Employer-subsidized retiree health insurance questions

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alter
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Employer-subsidized retiree health insurance questions

Post by alter » Mon Jun 04, 2018 7:30 pm

My employer offers subsidized health insurance to early retirees. Ie if I retired at 55 they would pay for 60% of my future premiums, with a few percent more each year I work from now until then. I'm just wondering how rare this is, and if a value can be attributed to this benefit. I know how to calculate the value of my pension with online calculators but as far as subsidized health insurance, I have no idea what this is worth, or even how common it is. Since I keep hearing that health insurance is one of the largest expenses in retirement, I'm trying to get a handle on how to factor this into my retirement planning. Any info is appreciated!

JBTX
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Re: Employer-subsidized retiree health insurance questions

Post by JBTX » Mon Jun 04, 2018 7:32 pm

Pretty rare these days. Usually only government employers. I've never seen one in corporate America. If it is a decent plan there is definitely value to it.

alter
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Re: Employer-subsidized retiree health insurance questions

Post by alter » Mon Jun 04, 2018 7:34 pm

Thanks for this info. It is a non-government corporation.

delamer
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Re: Employer-subsidized retiree health insurance questions

Post by delamer » Mon Jun 04, 2018 7:37 pm

You could go to the health insurance exchange for your state for ObamaCare and price a policy for a 55 year old (and family, if relevant).

They are more and more rare in the private sector, but they do exist.

Random Poster
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Re: Employer-subsidized retiree health insurance questions

Post by Random Poster » Mon Jun 04, 2018 7:44 pm

My employer offers this, where the subsidy amount is based on a matrix that combines your age and your years with the company.

I have no idea how to value the benefit, but I notice in the company literature that it never says that the subsidy benefit is guaranteed never to change or even remain in existence.

And knowing my employer, I expect that the health subsidy will get cut when the next downturn hits.

2comma
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Re: Employer-subsidized retiree health insurance questions

Post by 2comma » Mon Jun 04, 2018 8:02 pm

My fortune 500 had retiree health care but froze the amount they paid into it back in 1989. I retired in 2013 at age 58 and as part of a voluntary buyout offer we were given 25k for healthcare expenses (including paying premiums). I calculated it would cover me until almost medicare age but with the rising cost of healthcare, and more people retiring from the company the 25k was gone in about 2-1/2 years. The premiums went from about 450/mo to well over 850 by the time the till was empty. I hear it is over $1100/mo now. No matter, my wife is still working at the company and we will pay about $300/mo until I reach medicare age.

I would say you have a very nice but unique benefit from a private corporation. As mentioned above the value is the difference between what you are currently paying and what it would cost for a similar ACA plan in your state. You might want contingencies just in case the company decides to freeze the plan, modify the plan and in fact I think they could even terminate the plan.
If I am stupid I will pay.

delamer
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Re: Employer-subsidized retiree health insurance questions

Post by delamer » Mon Jun 04, 2018 8:08 pm

The thing that is hardest to quantify is the value of access to coverage through your former employer’s plan.

Even if you have to pay the whole premium, having the ability to stay enrolled in a high quality plan is an important benefit.

Dantes
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Re: Employer-subsidized retiree health insurance questions

Post by Dantes » Mon Jun 04, 2018 8:32 pm

Access to a plan that is not restricted to a specific geographical area in your country is valuable. I have a 50% subsidy from a university. I could actually pay a bit less if I went with a local Medicare Advantage plan, unsubsidized, but I value not being restricted to a specific network.

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MP123
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Re: Employer-subsidized retiree health insurance questions

Post by MP123 » Mon Jun 04, 2018 9:28 pm

From 55 to 65 at today's rates health insurance will likely cost you $700-1000 per person per month. And that's been increasing at double digit rates every year. You may qualify for substantial government subsidies if your income is low enough but if not it's a major expense.

So 60% paid is a good deal. Plus guaranteed renewal (I assume) and a good physician network makes this worth considering.

alter
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Re: Employer-subsidized retiree health insurance questions

Post by alter » Mon Jun 04, 2018 11:12 pm

Thank you all for the good info. It really helps!

andypanda
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Re: Employer-subsidized retiree health insurance questions

Post by andypanda » Tue Jun 05, 2018 7:08 am

"Usually only government employers."

I wish I'd worked for that government. :greedy

I worked for the Virginia government for 38 years before retiring in 2012. From 2012 until I was forced into Medicare at 65 in 2015 I had to pay 100% of my Anthem premium. Including prescription, dental and a little vision coverage, I was paying $657/month during the final year.

