How to value retiree healthcare benefit

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BostonButterfly
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How to value retiree healthcare benefit

Post by BostonButterfly » Tue Nov 13, 2018 2:09 pm

My spouse is interviewing for a job that offers retiree healthcare benefit. We have always thought that this benefit would be the golden ticket because healthcare costs are the biggest unknown when retiring, especially retiring early. Now that the opportunity could possibly be here, we would like to put some kind of value on that benefit in order to make a decision if she receives a job offer.

Our plan is to retire at age 58 (9 years from now), so my assumption is that the retiree health benefit would give us access to better insurance from age 58-65, and then supplemental insurance from that point forward. This is not free healthcare, but having access to really good health insurance at reasonable cost is an eye catching benefit.

Neither of us know anyone with retiree healthcare benefit, and have never been in a position to possibly get this benefit. So we need to educate ourselves asap. Can anyone in the know point me in the right direction on this topic? How can I put some kind of dollar value on this? (Obviously future healthcare costs are unknown…..)

FWIW, to compare the current job to the potential new job:
- Same job – different company.
- Likely same pay (won’t take job otherwise). Same commute (two blocks away).
- New job has higher stress level. She would have to go in and essentially whip the department into shape.
- Current job = 6% 401K match, plus 3% discretionary (has received every year for ten years. Unlikely to go away). Potential job = 5% 401K match, plus 5% pension. 5% pension for 9/10 years of work until retirement doesn’t seem like it will amount to much when all is said and done. Not sure how big of a factor this needs to be in evaluating a job offer. Again…..don’t know anyone with a pension. Seems like 401K plus discretionary vs 401K plus pension is basically a wash here. Right?
- Current job is stressful, but she can see being able to stick it out until age 58. She has ten years of seniority, and has complete support from executive management. New job, she’d need to prove herself all over again.
- All other benefits likely the same. Both companies are well established, large, profitable companies.

It kind of feels like the decision would all come down to the value of the retiree healthcare benefit. Is it worth giving up a good job with good benefits to get it? Is there a way I can put a value on it? Can I figure out how much more salary per year at her current job for the next 9 years would be equivalent to the healthcare benefit? (It would not be surprising if current job offers more money for her to stay).

Thoughts? Advice?

orlandoman
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Re: How to value retiree healthcare benefit

Post by orlandoman » Tue Nov 13, 2018 2:26 pm

My wife retired before age 65 from a large company. The company has a good BC/BS PPO group policy. Due to her years of employment she was eligible for retiree healthcare until age 65 (medicare). The plan has much better benefits than Affordable Care Act. The retiree health care is the same policy as employees, BUT without the company contribution. For 2019 her premium is $719 a month ... a single employee pay $176 a month.

Last year her company advise all employees that no new people would be offered retirement healthcare coverage in the future.

Planning on retiring 9 years out ... would not make any decisions based on potential of healthcare plan 9 years out.
"Don't Believe Everything You Think"

Chris K Jones
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Re: How to value retiree healthcare benefit

Post by Chris K Jones » Tue Nov 13, 2018 2:32 pm

orlandoman wrote:
Tue Nov 13, 2018 2:26 pm
My wife retired before age 65 from a large company. The company has a good BC/BS PPO group policy. Due to her years of employment she was eligible for retiree healthcare until age 65 (medicare). The plan has much better benefits than Affordable Care Act. The retiree health care is the same policy as employees, BUT without the company contribution. For 2019 her premium is $719 a month ... a single employee pay $176 a month.

Last year her company advise all employees that no new people would be offered retirement healthcare coverage in the future.

Planning on retiring 9 years out ... would not make any decisions based on potential of healthcare plan 9 years out.
+1
This sounds like the correct answer to me. Unless they are specifying under what terms it will be available and what it will cover, this isn't worth anything to me 9 years out. Too many things can change. Best wishes

CFOKevin
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Re: How to value retiree healthcare benefit

Post by CFOKevin » Tue Nov 13, 2018 2:35 pm

My SWAG would be something like $500 per month in today's dollars for those 7 years (difference of the insurance you'll have access to under the retiree health plan vs. on your own). Or, $42,000 over nine years of employment.

