Retirement is a time of change for you and your employees ― with a shift of income, responsibilities, and routines. While you are busy figuring out how to fill a soon-to-be vacant position, your departing employees are likely thinking about their healthcare and how it will change once they retire.
To help with a smooth healthcare transition, here are a few things to consider and discuss with your employees prior to their retirement.
Retiring Before Age 65
If your employee plans to retire before the age of 65 and will lose his or her employer-sponsored healthcare insurance upon retirement, they will be eligible for a Special Enrollment Period. This means they will be able to purchase health insurance on the marketplace, as provisioned by the Affordable Care Act.
COBRA
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act. This legislation allows employees to continue paying for their premiums on employer-sponsored group health insurance plans that they would otherwise lose once employment is terminated, no matter the reason for leaving. However, employees usually pay significantly higher premiums with COBRA.
During employment, employers typically share the cost of the premium. After their employment ends, employers no longer contribute to the premium, causing employees’ costs to increase.
COBRA is a temporary solution, as the employee can only buy coverage for up to 18 months. But this could be a helpful solution for someone who would like to retire up to 18 months before they turn 65 and are eligible for Medicare.
Semi-Retirement
Many employees would like to cut back on their work hours approaching retirement but aren’t ready to stop working completely. If you offer health insurance to part-time employees, this might be a way for your employees to reduce their hours while you simultaneously maintain a qualified and experienced staff. This can help provide for a smooth transition for your employees as they ease into retirement, as well as the training of their replacements. This option might also give them more time to organize their healthcare plans for when they fully retire.
Retiree Health Insurance Benefits
Some companies offer retirement healthcare benefits to their employees. When examining this option, be sure to address any differences in care or cost, whether or not the retirement benefits include spousal coverage, and if the plan extends past Medicare eligibility.
In instances where the employee would rather purchase a different insurance plan than keep the plan you are offering, there are some stipulations. If the employee voluntarily leaves your plan, they would not qualify for a Special Enrollment Period, nor would they be able to get tax credits based on income. This could make purchasing insurance cost prohibitive.
Medicare
Medicare is a federal insurance program available to individuals 65 and older. While other categories of people can qualify for Medicare (young people with disabilities and individuals with End-Stage Renal Disease, for example), many use Medicare as their primary insurance once they retire.
To meet the many healthcare needs of older Americans, Medicare comes in four parts.
- Medicare Part A includes coverage for inpatient hospital services, nursing facility stays, hospice, and some in-home healthcare services. For the most part, premiums are covered by taxes paid through payroll deductions while the individual was working.
- Medicare Part B is supplemental to Part A and includes additional coverage for services like doctor visits, medical supplies, and outpatient care. The premium is paid with monthly contributions and is usually expensed as a deduction in social security payments.
- Medicare Part C, also referred to as the Medicare Advantage Plan, is offered by private insurers and provides Parts A and B with prescription drug coverage under a single policy.
- Medicare Part D is used in addition to Parts A and B to provide prescription drug coverage under a separate policy purchased through private insurance companies with federally subsidized premiums.
Most individuals need to enroll in parts A and B (together, these are often referred to as “Traditional Medicare” or “Original Medicare”) to ensure full coverage once they are eligible.
Often, if an individual is able to keep a group plan from an employer or spouse’s employer, the group plan is secondary to the Medicare policy.
Consult with an Expert
Considering the fluid nature of the health insurance industry, it is a good idea to consult with an expert if your employee is unsure of which route to take. If your business works closely with a broker or a tax expert, refer your employee so he or she can receive the information to make an educated decision regarding their physical, emotional, and financial health. Let your employees know that you are there to help with and support their transition into retirement and that you care about their healthcare even after their employment ends.
