Retirees who get insurance from their former employer

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John2525
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Retirees who get insurance from their former employer

Post by John2525 » Tue Jan 03, 2012 2:29 pm

I came across an article last night that noted that only 1/3 of American companies still offer insurance to retirees and that of those that do most have a clause that states that they can cancel, modify or cap the amount they are willing to pay at any time. I dont know how common it currently is for a company to cut or cancel insurance on current retirees, I know GM just cut back on their retirees. I work for a very large chemical company and they stopped offering insurance to all new hires 1/1/08, luckily I was hired before then but am becoming worried because I have 20 years to go before I plan to retire and am starting to wonder if they will still offer me insurance then. My question is, for people who retired and receive insurance from their former employer how did you factor this into your decision about early retirement? Was it just a calculated risk you were willing to take? If someone was to retire at 50 or 55 thinking that their former employer was going to give them insurance and then canceled it a couple years later I would imagine that could be devastating to a finical plan. Has this happened to anyone? Has anyone had their company cap the amount they are willing to pay toward premiums and then passed the additional cost on to you, sometimes doubling premiums out of the blue?

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ascenzm
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Re: Retirees who get insurance from their former employer

Post by ascenzm » Tue Jan 03, 2012 3:04 pm

John2525 wrote:I came across an article last night that noted that only 1/3 of American companies still offer insurance to retirees and that of those that do most have a clause that states that they can cancel, modify or cap the amount they are willing to pay at any time. I dont know how common it currently is for a company to cut or cancel insurance on current retirees, I know GM just cut back on their retirees. I work for a very large chemical company and they stopped offering insurance to all new hires 1/1/08, luckily I was hired before then but am becoming worried because I have 20 years to go before I plan to retire and am starting to wonder if they will still offer me insurance then. My question is, for people who retired and receive insurance from their former employer how did you factor this into your decision about early retirement? Was it just a calculated risk you were willing to take? If someone was to retire at 50 or 55 thinking that their former employer was going to give them insurance and then canceled it a couple years later I would imagine that could be devastating to a finical plan. Has this happened to anyone? Has anyone had their company cap the amount they are willing to pay toward premiums and then passed the additional cost on to you, sometimes doubling premiums out of the blue?
My company offers retirees the option of purchasing the company group health insurance if the retiree meets certain criteria (age and years of service). Retirees have to be at least 58 years old with at least 30 years service or 60 years old with at least 10 years service to qualify. The company was paying up to 73% of the health insurance premium cost, but in 2005 they announced that they were capping the annual amount they would pay annually towards retiree health insurance premiums. Starting January 1, 2014 I will not be surprised to see my employer drop their retiree health insurance due to the Patient Protection and Affordable Care Act (PPACA) health insurance exchanges going into affect.

http://en.wikipedia.org/wiki/Patient_Pr ... _1.2C_2014

If my employer does this, this will most likely allow me retire a year earlier then planned because there will be no need to wait to be old enough to qualify for the current retiree health insurance.

What do other potential early retirees think?

Mike
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jebmke
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Re: Retirees who get insurance from their former employer

Post by jebmke » Tue Jan 03, 2012 3:12 pm

My ER plan assumed I would have to pay my way entirely but I ended up staying long enough to become eligible for retiree medical. The company has capped their contribution but for some unexplained reason, my premium has been constant for three years. The company is pretty responsible to employees and retirees so I doubt they would just drop the coverage suddenly. If they decided to discontinue retiree medical they would do some kind of phase out so people could plan accordingly.
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Re: Retirees who get insurance from their former employer

Post by RadAudit » Tue Jan 03, 2012 3:16 pm

I have insurance through my former employer. I factored it in to future expenses by assuming they'd cancel at any time - probably the most inconvenient - and I'd have to buy insurance on the open market. So far the part of the plan where I have to pay for private insurance hasn't been activated - but, it's early in to retirement.