About $4,500 per year in value compared to salary. Way too many variables to get any more precision (benefit could change, entire health insurance market could change, etc.)

Good Luck,

Kevin

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BostonButterfly
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Re: How to value retiree healthcare benefit

Post by BostonButterfly » Tue Nov 13, 2018 2:38 pm

Wow.....so you put no value on this benefit? Interesting. Not the answer I was expecting. Obviously nothing is written in stone, but given the healthcare issues in this country, I would expect this benefit to be fairly valuable. I guess maybe not?

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BostonButterfly
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Re: How to value retiree healthcare benefit

Post by BostonButterfly » Tue Nov 13, 2018 2:42 pm

CFOKevin wrote:
Tue Nov 13, 2018 2:35 pm
My SWAG would be something like $500 per month in today's dollars for those 7 years (difference of the insurance you'll have access to under the retiree health plan vs. on your own). Or, $42,000 over nine years of employment.

About $4,500 per year in value compared to salary. Way too many variables to get any more precision (benefit could change, entire health insurance market could change, etc.)

Good Luck,

Kevin
Interesting. Thanks.....

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Watty
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Re: How to value retiree healthcare benefit

Post by Watty » Tue Nov 13, 2018 2:50 pm

orlandoman wrote:
Tue Nov 13, 2018 2:26 pm
Planning on retiring 9 years out ... would not make any decisions based on potential of healthcare plan 9 years out.
That is when they would want to start getting it, with an additional 7 years until they are 65 they also need for it to continue for 16 years.

In addition to the company outright changing the terms things can happen like;

1) You leave the job before you qualify for the retiree healthcare.

2) The company is bought and the terms change.

3) The company may stop operating in your city and there may not be any in-network doctors or hospitals in your city, or you may want to move when you retire and there is no in-network coverage there.

4) You get divorced and the ex no longer has access to the retiree health plan.

You also have to remember that since you could do COBRA for 18 months at the same cost then for the first 18 months the retiree healthcare is not worth much of anything.

delamer
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Re: How to value retiree healthcare benefit

Post by delamer » Tue Nov 13, 2018 2:57 pm

BostonButterfly wrote:
Tue Nov 13, 2018 2:38 pm
Wow.....so you put no value on this benefit? Interesting. Not the answer I was expecting. Obviously nothing is written in stone, but given the healthcare issues in this country, I would expect this benefit to be fairly valuable. I guess maybe not?
The problem isn’t that the benefit isn’t valuable. It is whether the benefit will still be available, or relevant, in 9 years.

Your description of the other benefits sounds almost identical to those of federal civilian employees. If it is a federal job, I’d put more faith in retiree coverage continuing than if it is in the private sector.

Make sure that you are certain you understand the job tenure and age requirements to keep coverage in retirement.

Also, it isn’t clear from your post if your wife would pay the full cost of coverage once she retires or if there is some employer contribution. If there is no employer contribution, then the value is more in access to coverage than in dollars — although the dollar value isn’t zero.

The dollar value is the difference between what your wife would pay for coverage through the ACA versus through her employer, taking into account differences in deductibles and out-of-pocket maximums.

bhsince87
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Re: How to value retiree healthcare benefit

Post by bhsince87 » Tue Nov 13, 2018 3:11 pm

A very sore topic for me! One reason I took my current job 18+ years ago was the promise of being able to continue health insurance coverage, on my dime, after age 50 until age 65. I thought I was set.

But as others have mentioned, that "promise" was taken away a few years ago. , just as i turned 52. (Probably. There are still some legal rumblings going on, so I have heard).

However, in theory, the point became somewhat moot with the adoption of ACA/obamacare. of course, who knows how stable and long lasting that will be?

As far as putting a numerical value on it, I don't think it's possible. Too many variables.

For example, in our case, staying on the employer plan would cost us about $21k per year. That comes with $500 deductable, $1000 max out of pocket.


