10 Ways to Get and Keep Healthcare Benefits in Retirement

Strategies vary for pre- and post-65-year-olds.

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As the automakers search for ways to cut costs, one of the areas that are likely to take a hit is retiree healthcare benefits. This was once a perk that many workers took for granted, along with their gold watches, but the number of employers offering retiree health benefits has been declining steadily for decades. Twenty years ago, 66 percent of companies provided retiree health benefits, according to the Kaiser Family Foundation. By 2007, that percentage had fallen by half.

Today, the only thing that's certain about retiree health benefits is that they're likely to change. If you have or anticipate getting health insurance through an employer when you retire, those benefits may be reduced or eliminated, if current trends continue. And the Medicare program itself may change. President Obama's budget proposed requiring wealthy seniors to pay more for drug coverage under Medicare Part D, for example, and there has been talk of allowing people as young as 55 to buy into the Medicare program.

You can't control what changes may occur. What you can do is evaluate your own options and take steps to get the best healthcare possible once you retire.

Under age 65. Your options are starkly different—and more challenging—if you retire before age 65, when you become eligible for Medicare. Many people who have retired early—or been laid off before reaching 65—have a hard time finding coverage in the individual market. "People under 65 are really stuck," says Tricia Neuman, director of the Medicare Policy Project for the Kaiser Family Foundation. "The best advice may be to find another job, and in this economy that's difficult because not all jobs come with health insurance."

If you're under 65 and you lose your job or your retiree healthcare benefits, here are five steps you can take to try to get healthcare:

1) Sign on with your spouse's plan.

2) Continue with your former employer's health coverage under COBRA if it's available. Even though you can get a 65 percent subsidy on the premium for the first nine months, it's still likely to cost a bundle, because you'll have to pay 100 percent of the premium and, probably, a 2 percent administrative fee.

3) If you exhaust your COBRA benefits and you're not yet eligible for Medicare, federal law requires that you be permitted to sign up for an individual policy that doesn't exclude coverage for pre-existing conditions. Unfortunately, there's no guarantee that the premium will be affordable.

4) Check out affiliation groups that may offer coverage, like your alma mater or AARP, which offers coverage in many states for members between 50 and 65. There's a catch, though. "Those policies will have some underwriting," says Cheryl Matheis, senior vice president for health strategy for AARP. "They'll look at pre-existing conditions. They may not cover it, or they may charge you more."

5) Apply for an individual policy. This is the least attractive option for anyone with a medical condition. Insurers who sell individual policies can and often do refuse to cover people who have even minor health problems, like high blood pressure that is controlled with medication.

Unfortunately, there's no guarantee that any of these options will provide you with good health insurance that you can afford. So if you have a choice about leaving a job with health insurance, take the potential difficulties you may have replacing that insurance into account before you quit.

Age 65 and up. If you're 65 or older, you're in a much stronger position, because you have the Medicare program to fall back on if other health coverage ends or is substantially reduced. Here are five steps you can take:

1) If you're Medicare-eligible and employed and you lose your job-based health insurance, you can enroll in Medicare Part A at any time. Part A covers hospitalization as well as limited nursing home care, home healthcare, and hospice care. Most people don't pay any premium for this coverage. You can enroll in Part B, which covers doctor visits and other outpatient care, anytime during the eight-month period that begins the first full month that you quit working or your group health plan coverage ends.

2) If you have retiree health insurance through a former employer, that coverage is generally secondary to Medicare, which is the primary insurer. Many retirees thus carry both Medicare Parts A and B in addition to their private retiree coverage. Check with your company's human resources department to make sure you understand how your retiree coverage works with Medicare. Note: If you don't enroll in Part B at age 65 and your retiree health insurance is subsequently reduced or eliminated, you must wait until the next general enrollment period to sign up for Part B. This occurs from January through March for coverage that becomes effective July 1 of that year. In addition, you may have to pay a penalty for delaying enrollment in Part B.

3) If your retiree health insurance ends, you have a guaranteed right to sign up for one of six Medigap policies that cover costs not covered under Medicare Part A or B. You have 63 days to choose from Medigap plans A, B, C, F, K, or L.

4) If you lose your retiree health insurance and you'd rather try a Medicare managed-care plan instead of traditional Medicare, you have two months to sign up with a Medicare Advantage plan (Part C) that provides hospitalization, outpatient, and drug coverage.

5) Finally, if your retiree drug coverage is reduced or eliminated, you have two months to sign up with a stand-alone prescription drug plan (Part D).

Check out my recent posts on the COBRA subsidy and COBRA's basics, how the Obama budget would put more than $1 billion toward studying the comparative effectiveness of various medical treatments, and 5 ideas for improving Medicare Part D by making it more understandable and affordable.