But if you have 20 years to go before you retire - I'd just bet your employer's insurance won't be there and plan accordingly.
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dbr
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Re: Retirees who get insurance from their former employer

Post by dbr » Tue Jan 03, 2012 3:19 pm

Megacorp is terminating their health insurance offering for Medicare Eligible Employees at the end of this year. That means that if you are over 65 and you elected Megacorp secondary insurance instead of a commercial Medigap or Medicare Advantage Plan, you will now have to buy one of those plans for 2013 forward. If the people offering those plans think you have missed the age 65 open enrollment period, then you are screwed. Actually I don't know if you are really screwed because I am not sure what the laws are on that. I went directly to Medigap and canned the Megacorp offering precisely because they said it could be discontinued any time, and they did.

Muchtolearn
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Re: Retirees who get insurance from their former employer

Post by Muchtolearn » Tue Jan 03, 2012 3:22 pm

OP,
From an early retiree from a major company---
It sounds like you are 20 years away from retirement. In my opinion, you have less than a 5% chance of ever having retiree health insurance from your company. Even if one retirees and has insurance, for example now, it can and has been stopped at any time. So it doesn't matter. But all companies are going away from it. In 20 years, the health landscape willb e remarkably different so I do not think you should worry. More to the point, please do not even think of staying with a company until you are 55 if you are now in your 30s or even young 40s just to get retiree insurance. The plan will cease or you will get laid off first. Uck.

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Steelersfan
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Re: Retirees who get insurance from their former employer

Post by Steelersfan » Tue Jan 03, 2012 3:29 pm

My large company dropped health insurance for full age retirees about 10 years ago. Fortunately they still provide (with employee participation) health insurance for early retirees until they reach Medicare age. Then we're on our own.

I wouldn't count on company paid retiree health insurance if I were you.

John2525
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Re: Retirees who get insurance from their former employer

Post by John2525 » Tue Jan 03, 2012 4:12 pm

Looking over the Patient Protection and Affordable Care Act (PPACA), assuming it does not get repealed by the supreme court, would seem to be a good thing for early retirees. You get affordable health care that you don't have to worry about being canceled out of the blue. I know there are a lot of politics behind it and I don't want to ruin this topic. Just trying to figure out or imagine what my health care options might look like 20 years from now. The savings and investing part seems easy compared to figuring out the health insurance part.

Van
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Re: Retirees who get insurance from their former employer

Post by Van » Tue Jan 03, 2012 4:32 pm

Medicare kicks in @ 65, and, then, if you have company insurance, it becomes secondary to Medicare. So, the critical time is from retirement to age 65.

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ThePrune
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Re: Retirees who get insurance from their former employer

Post by ThePrune » Tue Jan 03, 2012 7:14 pm

John2525 wrote: I work for a very large chemical company and they stopped offering insurance to all new hires 1/1/08, luckily I was hired before then but am becoming worried because I have 20 years to go before I plan to retire and am starting to wonder if they will still offer me insurance then.
As a recent retiree from a "very large chemical company" I'm not too concerned about continued employer medical insurance contributions. My former employer caped medical insurance contributions back in the 90's for both employees and retirees. Hence they have limited their future liability to what management feels is a manageable level.

Modeling future retiree medical costs is a nightmare. One approach you might use is as follows:
(1) Get your employer's current dollar figure for full cost of medical insurance. This is before any contributions they make to reduce the cost to what you need to pay.
(3) Assume 6% annualized medical cost increases. (U.S. National Medical Expenditure dataset showed 6.2% annualized growth from 1987 through 2004, hence my 6% recommendation.) Many argue that medical costs simply can't go on rising at this rate indefinitely into the future. I'd caution that medical costs, like stock markets, can stay irrational longer than you can stay solvent! Plan for the worst case and future "surprises" will tend to be pleasant.
(3) Best Case Assumption: no absolute dollar increase in your employer's current retiree medical contribution going forward. Since retiree medical contributions are often different from employee contributions, you'll need to do some research to get the current retiree contribution.
(4) Base Case Assumption: employer ends retiree medical contributions before you retire. You'll need to plan to cover full cost yourself.

As an early retiree (pre age 65) I did a lot of research on my medical insurance. It turned out that High Deductible Catastrophic Medical plan was by far and away my best option, even with partial employer subsidy. But I needed to fully fund a Health Savings Account (H.S.A. - to pay the high deductible each year) to maximize the advantages.

