How should retirees handle the health care limbo

The number of retirees in “health care limbo” is rising, and could rise quite a bit over the next few years.

Health care limbo is that period when a retiree is not covered by an employer or other private health plan and is too young to apply for Medicare. People get in health care limbo because they took early retirement, lost their jobs through downsizing, or their former employers cut back on retiree health benefits. Health insurance for anyone is expensive. The cost rises as you age, and can be very expensive and difficult to even get if you have a pre-existing medical condition.

The number of people effected could rise in the next few years. Since Medicare is scheduled to run out of money in a few years, there is talk of raising the eligibility age to 67. That potentially would put everyone who retires at 65 in health care limbo. President Clinton made a proposal earlier this year that would have given these people the option of buying into Medicare. But that proposal would bankrupt Medicare sooner and isn’t going anywhere.

Fortunately, you can find private sector solutions to this health care dilemma.

• Your first line of defense is COBRA, a piece of legislation enacted in 1985. This gives you the right to remain in your former employer’s group health plan by paying premiums equal to 102% of the employer’s cost. You can purchase the coverage for up to 18 months after leaving the job and must elect to do so within 60 days after leaving the job. COBRA covers employers with 20 or more employees. Here’s a twist for widows that not many know about. If you were covered under your spouse’s employer plan and your spouse dies, then you can purchase coverage under COBRA for up to 36 months. The COBRA rules give you time to look for a long-term solution while remaining covered. 
• While shopping for an individual policy, you might be flexible on the policy terms. Don’t look for a policy that covers everything. You can reduce premiums substantially by covering yourself for the small items and choosing a high deductible. Use the health insurance to cover major medical costs or chronic conditions. A standard deductible is $250. See what happens to premiums as you raise that to $500, $1,000, or even higher. 
• Take a look at the HMOs and managed care plans in your area. Many HMOs offer individual coverage, though the bulk of their members come through arrangements with employers. An HMO usually offers better benefits than a traditional health insurance policy, with no deductible and small charges for doctor visits and prescriptions. If you can find an HMO with which you are comfortable, this can be a cost-effective solution.You might still get the low-cost coverage of an HMO without all the restrictions. Some HMOs now offer what they call a “point of service” plan. This allows you to see doctors outside the HMO. You get about 80% of the coverage of seeing only HMO doctors, plus you’ll pay a deductible and a higher premium.
• Group coverage might be available to you through a professional association or other organization. You might belong to one or more organizations related to your job. Many associations offer some kind of group health coverage to members. Check out the benefits before letting your membership drop. You also should check out organizations such as alumni associations and civic groups. A number of these offer some kind of group health coverage. 
• State laws are worth checking out. Over a dozen states have “guaranteed-issue” laws that require health insurers to make coverage available to everyone, regardless of medical history. You might pay a high premium to get the coverage, or you might have to get the coverage during a specific enrollment period during the year. States also are required under the Health Insurance Portability and Affordability Act of 1996 to provide at least two types of coverage to self-employed people and employees of small businesses who need health care coverage. You might be able to buy coverage under this law in your state. 
• A final option is to get a job under which you will be covered. Federal law now prohibits you from being denied coverage for a pre-existing condition if you were covered for at least 12 months under your prior employer’s plan. Most employer plans cover only full-time employees. But you might be able to find a situation that fits your needs.

There are a number of options open to those in health care limbo. It might take some scratching to find coverage in your price range. but coverage is available.