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Gap in Benefits Due to Early Retirement? Short Term Health Insurance May Be an Option

Gap in Benefits Due to Early Retirement? Short Term Health Insurance May Be an Option

Posted Aug 31, 2015 by Jenifer Dorsey

Age 65 is a well-known milestone. It is the age at which many Americans aspire to enter retirement and also the age at which they become eligible for Medicare. However, believe it or not, the average retirement age in America is actually 62.

If you find yourselves among those who retire early—whether several months or several years before turning 65—you may experience a gap in health insurance benefits. Preparing for a lapse in health insurance coverage is an important part of early retirement planning, and short term health insurance can be a wise investment for retirees in between major medical plans.

Why short term health insurance?
Even if you just have a month or two before Medicare eligibility, going without any health insurance coverage can be a bit of a gamble. It could even mean dipping into your retirement savings to pay for unexpected healthcare due to injuries or illness.

Adults ages 45 to 64 and 65 to 84 had the highest average cost per hospital stay in 2012 ($12,900 and $13,000, respectively), according to the latest analysis by the Agency for Healthcare Research and Quality. In an earlier AHRQ analysis, these age groups accounted for nearly two-thirds of aggregate costs for hospital stays. 

Unfortunately, coming up with the funds to pay large medical bills completely out of pocket can be daunting for many people. A 2014 Gallup poll found that not having enough money for retirement and not being able to pay medical costs in the event of a serious illness or accident ranked no. 1 and 2 among Americans’ top financial concerns.

When are short term plans an early retiree health insurance option?
There are many health insurance options for early retirees (e.g., Obamacare, a working spouse’s job-based coverage, Medicaid). A couple of scenarios in which short term health insurance may be helpful include the following:

  • You are close to turning 65. For instance, if you have a gap between your job-based health insurance plan and the start of Medicare, you might consider taking out a temporary health insurance policy so you have some benefits in the meantime.
  • You are a few years away from turning 65 and plan to enroll in an individual major medical plan via the Obamacare health insurance exchanges or private marketplace. Losing job-based benefits means you likely qualify for a special enrollment period and do not have to wait until the next open-enrollment period to obtain minimum essential coverage. However, you may still experience a short gap between your job-based insurance and individual major medical insurance. A temporary health insurance plan can help provide benefits and peace of mind.

How long does short term health insurance last?

Short term health insurance coverage typically lasts 30 to 364 days, depending on your needs and your state’s laws. It is designed to provide temporary benefits for medical expenses such emergency room visits, inpatient and outpatient hospital care, ambulatory services and more. 

Where can early retirees buy temporary health insurance?
Temporary health insurance plans may be purchased through a health insurance agent, directly from a health insurance carrier, or from a website such as healthedeals.com and ehealthinsurance.com

This type of coverage is known for being:

  • Customizable—Select your plan duration, lifetime maximum, deductible and out-of-pocket maximum.
  • Flexible—Visit the hospitals and healthcare providers you prefer or increase your savings by visiting in-network providers.
  • Straightforward—Quickly obtain quotes and compare plans from multiple carriers online. Many sites require only basic information such as your ZIP code, birth date and gender until you decide to apply.

Online application typically takes a few minutes and involves answering a few health history questions, providing billing information and deciding whether you wish to pay monthly or in-full. Plan materials are often sent electronically, and benefits may begin as early as the next day.

It is important to note that temporary health insurance plans do not fulfill the Affordable Care Act’s requirement that most Americans have health insurance. They are not considered minimum essential coverage, do not include essential health benefits and will not prevent you from facing a tax penalty if you go without health insurance for longer than allowed by law.

Remember supplemental coverage in your early retirement planning, too 
Dental insurance and critical illness plans can help you create a more robust personal benefits package for early retirement. 

If you do enroll in an Obamacare health insurance plan through a state-based or federally facilitated exchange, or in the private marketplace, you might also consider a gap plan with benefits that help pay for out-of-pocket expenses when a covered accident or critical illness occurs.

Have questions about temporary health insurance? Need help choosing a plan? 
Call 888-839-7679 to talk to an IHC representative. These individuals can help explain your options and assist you in finding health insurance coverage appropriate for your healthcare and financial needs.

Legal Disclaimers

Riffkin, Rebecca. “Average U.S. Retirement Age Rises to 62.” Gallup. April 28, 2014. http://www.gallup.com/poll/168707/average-retirement-age-rises.aspx

Moore, Brian, et al. "Costs for Hospital Stays in the United States, 2012.  HCUP Statistical Brief #146." Oct. 2014. Agency for Healthcare Research and Quality, Rockville, MD. http://www.hcup-us.ahrq.gov/reports/statbriefs/sb181-Hospital-Costs-United-States-2012.pdf

Pfuntner, A (Truven Health Analytics), Wier, LM (Truven Health Analytics), Steiner, C (AHRQ). "Costs for Hospital Stays in the United States, 2010.  HCUP Statistical Brief #146." January 2013. Agency for Healthcare Research and Quality, Rockville, MD. http://www.hcupus.ahrq.gov/reports/statbriefs/sb146.pdf

4Gallup. “Retirement Remains Americans’ Top Financial Worry.” April 22, 2014. http://www.gallup.com/poll/168626/retirement-remains-americans-top-financial-worry.aspx