If your employer is Dow Chemical, then PM me and I'll be glad to share even more information.
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FinanceGeek
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Re: Retirees who get insurance from their former employer

Post by FinanceGeek » Tue Jan 03, 2012 9:50 pm

ascenzm wrote:Starting January 1, 2014 I will not be surprised to see my employer drop their retiree health insurance due to the Patient Protection and Affordable Care Act (PPACA) health insurance exchanges going into affect.

http://en.wikipedia.org/wiki/Patient_Pr ... _1.2C_2014

If my employer does this, this will most likely allow me retire a year earlier then planned because there will be no need to wait to be old enough to qualify for the current retiree health insurance.
You might be able to retire 18 months before Jan 1, 2014 (e.g. July 1 of this year given 18 months of COBRA eligibility). Assuming of course PPACA survives the supreme court (we should know that by July 1) and the next election cycle.

Personally I believe its likely that the labor force participation rate just might tick down this summer. :sharebeer

dbr
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Re: Retirees who get insurance from their former employer

Post by dbr » Tue Jan 03, 2012 10:42 pm

Van wrote:Medicare kicks in @ 65, and, then, if you have company insurance, it becomes secondary to Medicare. So, the critical time is from retirement to age 65.
At which point if they stop the plan, you have no secondary or Medigap coverage if you had planned on that, which you probably should. I am not clear on what the status is if you took the secondary and failed to buy Medigap during the age 65 open enrollment. I can't prove that it might not be you could be turned down for Medigap and/or Advantage from that point on.

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VictoriaF
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Re: Retirees who get insurance from their former employer

Post by VictoriaF » Tue Jan 03, 2012 11:12 pm

A company may not terminate the plan but make it so expensive for retirees that it will become difficult to afford. Those with pre-existing conditions will still have a benefit of a group plan, but for others the plan will lose much of its value.

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umfundi
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Re: Retirees who get insurance from their former employer

Post by umfundi » Tue Jan 03, 2012 11:34 pm

John2525 wrote:Looking over the Patient Protection and Affordable Care Act (PPACA), assuming it does not get repealed by the supreme court, would seem to be a good thing for early retirees. You get affordable health care that you don't have to worry about being canceled out of the blue. I know there are a lot of politics behind it and I don't want to ruin this topic. Just trying to figure out or imagine what my health care options might look like 20 years from now. The savings and investing part seems easy compared to figuring out the health insurance part.
I worked for GM. No health coverage after age 65, when you are eligible for Medicare. In spite of the fact that I worked there for 30 years with an agreement of lifetime coverage, which was simply cancelled in the last year of my employment.

In the meantime, early retirees are forced into a high-deductible plan. You pay everything of the first $5,000, then 20% until your expenses are $7,000. Dental and vision are not covered.

In addition, "Retiree Health Care" plans can seek an exemption from the provisions of the Health Care Reform Act, which GM has sought and received. This means:

No coverage for non-student dependents over age 18.
A lifetime cap on benefits.
No coverage for pre-existing conditions.
...

In other words, most of the things you think are fixed by Health Care Reform do not apply to early retirees. It is interesting that I talk to current GM employees, and they are unaware of these curtailments. Current co-pays and deductibles for active employees are half what they are for retirees. In addition there are the unexpected retiree exclusions from HCRA.

Keith
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carolinaman
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Re: Retirees who get insurance from their former employer

Post by carolinaman » Wed Jan 04, 2012 6:40 am

dbr wrote:
Van wrote:Medicare kicks in @ 65, and, then, if you have company insurance, it becomes secondary to Medicare. So, the critical time is from retirement to age 65.
At which point if they stop the plan, you have no secondary or Medigap coverage if you had planned on that, which you probably should. I am not clear on what the status is if you took the secondary and failed to buy Medigap during the age 65 open enrollment. I can't prove that it might not be you could be turned down for Medigap and/or Advantage from that point on.
If you are past age 65 and have a retiree medical plan secondary to medicare and the retiree plan is canceled, you will get a special enrollment period for medigap insurance and the insurers cannot deny coverage due to health issues. Failure to enroll in a medigap during the special enrollment period would subject you to insurance underwriting decision if you later decide to get a medigap policy. The rules for enrollment in medigap, part B, C and D are all different and it is very hard to get good advice you can trust. I was given wrong information twice at call centers and their websites were misleading on certain key points. I do not know how the rules change in 2014 but this is how it is today.

sprocket
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Re: Retirees who get insurance from their former employer

Post by sprocket » Wed Jan 04, 2012 7:12 am

You might be interested in reading this book:
http://www.amazon.com/s/ref=nb_sb_ss_i_ ... ment+Heist

One of the chapters discusses health insurance that is promised to employees that take early retirement.
This is a very disturbing book and I wish more people understood what these companies are doing.