The closest ACA plan (with same network) would cost us $28k with $4k max OOP. So I guess you could value the benefit at about $10k per year.

But if we keep our income below the subsidy limits (about $65k per year) our ACA costs would drop to $6k in premiums and $4kOOP max. So in that case, ACA is about $12k BETTER than the employer plan.

So as they say, YMMV...
Retirement: When you reach a point where you have enough. Or when you've had enough.

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BostonButterfly
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Re: How to value retiree healthcare benefit

Post by BostonButterfly » Tue Nov 13, 2018 3:20 pm

All good points. Thank you.
To answer someone's question here......the job is at a very well known university in Boston. Cambridge actually. I think that reduces the risk somewhat of the benefit being yanked. Never say never, though. I know.

Retired2013
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Re: How to value retiree healthcare benefit

Post by Retired2013 » Tue Nov 13, 2018 3:22 pm

Back in 2005, I worked for a large corp with retirement healthcare. Due to a merger of companies, my subsidiary was being merged into the other companies subsidiary in another state. In order to be eligible for retirement benefits, you had to be age 55 or if your job was eliminated, you had to be age 50. I was age 48, two years short since my position was being eliminated in my current state. All I wanted was the Healthcare benefits as a retiree.

When I talked to HR, they informed me that if I moved to the new location, NOTHING guarantees that healthcare would be a company benefit in the future! One of the BIGGEST decision DW and I had to make was taking the job in the new location or the severance package. We turned down the position and took the severance package.

We still know people in our area that received the healthcare retiree benefit. They actually pay more than I do on ACA. When we ask why they pay so much, they say they are afraid to decline it because once they do, there's no going back.

MIL also had healthcare for a benefit (retired last 20 yrs). Last year they switch them to a HRA.

Retirees and spouses from Xerox were just notified that their healthcare benefits would stop 12/31/18.

Point being, they all say SUBJECT TO CHANGE. Nothing is guaranteed. Keep a plan B in your back pocket.

CFOKevin
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Re: How to value retiree healthcare benefit

Post by CFOKevin » Tue Nov 13, 2018 4:20 pm

BB,

It seems we have a lot in common.

My wife and I are planning to retire next year at age 58 and she is with a major University (10 years in May) through which we'll buy insurance until Medicare. One of her perks is that she gets to convert all unused sick leave into $$ at termination that can be used to pay healthcare premiums.

For us, that sick leave will pay about 60% of family premiums until we are 65. At her school, those with 15 years at retirement get a doubling of their sick leave to convert into HC premium payments.

You might want to check and see if the University your wife is considering has a policy like that.

Cheers,

Kevin

sawdust60
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Re: How to value retiree healthcare benefit

Post by sawdust60 » Tue Nov 13, 2018 5:44 pm

Also look out for a percentage reduction. 9 years of service and age 58 might impact the employer participation factor.

Since you have 9 years to get ready, you might be able to have sufficient savings in after-tax accounts and Roth to cover living expenses until age 65/Medicare. You might delay pensions, SS, and other taxable income -- to qualify for lower cost with ACA. And if the new job better enables this, you have a Plan-B.

Another problem retirees face is that healthcare premiums are paid with after-tax dollars. Perhaps a large HSA balance might help mitigate this.

InMyDreams
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Re: How to value retiree healthcare benefit

Post by InMyDreams » Tue Nov 13, 2018 10:58 pm

BostonButterfly wrote:
Tue Nov 13, 2018 3:20 pm
... in Boston. Cambridge actually. I think that reduces the risk somewhat of the benefit being yanked.
OP - not only do you have an employer that seems strong, and probably committed to its retiree promises - but Massachusetts has its own health insurance regulations, that would probably stay strong even if the ACA falters. Have you looked at what premiums would be if you had to fall back on the MA marketplace? Assuming, of course, that you remained in MA until Medicare eligibility.
I'm normally a person that advocates for low-risk health insurance choices, but I think I would be comfortable with the choice, keeping in mind there is a back up plan.
But the crystal ball is cloudy, so predictions are probably not useful :)

carolinaman
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Re: How to value retiree healthcare benefit

Post by carolinaman » Wed Nov 14, 2018 8:59 am

Is the health care benefit from a public (govt) or corporate employer? It may make a difference. I worked for a govt agency and attorneys have advised us that our health benefits are in essence a contract that cannot be broken. Public employers in our state have attempted to change their retiree benefit and lost their cases. Alternatively, it is my understanding that corporations can change or abandon retiree health care at will, and many have done so in recent years due to the high cost.

