What options do we have for Healthcare Insurance when we retire early

[Prague]

I am in my late 40s and husband in his early 50s and we currently plan to retire end of this year/early next year. Our net worth is about 5m with 60% of it in taxable accounts and the rest in IRAs/401Ks. Our taxable account should generate between 110K-120K a year for us and we plan to use that to pay for our living expenses before SS kicks in. One thing that we struggle with very much is the US health insurance market for people in our situation (i.e. early retirees and almost 15-20 years before we are eligible for Medicare). It is not just the expense of this but also the uncertainty (right now, I don't even know how much we should budget for it). Currently we plan to use my husband's COBRA for 18 months after he retires, but after that, what would be our options for our healthcare insurance? Would like to hear specifics of what you have done and experienced. Greatly appreciated!

 

[joeea]

Currently we plan to use my husband's COBRA for 18 months after he retires, but after that, what would be our options for our healthcare insurance? Would like to hear specifics of what you have done and experienced.

I used COBRA for a few month while I looked into ACA health plans. During open enrollment, we selected an ACA plan and have used it ever since.

For us, the COBRA plan cost us $703/month, while our subsidized ACA plan cost $273/month. Our ACA plan is better, has a lower deductible and a lower out-of-pocket cost than the COBRA plan in every scenario. We did't need to change doctors - only our prescription provider changed.

Clearly, that varies by state.

Use your 18 months (or less) to learn what is available to you, in your state, with your husband's former employer. Compare it to your COBRA plan, then decide.

Today, you probably have plenty of options available to you. Some companies offer retiree health insurance, most don't. COBRA is available for some number of months. ACA plans are available today, but the future is unclear. And non-ACA plans are available as well.

Uncertainty about future healthcare is one of the things that all early retiress must be prepared to face. With a net worth of around $5M, you should be far less worried than most. As long as you remain insurable, I'm guessing you can afford any premiums that could realistically come your way. That's not something everyone can say.

 

[swakyaby]

I retired earlier this year at age 56 and had similar concerns over the rising health care premiums. I live in California and my COBRA is expensive. It is approximately $2200 a month for DH and I for low deductible Blue Shield, so we elected the high deductible Blue Shield for $1,440/month. I looked at ACA insurance, but my investment earnings put me just over the subsidized level. I considered changing my investments so that it wouldn’t generate so much dividends and capital gains for next year because the premium difference is substsntial, but then something happened last week. I was notified by the trustee of my mother’s investments that I am to receive a sizable inheritance before the end of this year. With the RMD that starts this year on this inherited IRA, I think subsidized health insurance is off the table for us. Oh well.

 

[kimcdougc]

We have been using ACA for the last 3 years since we retired. We pay $1656 per month for me at age 58 and DH at age 60. We don get some of that back when we file income taxes. Do I like the coverage we have. No, but the alternative was to keep working...so we also allow $500 per month in our budget for medical/dental expenses if needed.

 

[travelover]

You can get an idea of what it will cost you today at healthsherpa.com. Future costs require a crystal ball.

 

[Aerides]

I'm currently on COBRA and will be shopping the exchange for an ACA plan. Open enrollment begins later this year, for plans to start in January 2019. COBRA is pricier than most ACA plans, but for continuity, peace of mind, etc., it can be a good bridge to start things off.

Depending on your state and area providers, you may have a lot of ACA options, or few. In FL, we have a lot of coverage from BCBS, and there are many plans at all levels.

You can also go to healthsherpa.com, and have it provide you some options now. Just indicate that you have a loss of coverage so it allows you to search during the non-open period.

 

[ivinsfan]

At that income level you qualify for no subsidies, what ever plan you choose will cost you rack rate and most likely have a substantial deductible.

A better exercise would be to calculate your net after taxes, enter your budget needs without healthcare and look at the remaining number. If you want to come back and share that number we could probably go from there. The problem is as you age and get into higher premium charges the rates will

skyrocket so a 15-20 number is difficult to calculate.

 

[Dtail]

Healthcare.gov will provide you with the available ACA plans, but as been mentioned, you won't be eligible for tax subsidies at your taxable income levels.
Most folks who manage their income (MAGI) to the fullest, typically have a decent amount of cash or Roth IRA available to supplement their taxable income.

 

[cathy63]

We are in a similar situation, so I created a spreadsheet that I am using to track past costs and estimate future costs. You can see it here as a Google Sheets file if you are interested: https://tinyurl.com/ybdfl5y9. You're welcome to copy it and play with your own numbers and feel free to ask me any questions.

What I was trying to do with this was to separate the increase in premiums due to age from the increase due to inflation. So when the news reports that premiums are going up 9.7% next year, that's on top of the 6% that they're going up just because we're both getting a year older. I also tried to account for the fact that there might be a couple of years where one of us hits the max out-of-pocket amount, even though in most years we hardly use any healthcare, so those were just randomly chosen.

We started on ACA in January 2017. One thing to be careful about with COBRA is if it ends in the middle of a year, then you will be subject to two deductibles that year as you change plans. It may be more cost effective to forego the last few months of COBRA and start an ACA plan on January 1.

 

[pb4uski]

You can get an idea of what it will cost you today at healthsherpa.com. Future costs require a crystal ball.

+1 best place to start.