Retired PA Educators Need Health Insurance- Here Are the 6 Best Options

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Health insurance coverage is often the area of most concern for retiring PSERS educators. This is especially true for those who retire before qualifying for Medicare at age 65. Once retired, the health coverage provided by your employer ends and an alternative is needed until Medicare age. The challenge for retirees is deciding which options are available and which is best in terms of costs and benefits.

Planning for your retirement can be stressful enough without the added complication of health insurance coverage. Let’s simplify this by walking through each health insurance option that may be available to you at retirement.

Option 1- Apply for Medicare

If you are age 65 or over at retirement, you should apply for Medicare. A good rule-of-thumb is to apply for Medicare three months before you retire to make sure your coverage will start when you need it. Many retirees find themselves a little overwhelmed by the various coverage options available through Medicare. It can be difficult to know which coverage is right for you to get started.

Let’s review the basic parts of Medicare so you have a good understanding of your choices.

Medicare Part A

Part A covers hospital stays, nursing care and limited home health services. Most people will not pay a monthly premium for Part A, but there are co-pays and deductibles. If you are still working when you turn 65, you should still apply for Part A as it is free and will likely act as a backup to your employer health plan.

Medicare Part B

Part B covers doctor visits, specialists, testing and screenings, medical equipment, physical therapy and more. There is a monthly premium for Part B which increases based on your annual income. In 2021, this monthly premium ranges from $148.50 – $504.90. Aside from the premium, Medicare participants usually pay 20% of the costs for care and Medicare covers the rest.

Medicare Part C- Advantage Plans

Advantage Plans are an alternative to traditional Medicare Parts A and B. You choose either A and B together or an Advantage Plan, not both. An Advantage Plan works more like a health plan offered by your employer. You have coverage through a private health insurance company like Highmark, Geisinger, United Health, etc. Aside from your monthly premium, there are co-pays, deductibles, and other out-of-pocket costs. Most Advantage Plans include prescription drug coverage.

Medicare Part D- Prescription Drug Coverage

Parts A and B do not cover prescriptions. Part D plans do cover drugs and the plans are offered by insurance companies. Each plan comes with a monthly premium and a flat monthly fee based on your income. In 2021, the extra monthly fee ranges from $12.30 – $77.10 per month for single tax filers with income over $88,000 and joint filers over $176,000.

Supplemental Coverage (Medigap)

Medicare Supplement plans are only available to those who have Parts A and B. These plans cover deductibles, co-pays and other costs for Parts A and B. They are offered by health insurance companies and come with a monthly premium that varies by the policy and company.

You can learn more about Medicare and the various options here.

Option 2- Join Your Spouse’s Health Plan at Work

If your spouse works for a company that offers health coverage, joining that plan may be the best option for you simply from a cost perspective. Generally, the monthly costs should be much lower than COBRA, the PSERS Health Options Program (HOP), and private health insurance.

Option 3- Apply for COBRA

COBRA allows you to continue the coverage under your health plan at work for up to 36 months. There is usually a major cost increase when going on COBRA because you are now paying the full monthly cost of the health insurance coverage while your employer no longer pays. While the monthly premiums are a major downside of COBRA, a benefit is that you can continue the same coverage you had while working. You can learn more about COBRA here.

An important consideration when electing COBRA is what you will do if you your coverage runs out before you reach Medicare age at 65. Let’s say you retire at age 60 and have COBRA coverage for 18 months, you will still need health coverage for three and a half years before Medicare can begin.

Option 4- Retiree Health Plan Through Your Employer

Some school districts and other employers offer health plans to their retiring employees to help bridge the gap to Medicare. Essentially, these plans are a continuation of your current coverage but with a higher monthly cost then you paid as an employee. The main benefit of the retiree health plan is you can stay with the same insurance company and avoid making major changes to your doctors, specialists and other providers.

If you have this option available, human resources will likely discuss it with you at your retirement meeting. However, it is helpful to learn if this option is available as early as possible so you can factor the costs into your retirement decision.

Option 5- The PSERS Health Options Program (HOP)

HOP is unique in that it offers health coverage to PSERS members both before and after reaching Medicare age. For those in need of coverage between retirement and Medicare, HOP offers Pre-65 medical plans. These plans offer full health insurance benefits. As with COBRA and employer retiree plans, the monthly premium may be financially difficult for many retirees. You can find your specific premium based on the county in which you live here.

Aside from the Pre-65 plans, HOP also offers coverage for those on Medicare including Advantage Plans, Medicare Supplement, dental and prescription drug plans. Most PSERS retirees will qualify for HOP but you should check your eligibility.

HOP is usually a good option for PSERS members who are retiring “early” or before reaching Medicare age and need full health insurance coverage.

Option 6- Private Health Plan from the Marketplace

Much like COBRA, private health coverage is usually viewed as an option of last resort. It is commonly known that private health insurance is expensive and the benefits are usually lacking when compared to plans to which educators are accustom. Fortunately, most PSERS retirees qualify for at least one other health insurance option. If you need to find coverage through the healthcare marketplace, you can get started by exploring Pennsylvania’s new healthcare exchange here.

Health insurance is likely a major factor in your retirement decisions and may make your pension, Social Security, and other financial choices even more complicated. The best action you can take is to become informed on all of your options well ahead of your retirement so you can plan for these extra costs and avoid surprises .

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If you're thinking about retiring at the end of the 2022-2023 school year, there is a lot you need to do. You need to choose a pension option, decide on your PSERS lump sum, figure out health insurance coverage, and get your financial ducks in a row. You probably want to make sure that retiring this year is a good decision in the first place too.

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