Retire Early, The Savings Highway Has Your Health Care Benefits Covered Until You Reach Medicare

The solutions to bringing down these costs aren't miracles, but some may save you enough money to get you to Medicare without soaking up other resources. Today I'll explore the major sources of health coverage open to those who choose to retire early, and the next section will look at some other (sometimes not-so-conventional) routes to reducing health care costs.

If You Can, Bring It With You

If you retire early (before age 65), your company's group health coverage is probably your best option. The average retiree paying about $120 per month for company-sponsored coverage - literally hundreds of dollars less than coverage this group obtains on its own. Many companies will cover your spouse if he or she is enrolled in the plan before you retire.

Alas, less than half of those who retire early can count on this coverage, which means finding a way to bring down the price tag on coverage until Medicare is available.

Your Fallback: COBRA + HIPAA

For the many of you who won't be able to buy into extended employer coverage, your next-best bet is coverage offered under COBRA (Consolidated Omnibus Budget Reconciliation Act of 1986), followed by the coverage protection of the Health Insurance Portability and Accountability Act (HIPAA). As you'll see, this package isn't ideal, but it's more than what was around a few years ago.

Under COBRA, you can continue group coverage for you and your covered spouse and dependents for 18 months after your employment coverage ends. (This coverage can be extended up to 36 months under certain circumstances, including disability.) In most cases you would pay the maximum allowed, which is 102% of the premium, or 2% above the group insurance rate your employer paid. But that group rate can be less than half of what you would buy on your own.

Once COBRA ends, HIPAA guarantees that you can buy certain coverage without being subject to restrictions due to preexisting conditions, so long as you have been covered almost continuously by a group plan or COBRA for at least 18 months. But HIPAA doesn't do anything about the cost of coverage - in fact, in some states you may wind up paying more than you would with some individual policies. That's because HIPAA leaves the choice of which plans to offer up to the states.

HIPAA doesn't always mean immediate coverage - Under HIPAA, insurers can delay covering your preexisting condition for up to one year; they just cannot deny coverage for this condition forever.

For HIPAA protection, be careful with coverage choices - You are protected by HIPAA only when you jump from group coverage, not when you leave a self-purchased policy. If you find a great deal on coverage outside of your pre-retirement policy, keep in mind that you aren't protected by HIPAA if you decide to change policies again before you're eligible for Medicare.

ARE There Other Options?

Yes, there are other ways to keep down health care costs in early retirement. And if you join the Savings Highway today you will receive discounts on Dental, Vision and Health benefits coverage to reduce costs that could prevent you from being able to retire early.