Don't bet on your retiree health care

Health-insurance backstops

What can you do if you're contemplating retirement before you reach Medicare eligibility and you lose health-insurance benefits?

Here are some expert suggestions:

• Check to see if you qualify for another group plan, perhaps through your spouse's employer or a fraternal organization. Can you join a professional or social group that carries member insurance? Find out. It may be worth becoming a part of the organization simply for the health insurance.

• Buy an individual plan with a high deductible. Many dislike individual policies because they often come with high deductibles and pay for little or no routine care. But even if you set aside the money you save by not paying the premiums and don't spend it, if faced with a catastrophic illness, you may quickly run through your savings and find yourself with a mountain of unpaid medical bills.

• Don't change jobs unless you know the status of your health insurance. Does your new company offer it? What will it cost? Can you qualify for COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) benefits? Research your rights under HIPAA (Health Insurance Portability and Accountability Act of 1996) before changing insurers.

• Start living a healthier lifestyle right now. Don't neglect preventive medicine. Have annual physicals and other routine tests as you age. Keep your teeth and gums in top-notch condition. Exercise, eat right and quit smoking. The healthier you are when you retire, the less medical attention you will need.

• Save cash to cover health-care costs that might arise during the gap between retirement and Medicare eligibility. And that doesn't mean throwing coins in a big jar. It means knuckling down and putting away some real money. Experts say retired couples may need anywhere from a quarter-million to a half-million dollars to cover post-retirement out-of-pocket medical expenses.

• This one's tough, especially if you've been pricing cruises and breaking in new golf shoes: Put off retirement. Yeah, it's derailing a dream, but things change. Health and health-care costs are part of that change. Sadly, there's no guarantee your company's health insurance won't change, too.

Government workers not immune

If you think you're safe from health-care plan changes because you work for the government, think again. Government employees are also getting nasty surprises. Even veterans aren't exempt.

Retired military families have also been affected, with proposed premium increases to Tricare, the managed-care insurance program for service members and their families. While Tricare is still inexpensive compared with "civilian" health care coverage, many fear this is simply the beginning of an upward spiral of costs.

And Wellesley's Coile adds this food for thought: "The central issue is that health care costs are rising rapidly, at a faster rate than either (consumer) prices or income. The difference may be only a few percentage points in any given year, but over time, the differences really add up."

Health-care costs in general have risen at an average rate of more than 5 per year above inflation for the past 15 years. By law, Medicare premiums must cover 25% of total program costs, so as health-care costs continue to rise, so will premiums.

If you haven't punched your last timecard yet, know exactly what's happening with your health-care coverage before you retire. You may find that working longer, practicing preventive medicine and saving more will still allow you time to swing that golf club down the road.

This article was reported and written by Carole Moore for Bankrate.com.

Updated Sept. 10, 2008

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