Post Retirement Health Insurance at 55: No Questions Asked!

The cost of employee benefits in general has increased over time, with health care leading the way. With an aging employee population, defined benefit retirement plans went the way of the Sony “Walkman”, to be replaced by the 401k Ipod. Other expensive employer sponsored programs have followed suit: among them post retirement health care. As of 2008, only one in four employers offered any post retirement health benefits, leaving pre-Medicare eligible retirees and their families to fend for themselves. The cost of adequate post retirement health insurance coverage prior to age 65 is often unaffordable.

A temporary reinsurance program created by the Patient Protection and Affordable Care Act will hopefully incent employers to keep their post retirement health care benefits and, in fact, expand the coverage to those retirees who are age 55-64. The program will be funded with $5 billion and will be available beginning June 1st to employers who cover retirees, spouses and dependents. These employers will be eligible for an 80% reimbursement of health care costs between $15,000 and $90,000. Employers must maintain their current contribution level to the existing benefit plans, and only use the reimbursement funds for premiums, deductibles, co-payments and other similar costs. This federal aid will enable many older retirees, in addition to those with high cost and chronic conditions, to continue to afford health insurance.

The program will be in place until January 1, 2014, when pre Medicare retirees can purchase health insurance from state run exchanges. It is possible that the reinsurance fund may be depleted prior to that date, however, as no additional allocations are expected.

Individuals need to understand the importance of post retirement health benefits BEFORE they retire. Although the new law is offering an inducement for employers to maintain these benefits, it is critical to understand how health insurance and other health benefits are impacted by the Patient Protection and Affordable Care Act.