Health Insurance

[Retire Soon]

Hi,

I plan to retire when I turn 55 next year. My wife will retire at the same time.  My employer by contract is required to provide health  insurance until we turn 65.  My employer is dropping their PPO plan, because it is getting too expensive.  This will leave two HMO's, Kaiser and Sharp.  We're relocating to a different state, where we currently own a home.  Neither Kaiser, nor Sharp will be available there.  When our current PPO is dropped, we'll either receive the same amount of money that is paid for health insurance for an employed couple (currently $5,200) per year or we'll receive catastrophic health insurance. The one that we'll receive , will be negotiated by our union. I am a member of our union board and have a chance to influence the outcome of this decision.  I am hoping that someone out there can help me with two questions: 1) Would we be better off with approximately $5,200 to purchase our own policy or allow our employer to purchase catastropic health insurance for employees who leave the HMO service area (such as my wife and me).  2) How difficult is it to purchase coverage at the price that  is quoted by PPO's such as Pacific Care, Health Net, or Blue Cross, such as what is seen on eHealthInsurance.com?  I would greatly appreciate responses to one or both of these question.

Thanks,

Retire Soon

 

[WhodaThunkit]

Hi, RS. I'm not an insurance expert. But I would like to put in my two cents worth anyway.

The tradeoff might depend a lot on preexisting conditions, at least in most of the 50 states. If you have significant preexisting conditions, then the group policy might be better (although there would be a serious disadvantage to having catastrophic coverage and a preexisting chronic condition). OTOH, if you are a perfect specimen, then taking the money and buying individual coverage would almost certainly be better.

Maybe Martha will comment on this. She is a regular poster here who is an attorney and who knows a lot about this kind of thing.

 

[Brat]

If a Kaiser community isn't too far consider buying or renting a studio in their service area and call it home. For example, if you are retiring to the Seattle area rent a place in Vancouver. Kaiser and Group Health cover each others members when out of area.

 

[Retire Soon]

Brat,

I've already considered that possibility.  The nearest Kaiser facilities are about 4 hours from where we'll be living.  I called the insurance administrator with our personnel department, and according to her, we do not have an agreement with this other state.  She said, that if I moved that my Kaiser coverage would only be good for 90 days with the facilities in the new state, and then I would be dropped by Kaiser.

Retire Soon

 

[WhodaThunkit]

Group coverage and individual coverage are hard to compare. Generally, group coverage is cheaper for unhealthy people and more expensive for healthy people. Individual coverage is cheaper for healthy people and more expensive for unhealthy people. So, of the 41 you mentioned, some would win if you went with group coverage, and others would win of you went with individual coverage.

BTW -- there is a good new book just out about all of this stuff. It is "The New Health Insurance Solution" by Paul Zane Pilzer (John Wiley and Sons, 2005). Talks at length about the different angles, and suggests appropriate actions for individuals and businesses. Since you are representing a union, however, your interests might not coincide with the author's. Still, it might be good to know what the "other side" is thinking when you negotiate.

I hope this helps! Again -- I'm not an expert (far from it)

 

[REWahoo]

2) How difficult is it to purchase coverage at the price that is quoted by PPO's such as Pacific Care, Health Net, or Blue Cross, such as what is seen on eHealthInsurance.com?

I can only relate my personal experience in applying for an indvidual health policy for my spouse and I before I retired earlier this year at age 58. The prices quoted online increased about 20% after we went through underwriting. But ther real kicker was all the exclusions placed on my wife's coverage.

As a result, we went the COBRA route. When our 18 months are up looks like I will get an individual policy and get insurance through the state pool for her.

Best of luck to you.

 

[Retire Soon]

WhodaThunkit,

Thanks for your recommendation.  Just went to Amazon.com and ordered, "The New Health Insurance Solution."  

Retire soon

 

[Martha]

I don't have much to add to Whoda. For the catastrophic coverage, what will be the coverage? What is the deductable? $10,000? If the deductable is huge and it doesn't cover things such as drugs, it isn't going to be very helpful for those with chronic health problems. Your odds of those increase substantially as you age. So the less healthy might end up just staying in the state where they were employed to be covered by the HMO because both the cash option and the catastrophic insurance coverage option are not near as good as the HMO.

The healthy people may be able to get better coverage with the cash. But this also will vary depending on where they decide to move.

I think you will need to look carefully at what kind of catastrophic policy is being offered.

 

[Retire Soon]

When we negotiated our last contract, the monthly employee contribution for our PPO was increased to $350 from $180, while the HMO went from $89 to $105. This was done in an effort to encourage employees to switch to the HMO (the actual cost for a married couple is $4,000 more per year more for the PPO).  Our PPO has already warned our employer that they will "drop us" once our group enrollment falls below 300 partipants.  As our employer hopes, this will happen this year (open enrollment just closed).  Then it will be up the bargaining teams on both sides to decide the fate of retired employees and future retirees (management and union members will receive the same coverage). At that point in time, we will have to make a choice between catastrophic coverage or giving the retiree a check to purchase their own coverage. Our contract requires that retired people get the same health benefits as working people until they turn 65.  Since we haven't got that far yet, we haven't had a chance to look at the specifics of catastrophic coverage. I might add, that when my wife and I purchased a house out of state two years ago, we did it under the pretense that when we retired and relocated there, that we would have coverage for health insurance.

 

[vic]

At that point in time, we will have to make a choice between catastrophic coverage or giving the retiree a check to purchase their own coverage.

Is that check income according to the IRS or a non-taxable reimbursement?

 

[Martha]

Is that check income according to the IRS or a non-taxable reimbursement?

The employer can set it up as a health care reimbursement account for qualified medical expenses. In that case it won't be income to the retiree. http://www.irs.gov/publications/p969/ar02.html#d0e1752


We do this at work for those who want to buy long term care insurance with pre-tax dollars.

 

[Retire Soon]

Tax issues will certainly be an important consideration. Martha, thanks for pointing out the IRS publication. I'll pass that information on to our health insurance committee.