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Staying Covered Until Medicare Kicks In

If you retire before 65, how can you replace the health insurance coverage you received from your employer? These tips can help you bridge the gap.

YOUR EASIEST OPTION MIGHT BE to sign on to your spouse’s policy, if you’re married and your spouse is still working, says Ben Storey, director of  Retirement Thought Leadership at Bank of America. Or you might be able to be covered under a domestic partner’s plan. You may also have the right to continue the coverage you received from your employer under the Consolidated Omnibus Budget Reconciliation Act (COBRA), typically for up to 18 months after you leave your job. However, your premiums will be more expensive than they were when you were working, because you’ll have to pay the full cost of the insurance plus up to a 2% administrative fee.

“I’d suggest that you compare the cost of those two options with the cost of policies available from health insurers in your area,” says Storey. Under the current provisions of the Affordable Care Act (ACA), people who lose coverage under an employer’s plan may be able to purchase insurance from a federal or state insurance exchange. You can research the policies currently available to you at healthcare.gov. However, those options may well change in the future.

Ask your doctor and dentist whether there are any procedures they would recommend you take care of while you’re still covered by your employer’s health plan.

When doing your research on an exchange-based plan, you might consider purchasing a high-deductible health plan. “Your premiums may be lower,” notes Storey, “and with such a plan you may be eligible to open a health savings account (HSA), which offers certain tax advantages over other types of accounts.” An HSA allows you to save money to pay for qualified medical expenses not covered by your insurance. Contributions are tax-deductible, and any interest earned is tax-free. Withdrawals are also tax-free, as long as they’re used to pay for qualified medical expenses; these include home medical care and prescription drugs. Once you’re eligible for Medicare, you can even draw on your HSA funds to pay certain Medicare premiums.

One more thing: If you know you’re about to leave the workforce—whether you’ve decided to take early retirement or you believe a layoff is imminent—it’s a good idea to ask your doctor and your dentist whether there are any procedures they would recommend you take care of while you’re still covered by your employer’s health plan.

And, of course, it can’t hurt to start exercising and eating right, if you’re not already. As Storey notes, “The best health insurance is staying healthy.”

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Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

This material should be regarded as educational information on health care considerations and is not intended to provide specific health care advice. If you have questions regarding your particular situation, please contact your legal or tax advisor.

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