Health insurance for those retiring

Planning retirement has been growing more challenging over the last twenty or so years. In part this is caused by the increase in life expectancy. When we were all expected to die shortly after we retired, the government could assume it had enough cash in hand to cover the costs of looking after our health. Now the statistics show more people living into their 80’s, the federal government and individual states have been doing calculations. They have all realized there will not be enough money in the funds set aside to deal with this commitment to provide health care. The first sign of this was the change in the linkage between Social Security and Medicare benefits. Originally, we were eligible to get both benefits at the age of 65. Now you can still get Medicare at 65 but, depending on your birthday, you may have to wait until 67 to get retirement benefits.

To trigger the Medicare coverage, contact Social Security within the three month period before your 65th birthday. It’s better to do this even if you intend to keep on working and a group health plan covers you. There’s a Special Enrollment Period that applies if you or your spouse has a Plan. If you want guidance on the costs and benefits, you should call Social Security. However, the issue of health care retirement funding has become a legal hot potato as more states find their budgets under pressure. One of the most interesting examples is in Michigan. First Gov. Jennifer Granholm and now Gov. Rick Snyder have been leading the efforts to make major savings across all aspects of the state’s activities. The plans calls for a reduction in next year’s projected deficit of $1.4 billion, with measures to save not less than $3.5 billion over the next ten years.

In 2010, the lawmakers required public school employees to pay 3% of their earnings into the retirement and health care funds. In particular, this was intended to avoid a projected loss of about $360 million in the School Aid Fund. The important feature of this fund is that it covers the health care costs and pays out pensions to current retirees. The cost is about 24% of the school districts’ budgets but, as the courts have pointed out, there’s no guarantee that younger people paying into this fund will ever receive benefits. This has led the judges in two separate cases to hold the laws unconstitutional. It would probably be lawful to increase the deductions from pay if the teachers were guaranteed a benefit. As it is, the courts have knocked a big hole in Michigan’s efforts to close the deficit gap.

Health insurance plans come under pressure from all sides. The employees find their contributions inching up. This eats into their disposable income. The employers find their own budgets going into deficit, while the healthcare insurers find everyone reluctant to continue paying higher premiums when nothing is done to control the healthcare providers’ costs. No one objects to paying when they feel the benefits they receive are good value for money. But when health insurance as part of the retirement process may be compromised because the states have not been making adequate provision for payment, everyone is right to be angry.