Key Considerations in navigating pre-Medicare insurance options
As a financial advisor, I often encounter clients who are in the transition phase between leaving their employer-sponsored health insurance and becoming eligible for Medicare at age 65. Here’s what you need to know to ensure you make informed decisions and maintain adequate health coverage during this period often referred to as “pre-Medicare.”
Understand Your Coverage Options
COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your employer-sponsored health insurance for up to 18 months (and in some cases, up to 36 months) after leaving your job. However, COBRA can be expensive since you’ll be paying the full premium, including the portion previously covered by your employer, plus a 2% administrative fee.
ACA Marketplace Plans
The Affordable Care Act (ACA) provides a marketplace for individuals to purchase health insurance. These plans are often more affordable than COBRA, especially if you qualify for subsidies based on your income. The ACA marketplace offers various levels of coverage, from Bronze to Platinum plans, so you can choose the one that best fits your needs, budget, and the amount of time you’ll need coverage before you’re Medicare eligible.
Short-Term Health Insurance
Short-term health insurance plans are designed to provide temporary coverage during gaps in insurance. These plans can be less expensive than other options but typically offer limited coverage and may not cover pre-existing conditions. They are best used as a last resort or for very short coverage gaps.
Plan for Out-of-Pocket Costs
Regardless of the type of pre-Medicare insurance you choose, it’s essential to budget for out-of-pocket costs. These include premiums, deductibles, co-pays, and co-insurance. Understanding your potential expenses will help you avoid financial surprises and ensure you have sufficient savings to cover healthcare costs.
Evaluate Your Healthcare Needs
Consider your current health status and anticipate any future medical needs as best you can. If you have chronic conditions or require regular medication, ensure whatever plan you choose provides adequate coverage. Review the network of doctors and hospitals, prescription drug coverage, and any limitations or exclusions in the policy.
Consider Costs for Dental and Vision Care
Most pre-Medicare health insurance plans do not include dental and vision coverage. Given that, insurance may not be necessary or even desirable for this care. Routine dental and vision care can prevent more significant health issues, so it’s wise to include these in your overall preventive healthcare practices. Doing so may enable you to private pay for your care in these areas rather than relying on insurance.
Stay Informed About Changes in Legislation
Healthcare laws and regulations can change, affecting your coverage options and costs. Stay informed about any changes in healthcare legislation that could impact your pre-Medicare insurance.
Utilize Health Savings Accounts (HSAs)
If you had a high-deductible health plan (HDHP) while employed, you might have contributed to a Health Savings Account (HSA). HSAs offer tax advantages and can be used to pay for qualified medical expenses tax-free. Even if you’re no longer contributing to the HSA, you can still use the funds to cover healthcare costs during the pre-Medicare period.
Conclusion
Understanding your options and planning ahead can help you maintain continuous and affordable health coverage in the interim before Medicare eligibility. Evaluate your needs, budget for costs, and stay informed about changes in the healthcare landscape. If you’re unsure about the best approach, your FSG financial advisor can help you navigate this transition.