Fwiw, now that I'm on Medicare, the monthly premium for the same policy is only costing me $307. They trim away at the benefits to hold the price down, but it's still a decent deal I suppose when combined with Medicare.There's no shopping around for a better deal either. If I ever drop my state coverage I can NEVER get it back.

dknightd
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Re: Employer-subsidized retiree health insurance questions

Post by dknightd » Tue Jun 05, 2018 7:22 am

One thing to check out is to see if it can also be kept as a "medicare advantage" type plan when you do qualify for medicare. This makes this benefit even more valuable. I'm not sure how you apply an exact value to this benefit. Partially because you don't know what future premiums will be, and you don't know what open market premiums will be. I'd consider it a 60% savings on medical insurance premiums, and if it is a good plan it might also be a savings in copays. That kind of benefit is getting harder and harder to find - kind of like defined benefit pensions ;)

alter
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Re: Employer-subsidized retiree health insurance questions

Post by alter » Tue Jun 05, 2018 8:22 am

dknightd wrote:
Tue Jun 05, 2018 7:22 am
One thing to check out is to see if it can also be kept as a "medicare advantage" type plan when you do qualify for medicare. This makes this benefit even more valuable. I'm not sure how you apply an exact value to this benefit. Partially because you don't know what future premiums will be, and you don't know what open market premiums will be. I'd consider it a 60% savings on medical insurance premiums, and if it is a good plan it might also be a savings in copays. That kind of benefit is getting harder and harder to find - kind of like defined benefit pensions ;)
Yes I just checked and there is an "indemnity" medical plan, which apparently is a supplemental plan used in conjunction with medicare, and it has things like out of pocket maximums, etc. So it looks like it covers things that medicare doesn't. And there is a dental plan.

Broken Man 1999
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Re: Employer-subsidized retiree health insurance questions

Post by Broken Man 1999 » Tue Jun 05, 2018 8:42 am

I have subsidized retiree insurance for wife and I. The amount I pay is $52.50/month for both of us, plus the Medicare Part B premium of $134 each/month. That provides dental, vision, and medical insurance.

So far MegaCorp has provided excellent insurance plans for their retirees, but, as with many, or, perhaps even most benefits, our retiree benefits such as insurance are offered with lots of wiggle room for them to reduce, or even cut out any coverage.

OP, the closer you can get to 65 the safer you would be IF your company suddenly decides to reduce, or even eliminate your subsidy.

My retirement plan was frozen in 2006, nine years before my actual retirement, but I had enough years of service to max the amount out, so no harm done. Currently my MegaCorp management employees have no pension plan at all, just a 401k plan.

A few of my relatives work at entities covered by the State of Florida pension plan, and they have suffered changes in their pensions.

Changing environment in the workplace, for the worse. My peers and I were members of a golden age of benefits; we enjoyed pensions AND 401k plans, stock plans/options.

OP, I hope your employer keeps your retiree benefits as they are, but if they don't they certainly won't be the first employer to drop the benefits.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

MNGopher
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Re: Employer-subsidized retiree health insurance questions

Post by MNGopher » Tue Jun 05, 2018 8:53 am

My employer will pay full single medical coverage for early retirement (57 to Medicare) and about 80-90% of family coverage.
I am grandfathered in though, and new employees don't get this.

dknightd
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Re: Employer-subsidized retiree health insurance questions

Post by dknightd » Tue Jun 05, 2018 10:39 am

it is a crap shoot. Nobody can predict how it will work out, Frustrating for people who like to plan, I'd plan for things to get worse. Because that seems to be the trend, YMMV

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dm200
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Re: Employer-subsidized retiree health insurance questions

Post by dm200 » Tue Jun 05, 2018 11:04 am

dknightd wrote:
Tue Jun 05, 2018 10:39 am
it is a crap shoot. Nobody can predict how it will work out, Frustrating for people who like to plan, I'd plan for things to get worse. Because that seems to be the trend, YMMV
Today, such retiree benefits have become very rare outside of government.

If it continues to medicare eligibility, it can be very valuable - especially with the turmoil in healthcare and related insurance. Many private companies that decades ago were tops in such retiree benefits - have terminated or phased them out.

MathWizard
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Re: Employer-subsidized retiree health insurance questions

Post by MathWizard » Tue Jun 05, 2018 11:10 am

Pretty rare in any situation.

I feel very lucky that my employer will allow me to stay in the group insurance
if I pay full cost + 5% administrative fee.

This is the same as COBRA , but it does not go away after 18 months.

Pre ACA, pre-existing conditions was always a concern in retirement. I'm glad that I
will not worry whether that will again become a concern.

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dm200
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Re: Employer-subsidized retiree health insurance questions

Post by dm200 » Tue Jun 05, 2018 11:32 am

MathWizard wrote:
Tue Jun 05, 2018 11:10 am
Pretty rare in any situation.
I feel very lucky that my employer will allow me to stay in the group insurance
if I pay full cost + 5% administrative fee.
This is the same as COBRA , but it does not go away after 18 months.
Pre ACA, pre-existing conditions was always a concern in retirement. I'm glad that I
will not worry whether that will again become a concern.
Yes - although even before ACA - the continuous coverage situation reduced or eliminated the pre-existing condition risk

For older folks before Medicare, the ACA cap on the age premium/penalty to no more (depending on state) than 3x the younger premium can be very important as well.

Exafchick
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Re: Employer-subsidized retiree health insurance questions

Post by Exafchick » Tue Jun 05, 2018 1:56 pm

When I enlisted in 1986, I had no idea how valuable the medical coverage and pension would be. I didn't even plan to stay 20 years (actually, retired after 21 years) just kept re-enlisting thinking "yeah, i could do 4 or 6 more years and then see". Since retiring, I am impressed with people who can support their families or themselves on just their civilian job. I'm not sure I would be able to on just civilian pay. Everyday I am grateful I have a pension and more and more realizing how lucky I am to have Tricare. Civilian job does have a 401k so that's nice!

I think any company that takes care of their employees and helps cover medical insurance costs is rare!

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