Retirement health coverage from an employer... no guaranty it will be there upon retirement, or it may be cancelled after you retire.  I know people that that has happened to.  Dumped out of the boat to swim with the sharks, and they retired not expecting to have to swim.

 

[Martha]

Martha, thanks for the link. For some reason, my state (Georgia) is no longer on it. Looked up Florida just to see
what was on it. Didn't seem to offer much more than the conversion policies. We just don't have a lot of options because insurance actuaries view DH as high-risk (when in actuality, he really is healthier and has a lower-risk lifetsyle than most people).

Poked around a little and it looks like Georgia doesn't have a lot to offer, beyond the conversion policy. But check this site: http://www.healthinsurance.org/georgia/default.lasso and for more information, contact the Georgia Insurance Department Consumer Services Division at 1-800-656-2298 or (404) 656-2070.

 

[MJ]

The Insurance goddess has smiled on me again.
I current have cobra coverage. I had anticipated an increase last May 2005 but the cost remain the same except for a $10 increase in the co-pay. This May, I budgeted an increase of 12%. The company switched insurance coverage from cigna to united care my current premium went down almost 5% and the copay for a regular doctor's visit decreased by $10. Although I am leaving the area, I would have continud to have the same doctors/dentists within the network.

 

[tryan]

Hey it's not all doom n'gloom ....

Once you accept that you will not w*rk until 65, you're better off applying for health coverage while you're young and healthy. So sooner is better when applying.

At the risk of repeating myself ... family of 4 got an individual NH BC/BS (non-smoker, pregnancy exclusion) at nearly 1/2 the cost of COBRA with my MA employer.

Can't predict the future (crystal ball broke) but w*rking partime at the Depot just for health coverage would not be the end of the world.

 

[jmm]

i am 56 and decided to get out of the corporate rate race last year.  for the first time in my life i had to find health insurance.  i investiagated and bought a HSA qualified policy.  $5000 deductible and the ability to contirbute $3300 into a tax free account ala an IRA.  any meds, or med costs i draw out of my HSA account.  my monthlys are $235 and probably growing annually.  the HSA is tax free and any moneys you dont spend by 65 are yours tax free.  its a little complicated but for now it was the best way to go for me.....google HSA and you will find out the details.
to save on prescriptions i opted for canada. i can still may for drugs out of my HSA account.

 

[Rich_by_the_Bay]

the HSA is tax free and any moneys you dont spend by 65 are yours tax free.

I know that at age 65 you can draw out HSA funds for any purpose, not just uncovered health expenses, but are you SURE you can draw them tax free? After funding the HSA with pre-tax dollars?

 

[Martha]

I believe the HSA distributions after 65 for non-medical expenses are taxable, but you don't have to pay the 10% penalty, which would be due if you took the money out before age 65.

 

[eridanus]

I believe the HSA distributions after 65 for non-medical expenses are taxable, but you don't have to pay the 10% penalty, which would be due if you took the money out before age 65.

Yes, they are taxable distributions.

Over age 65 people can also use their funds (tax-free) to pay for Medicare premiums.

http://www.ustreas.gov/press/releases/js1045.htm

"Qualified expenses include prescription drugs, qualified long-term care services and long-term care insurance, COBRA coverage, Medicare expenses (but not Medigap), and retiree health expenses for individuals age 65 and older. "

 

[Billy]

I seem to have a different view of healthcare insurance costs than most people here -- Since I came from a business family, was self-employed most of my adult working life, I had to pay for my own health care insurance all along (other than for short periods when I worked for others).

It seems to me that those who have employer supplied health care policies feel the most threatened with the idea of having to foot their own health insurance policies once they no longer have a job.

I agree. It is frightening, especially given all the scare talk in the media. That being said, if it is really a concern, and you are looking at retirement, consider also the idea of moving to another state. Just as you would weigh the costs of housing, needs for better weather, cost of living expenses, etc... you could research HICosts offered in different states.

Also -- and not to be taken lightly - is the rising surge in Medical Tourism.
http://www.retireearlylifestyle.com/medicalTourism.htm
http://www.retireearlylifestyle.com/medicalTourismCBC.htm
http://www.retireearlylifestyle.com/medicalphilippines.htm

I fully understand that this option would intimidate most 'regular' Americans, however, it is an option, and it feels better to have an option available than to be scared *%#less all the time (which only adds to the stress of your life).

Akaisha
Author, The Adventurer's Guide to Early Retirement

 

[ESRBob]

Akaisha,
This is really interesting. Though I knew of course about getting medical procedures at great prices overseas, I thought the initiatives were essentially promoted by the hospitals themselves. Seeing your link (Philippines) made me realize this is now at the Government tourism initiative level. That means the scale is such that it has hit the govt's radar -- I hadn't realized this had become so big. So it looks like this is becoming (has become?) more than a blip or a whacked-out left-field option for people needing major procedures.