Retiree Plans

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Senior Health Insurance – Retiree Plans

When you or your spouse retires from a company or a union, you may be offered health insurance as a retirement benefit – a retiree health plan.

While useful after you turn 65 (and are eligible for Medicare), these policies are critical for those retiring early (before 65), since you'll need health coverage and it will be very expensive.

How does a Retiree Plan Work?

A retiree health plan coordinates with Medicare much like a Medigap policy (a Medicare supplement insurance) – meaning that if you are 65 years old or older you must be enrolled in Medicare Parts A and B.

Retiree plans, however, are not Medigap policies and are not designed in the same way. When you have retiree insurance, Medicare will pay first (primary) and your retiree insurance will pay second (secondary). Medicare is billed first and pays for services it covers without regard to what the employer insurance covers. Once Medicare has processed a claim, the employer-based insurance will process it and pay for any services it covers.

Retiree Plans Can Be Valuable Assets

Retiree health plans can be very valuable to your financial health. About one fourth of retirees age 65 or older were covered by a company health plan in 1999, according to the federal government. You should keep your retiree plan if you can afford it and it covers the gaps in Medicare. If it covers prescription drugs, it is very valuable, since Medicare doesn't pay for prescriptions.

Evaluating Your Retiree Health Plan

First and foremost: You should speak with your employee benefits office about the following issues. It is important to know what benefits your plan provides and how your retiree policy works with Medicare.

  • In most cases, retiree health insurance requires that you be signed up for Medicare Part A and Part B policies.
  • Your spouse may or may not be covered by the retiree health plan
  • The coverage details of retiree plans vary widely.
    • Most cover the same medical services that are covered by Medicare
    • Some cover prescription drugs, eyeglasses and dental care – services not covered by Medicare – which can make the plan very useful.
    • A retiree plan may provide you with traditional fee-for-service insurance or you may be covered through a health maintenance organization (HOM) or a preferred provider organization (PPO).
  • Be sure you understand your retiree plan's deductible and co-payment amounts.
  • Ask what would happen if you were to move to another area or state.

Coverage under a retiree plan varies greatly. However, many retiree plans provide better coverage than an individual Medigap insurance plan or Medicare Advantage insurance.

Think carefully before dropping it even if it is expensive. You may not be able to get it back.

However, you should also understand that most employers could change the benefits of their health plans, the premiums you pay and/or drop your coverage altogether at any time due to a disclaimer clause in their policies. In some cases, these disclaimers are not communicated to the employees. Be sure to ask your employee benefits coordinator what your choices might be if that happens.

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