You’ve been covered by private health insurance through your employer for years. It’s taken care of all of your medical expenses. Sure, the premiums and the deductibles have gone up, but given the state of health care in the United States you feel lucky. With retirement on the horizon, you’ll be enrolling in Medicare, which, as we know, doesn’t cover everything. No worries: there is retiree health insurance. It helps fill the gaps in Medicare and helps limit the costs you would otherwise incur for medical care.
Stop right there. The Kaiser Family Foundation has been tracking trends in employer-sponsored health coverage and has documented a significant drop in the share of large employers (200 employees) offering retiree health insurance coverage, from 66% in 1988 to 23% in 2015. Many firms that still offer retiree benefits have adopted changes in these programs. Many retiree health insurance plans are now defined contribution health plans accessible through a private health insurance exchange. Also, employers have increased premiums and cost-sharing requirements paid by retirees and their spouses. You may not have retiree health coverage at all, and if you do, it is likely different than what you have now.
This drop in employer-sponsored retiree health coverage is an important factor for retiring baby boomers who are approaching their Medicare years. Insurance needs change over time, and an increasing number of boomers are enrolling in Medicare without the additional financial security of an employer-subsidized retiree health plan. This decline in coverage will ultimately lead to a fundamental change in the way individuals fund their health care in retirement.
What should you do? First, keep up with your health insurance benefits. A large percentage of employees automatically elect the same coverage year after year. If you spend the time reviewing your employer’s health insurance benefit, you will be able to ascertain whether there is a retiree health plan, in addition to what’s currently best for you and your family. Then, review your financial plan with an eye towards health care expenses in retirement. Without an employer-sponsored health care plan, you should incorporate what may be higher health care expenses.