Health Savings Account Blog                  

A recent study by Employee Benefits Research Institute (EBRI) noted that adults ages 55 to 64 were in 2005 one of two groups most likely to have health-insurance coverage. Just 13.6% or some 4.2 million presently were uninsured.

But future retirees may not be so lucky, according to EBRI. That group faces an increased likelihood of being uninsured if employer cutbacks to retiree health benefits affect them and they have no other means of getting health insurance. Plus, EBRI notes that the size of the uninsured population ages 55 to 64 will also grow as the baby boom generation ages.

Perhaps you are contemplating retiring before age 65? Or perhaps you are living in fear of being laid off before age 65? Or perhaps you retired -- either voluntarily or involuntarily -- before age 65 already and the issue of health insurance weighs heavy on your mind.

What do you do?

For those under 65 and not yet retired, there are two options. One, stay in the work force -- if health isn't an issue, but money is. In some cases, that may mean full-time, in other cases it could mean part-time (you can get health insurance if you work 20 hours at Starbucks, for instance). The other option is to purchase health insurance as a dependent in a spouse's plan.

"The options for pre-Medicare are limited and expensive," said Paul Fronstein, director of the health research and education program at EBRI. Others agree.

"The cost of health insurance for people who are not receiving coverage at work can be extremely high," said Steve Weisman, author of "Boomer or Bust."

Indeed, EBRI estimates that a person would need -- not factoring in the effect the President's tax break could have on making health insurance more affordable -- an estimated $51,000 to $193,000 to cover the cost of premiums during the 10-year period before becoming eligible for Medicare. And given those costs, EBRI predicts that more and more Americans will choose to stay in the work force.

"The erosion of retiree health insurance may ultimately change retirement patterns as employees nearing retirement age postpone their decision to retire upon learning that, without a job, they may not be able to obtain health insurance coverage or afford health-care services that are not covered by insurance," Fronstein wrote in a recent EBRI report. (Read the report at www.ebri.org.)

Options are limited

To be fair, staying in the work force is a good option, according to Rick McGill, a principal in Hewitt Associates' health management practice. For starters, it gives someone plenty of time to investigate all the options. "The most important thing to do is look before you jump," he said.

And the options are many, at least for those who are "insurable." At one end, those who may not have a lot of time to plan can always purchase health insurance through their employer under COBRA for 18 months after leaving the company. While that's not a long-term solution and it can be very expensive, it does provide some breathing room.

Another option available is a Health Savings Account (HSA), which offers the pre-Medicare crowd the chance to purchase a high-deductible health insurance plan as well as save money in a tax-deductible IRA for health-care costs, could prove a good option -- at least if they can afford the premiums and the contribution to the HSA.

Weisman also said the pre-Medicare crowd might consider working with an independent insurance broker who may be able to find the "most appropriate" health insurance program for them. HSA for America would be an ideal insurance broker if you are looking at Health Savings Accounts.

"Coupled with this, they may wish to take advantage of the HSAs, which are a particularly good choice if your health-care needs are such that you are relatively healthy and do not anticipate needing to use your health insurance much during the year," he said.

Still, those who have designs on retiring early, before age 65, will be in for some sticker shock. But owning a Health Savings Account with a high deductible health insurance plan can ease some of that shock.