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Can you imagine living to age 100 or perhaps even longer? With medical breakthroughs, it may be more possible than ever. That leaves the question: How will you pay for your medical care as you live longer?
Increasing health care costs are a very important issue for many retirees. One study by Fidelity, for example, estimates that a 65-year old couple retiring in 2006 will need $200,000 to cover medical costs in retirement. Fidelity calculates this number each year and found it has risen an average of 5.8% per year.
Union workers are much more likely to have health care benefits (83% of union workers versus 49% of nonunion workers according to the AFL-CIO, 2005). In addition, your union may have negotiated retirement health benefits for you. This can be a tremendous benefit, since it is difficult to get private insurance, other than Medicare, when you are older.
Employer-provided health insurance: Make sure to talk with your union representative and benefits administrator to find out whether you will continue to receive health care benefits when you retire, and what you must do to enroll or continue those benefits. If you drop your employer or union group health coverage, you may not be able to rejoin later.
Note: Some employers are discontinuing their retiree health benefits because of the high costs, so even if you are covered now, those benefits are not guaranteed to be there in the future.
Four points to consider when deciding which health insurance option to choose at retirement:
- Consider the cost of the various plan options available to you, compared with the benefits offered. Insurance premiums can vary significantly; however, most often the premiums vary due to differing levels of benefits provided under the plan. Keep in mind that the cost of any health plan will increase annually.
- Decide what type of health plan works best for you and your family. You may prefer a managed care plan, or a preferred provider organization (PPO)-type plan may work better for your family. Managed-care plans or preferred provider plans work through specific networks of physicians and hospitals and usually have limited geographic coverage areas. Also, where you live will determine the plan or plans you are eligible for. Are you planning to live elsewhere when you retire or move shortly after you retire? If so, check out portability of plans in your current state as well as plans in the locations to which you're planning to relocate.
- Be sure to check how long the plan option you choose will be available to you and/or your family members and what your options would be if (or when) that coverage terminates. (For example, if you are considering insurance through your spouse's employer plan, does that plan cover children who are in college? Or if you choose an individual policy, can the insurance company refuse to renew your coverage if you develop health problems?)
- Understand the options available through your employer and/or your state's health insurance assistance program. Non-Medicare eligible retirees usually find better coverage at a lower cost by remaining insured through their employer plans after retirement.
Two supplemental programs for union members
Medicare is an essential part of every senior's health planning, but it never was intended to provide for all your health care needs. Escalating health care costs leave many expenses that Medicare does not cover—deductibles, coinsurances, outpatient hospital services and physicians' bills, to name a few. Unless you have supplemental insurance coverage, these expenses come out of your pocket.
1) The Alliance for Retired Americans was created by the AFL-CIO to promote the interests and welfare of retired workers. With this in mind, the Alliance is offering members affordable retiree health insurance coverage to supplement Medicare. Depending on the plan you select, policies pay various Medicare deductibles, coinsurances and medical/doctor expenses not covered by Medicare. To learn more, and to get a free rate quote, click here or call 1-866-298-9117.
2) The Union Plus Health Savings program also can help you save money on out-of-pocket medical expenses like prescription drugs, vision care and dental care. While it's not insurance, this supplemental plan can assist in cutting costs when you don't have coverage. Read about the program here.
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