Cobra for Early Retirees

Retire at 30?

One of the big expenses that early retirees need to concern themselves with is health insurance. Most people time their retirement to coincide with Medicare eligibility at the age of 65. Early retirees have to consider other options until Medicare begins.

Consolidated Omnibus Budget Reconciliation Act (COBRA), which passed by Congress in 1986, provides healthcare coverage for retired employees, spouses, former spouses and dependent children for 18 months. The cost is less than what you would pay on your own but more than your rate as an employee.

Early retirees qualify for COBRA benefits under the following conditions:

Individuals who must reduce their hours are also eligible, since health insurance usually drops if an employee does not work a certain amount of hours.

Once COBRA runs out though you are back in the marketplace looking for health insurance. Here are some possibilities to consider given your situation:

No insurance – Some people actually choose this option thinking they will save a lot of money. It is not a good financial strategy because as you age your likelihood of health problems increases. One major problem could wipe out your savings.

Get covered under spouse’s employer-provided health plans – if your spouse is still working and has insurance this is an excellent option.

Check if your employer extends health insurance coverage as a fringe benefit for early retirees - It really depends on your employer how good of an option this will be for you. Different employers have different eligibility requirements (e.g., age or tenure rules) and while some cover the whole premium others may only cover a portion.

Find part time work that offers health insurance – Starbucks, UPS, Walmart, JC Penneys, COSTOC, Sams, Barnes and Nobles, LOWES, Home Depot, Safeway, Kroger, MACY’s, JP Morgan Chase,REI, Nordstrom, Target, Whole Foods, Walgreens, Trader Joes, UHaul, Wegmans, Kaplan, Land’s End, Aerotek (a temporary agency) all offer health insurance to part time employees.

These companies also offer other benefits to part time employees such as: dental and vision insurance, life insurance and 401K, discounted stock purchase plan, tuition assistance and adoption assistance, paid time off, in store discounts for employee and immediate family members, profit sharing (“Gainsharing”), , accident and life insurance coverage even for temporary and seasonal employees, or those who work less than 20 hours per week, short term disability and life insurance, Flexible Spending Account for out of pocket medical and dependent care expenses

Take a part time municipal or county government job – Many county and local governments provide benefits to part-time employees.

Get coverage through associations – Check for trade, fraternal or professional associations such as AARP, AAA, your alumni association or the local chamber of commerce. Check with groups you’re involved with or join one to take advantage of the plan. Your state insurance department can help you find a plan. But be cautious — some of these so-called associations are nothing more than scams.

Early retirees are also helped by the 1996 Health Insurance Portability and Accountability Act (HIPAA) allows workers with COBRA benefits to purchase private individual policies with no preexisting-condition exclusions after the 18 months of COBRA coverage.

Even if you work for a small firms (fewer than 20 workers) you have guaranteed purchase privileges into the individual market when you retire.

The only problem here is “sticker shock.” Rates will most likely be higher than you experienced with COBRA.

Want more information on how to make early retirement possible? See our post Frugal Retirement Living

Popularity: 1% [?]

Related posts:

1. Tips On Retiring Early
2. Early Retirment Planning Expenses
3. Early Retirement – Is It For You?
4. Tips On Early Retirement
5. Tips On Early Retirement #1