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ascenzm
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Re: Retirees who get insurance from their former employer

Post by ascenzm » Wed Jan 04, 2012 8:48 am

FinanceGeek wrote:
ascenzm wrote:Starting January 1, 2014 I will not be surprised to see my employer drop their retiree health insurance due to the Patient Protection and Affordable Care Act (PPACA) health insurance exchanges going into affect.

http://en.wikipedia.org/wiki/Patient_Pr ... _1.2C_2014

If my employer does this, this will most likely allow me retire a year earlier then planned because there will be no need to wait to be old enough to qualify for the current retiree health insurance.
You might be able to retire 18 months before Jan 1, 2014 (e.g. July 1 of this year given 18 months of COBRA eligibility). Assuming of course PPACA survives the supreme court (we should know that by July 1) and the next election cycle.

Personally I believe its likely that the labor force participation rate just might tick down this summer. :sharebeer
I like the way you think and yes, the COBRA option you mentioned has been in the back of my mind. :sharebeer

Mike, who would love to try and help out the nation's unemployment problem
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BachemFan
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Re: Retirees who get insurance from their former employer

Post by BachemFan » Wed Jan 04, 2012 10:25 am

I lost my job with my employer (a European company) in June. I was old enough and with enough service to officially retire from the company. My employer still has employer provided health insurance for retirees, but as of two years ago with the following caveats.

1. The company's contribution to the premium is frozen at the amount as of 2009. Therefore the retiree bears the whole burden of any premium increases.
2. The company mandates that all retirees use a particular health plan. There are no options among an HMO, a Point of Services etc. I was forced to change plans.
3. The retiree's coverage from the employer is supplemental to Medicare, not primary. Hence, it is the rough equivalent to Medicare Part C. The company's plan includes prescriptions.
4. The company reserves the right to drop or modify it at any time. The big unknown is, of course, how the company will react to any costly mandates imposed on the plan from federal legislation and/or Health and Human Services.

I am 59, my wife is 69. Therefore all my coverage is from the plan, while my wife's cost are covered by a combination of Medicare and the retiree plan. The retiree benefits were critical for me. Therefore will be counting down the clock until I am eligible for Medicare. Although I am responsible for all future premium increases, that is still better than trying to buy individual coverage.

If you are 20 years from potential retirement, I would not even worry much about the issue. The health care world is about to be turned upside down. To try to figure out what will happen and project that out 20 years is impossible.

Do all you can to stay healthy. I have decided that should be the highest priority in preparing for retirement.

Regards

Bachemfan

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Re: Retirees who get insurance from their former employer

Post by magazinewriter » Wed Jan 04, 2012 11:58 am

I am in the exact situation described by the OP.

My company offered health insurance to early retirees age 55 and older for those people who also took their pension early. I took this option and a year later the company announced it was eliminating all retiree insurance, both for Medicare eligible and also younger retirees. It was disheartening to say the least. For those of us younger than 65, our options were to find individual insurance or, if rejected because of pre-existing conditions, get insurance according to the HIPAA law. Or, of course, find a job that offered health insurance.

I was lucky to get a high-deductible individual plan but at the cost of a 150% premium. As I have no other debt, I can afford this (at least for now) but medical is now by far my biggest expense. A friend who has diabetes had to get his insurance through HIPAA, which I believe is a 200% premium.

My fear is that if health care reform is overturned, some of the protections that now prevent ins. companies from dropping someone will no longer be in place. Also, I would hate to see the "no lifetime max" go away, although I hope that I never need that provision! It also would be nice to be able to shop around for policies without worrying about being turned down for my pre-existing condition. When I had my company's group policy, I never had to worry about losing my coverage. That was so nice.