This benefit could be extremely valuable during pre Medicare period, providing better coverage at a lower price. You can price health plans and coverage against the employer plan to see the difference. After Medicare kicks in, it can serve as a supplement. Depending on your cost, the employer plan may or may not be better. My guess is, at best, it would be marginally better after medicare kicks in. My retiree supplement includes prescriptions and is superior to any plans in the marketplace.

quantAndHold
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Re: How to value retiree healthcare benefit

Post by quantAndHold » Wed Nov 14, 2018 9:07 am

If I lived in MA, I’d value it at zero. What people are finding here (CA), is that even if they qualify for retiree healthcare, often they can get ACA plans considerably cheaper. The calculus they’re doing is whether or not the ACA will still be there for the number of years they need until they get to Medicare.

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dm200
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Re: How to value retiree healthcare benefit

Post by dm200 » Wed Nov 14, 2018 9:11 am

If this is a private employer - close to zero - since even the (past) best megacorps have stopped this - at least for those over 65.

If the federal government - probably worth considering. Not sure about state and local government.

In Virginia, a very large County near me offers a very nice MA plan to retirees over 65 - both County and school retirees. BUT - it is an MA plan.

Federal retirees, both before and after Medicare, in my opinion, have a very significant retiree (and family) health benefit.

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N1CKV
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Re: How to value retiree healthcare benefit

Post by N1CKV » Wed Nov 14, 2018 9:17 am

It depends specifically on what the benefit actually is.

My employer has retiree healthcare benefits, here is how it works:
-I am in the group that will receive 100% of the employer subsidy after 10 years of employment. This means I will pay only what current (at the time) employees pay.
-Those that started after the year I did do not have quite as sweet of a deal. They get 50% of the employer subsidy at 10 years, then earn another 5% for the following 10 years, so only achieving the full employer subsidy after 20 years total.

Employees with less than 10 years are not eligible. This is a government employer.

Swansea
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Re: How to value retiree healthcare benefit

Post by Swansea » Wed Nov 14, 2018 9:36 am

I would value my retirement health benefit to be about $5500 annually.

Pigeon
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Re: How to value retiree healthcare benefit

Post by Pigeon » Wed Nov 14, 2018 9:38 am

In order to have any idea you will need to get specifics from the employer's HR department once you have the job offer.

In my case, it's worth a great deal as I also have the situation where your unused sick leave (up to a certain amount) can be converted according to a formula depending on your salary and your length of employment and applied toward retiree health premiums. We have a choice of health care plans and each costs a different amount. My employer is the state and thus has negotiated very good prices. I will be retiring in a few years. I should be able to pay very little for healthcare for myself or a very reasonable amount for myself and my husband.

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dm200
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Re: How to value retiree healthcare benefit

Post by dm200 » Wed Nov 14, 2018 10:04 am

dm200 wrote:
Wed Nov 14, 2018 9:11 am
If this is a private employer - close to zero - since even the (past) best megacorps have stopped this - at least for those over 65.

If the federal government - probably worth considering. Not sure about state and local government.

In Virginia, a very large County near me offers a very nice MA plan to retirees over 65 - both County and school retirees. BUT - it is an MA plan.

Federal retirees, both before and after Medicare, in my opinion, have a very significant retiree (and family) health benefit.
These County and school system retirees' MA plan really benefits those with a lot of health problems and issues - since just about everything is paid in full (for those medicare eligible). That network is large (but still a network). Those who have low usage are not "rewarded" financially - as they would on regular MA plans.

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