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Between Retirement and Elder Years

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Many Americans are retired, but also are able to carry health insurance through their former employer’s retirement only insurance plans. Until recently, it was a significant benefit for those who might not be preparing for their “elder years” but who were also no longer working full time. You know: those golden years when life falls into place, the grandkids are the only priority and enjoying life without budgeting the pennies is no longer the reality. After all, this is our reward for working hard, planning for our retirement, taking care to cover our financial bases and even putting into place our burial policies and other estate planning considerations.

With the new healthcare laws, everything has changed. While those changes may be good for you and your family, for others, the changes can present more than a few quagmires.

Retirement and Insurance Coverage

One common scenario playing around the nation are letters from insurers with less than ideal news about premiums and coverage. Retirees are learning that their premiums are going to be increased at the beginning of the year. In some instances, they’re doubling. This means those pennies are going to be closely watched again in some instances those increases are unrealistic. Further, it’s also placing some couples into a situation where they may not qualify for subsidized health insurance in the Affordable Care Act Marketplace exchange without making other tough decisions.
They don’t qualify for Medicaid or Medicare, but now their backs are to the wall.

Solutions

There are solutions, though. Many retired couples are either keeping the retirement only insurance plans for the primary person and dropping the spouse or they’re dropping the policies completely (if they’ve not already been dropped by the insurer). In some cases, the spouse can qualify for subsidies on the exchange, which can offset the financial increases. In others, the retiree drops his insurance plan completely and instead is shopping via the Obamacare exchange.

The Numbers

Because employer sponsored insurance is often provided with minimum coverage, those cancellation letters have already arrived from insurance carriers in droves. If it pays for less than 60 percent of covered medical expenses, there’s a good chance the retiree has already seen his coverage drop or his premiums skyrocket. By the new laws, “unaffordable” means the premiums are more than 9.5 percent of one’s income, so even if the premiums are increased to get the policy in compliance with the guidelines, they often become unaffordable in the process. Note that as long as coverage for one person doesn’t exceed 9.5 percent of family income, the plan is considered affordable, even if the premium for family coverage exceeds that threshold. Since the plan is considered affordable, employer-insured workers generally can’t qualify for subsidies on the marketplace.

The Silver Lining

Here’s where the silver lining plays into the dynamic: the law treats people with retiree coverage differently than those working full time and with employer based insurance. This means that retirees who are eligible for retiree coverage but who opt to not receive it also aren’t deemed to have minimum essential coverage. They are then able to apply for premium tax credits.

What this equates to is that if you decide to not use the retiree plan, but instead choose to go through the marketplace, you may then qualify for those premium tax credits; the same ones that are available to those with incomes between 100 and 400 percent of the federal poverty level, presently at $15,510 to $62,040 for a couple in 2013.

What you’ll want to pay attention to is the premiums in relation to the type of coverage.

Keep in mind, however, that even though the premiums may be more affordable on the exchange, it’s important to carefully compare the benefits in your retiree plan with those in the exchange plans to make sure a new policy provides the coverage you need.

Stephen Unsworth
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