I'm still happy that I took retirement when I did because for those who remain it is a stressful situation with two pay cuts, no more 401k match, no more pension (this happened a few years ago), etc.

I am a frugal Bogelhead so I am OK and since I don't have close relatives the primary ones to suffer if I have a smaller estate will be charities.

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Re: Retirees who get insurance from their former employer

Post by Alan S. » Wed Jan 04, 2012 3:37 pm

Even companies that are still allowing early retirees in their medical plan, the MO for the last several years is to create a separate rate group for the retirees who are of course older than the actives. That causes the premium to be very high, often dwarfing any earned premium supplement from the years of service.

Those that do offer coverage at an affordable premium to Medicare age may take another look if the Medicare age is increased as has been proposed.

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Re: Retirees who get insurance from their former employer

Post by htdrag11 » Wed Jan 04, 2012 4:38 pm

sprocket wrote:You might be interested in reading this book:
http://www.amazon.com/s/ref=nb_sb_ss_i_ ... ment+Heist

One of the chapters discusses health insurance that is promised to employees that take early retirement.
This is a very disturbing book and I wish more people understood what these companies are doing.
Thanks. I just put this book on my library reserve list - sounds a lot more scary than any horror films I've seen, but we're the victims.

As a retiree from one of the telecom's, there were rumors from our financial folks that the company "cooked" the book to reduce our pension payout.

sprocket
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Re: Retirees who get insurance from their former employer

Post by sprocket » Wed Jan 04, 2012 4:48 pm

htdrag11 wrote:
sprocket wrote:You might be interested in reading this book:
http://www.amazon.com/s/ref=nb_sb_ss_i_ ... ment+Heist

One of the chapters discusses health insurance that is promised to employees that take early retirement.
This is a very disturbing book and I wish more people understood what these companies are doing.
Thanks. I just put this book on my library reserve list - sounds a lot more scary than any horror films I've seen, but we're the victims.

As a retiree from one of the telecom's, there were rumors from our financial folks that the company "cooked" the book to reduce our pension payout.
I'm glad to know that you'd like to read the book. I predict you will be disgusted when you understand what is happening. I am buying a copy for my local library because I would like more people to have this information. It is a travesty.

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Prokofiev
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Re: Retirees who get insurance from their former employer

Post by Prokofiev » Wed Jan 04, 2012 9:29 pm

I took early retirement at 47 and the company-funded healthcare was a big part of the decision - since I needed it for another 18 years. Luckily, after 10 years they still have the retiree insurance intact, but I have another 7.5 years to go. The only change to the program AFTER my retirement was a cap of 4%/yr on the company contributions, which seemed a relatively minor point at the time. But with premiums rising 5-12% each of the following years, it turned out to be more important than I realized. When rates rose 10% last year, I had to pay 10% more on my portion AND 6% more on the companies.

10 years ago, I started out paying $75/mo (20%) and the company paid $300/mo (80%). For 2012, I now pay $477/mo (52%) and the company pays $452. And that is for a single person (total $929/mo). Seems expensive, but it is an excellent policy ($300 deductible) and the retiree insurance pool is kept separate from the active employee pool. So one has an average age of 62 and the other around 42.
Last edited by Prokofiev on Thu Jan 05, 2012 1:12 pm, edited 1 time in total.
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ascenzm
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Re: Retirees who get insurance from their former employer

Post by ascenzm » Wed Jan 04, 2012 10:16 pm

sprocket wrote:
htdrag11 wrote:
sprocket wrote:You might be interested in reading this book:
http://www.amazon.com/s/ref=nb_sb_ss_i_ ... ment+Heist

One of the chapters discusses health insurance that is promised to employees that take early retirement.
This is a very disturbing book and I wish more people understood what these companies are doing.
Thanks. I just put this book on my library reserve list - sounds a lot more scary than any horror films I've seen, but we're the victims.

As a retiree from one of the telecom's, there were rumors from our financial folks that the company "cooked" the book to reduce our pension payout.
I'm glad to know that you'd like to read the book. I predict you will be disgusted when you understand what is happening. I am buying a copy for my local library because I would like more people to have this information. It is a travesty.
I reserved a copy in my local library system. It must be popular because all copies are currently checked out and there are 15 people ahead of me on the reservation list.

Mike
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