Obtaining medical insurance before Medicare

Q: I’m a 60-year-old gay man considering retirement this year. But I’m concerned about obtaining medical insurance when I retire. I know I’m not eligible for Medicare until I turn 65. Can you please tell me what my options are?

A: First, let me congratulate you for being ready to retire! It’s critical for retirees to have a plan for medical insurance, and unfortunately many people underestimate the importance of having quality medical insurance in retirement. Here’s what you need to know.

In most instances, retirees who collect Social Security benefits are eligible for Medicare after their 65th birthday. If you retire before age 65, you will need to find another source of health insurance before you qualify for Medicare. Depending on your situation, your options may include the following:

— A former employer: Determine whether your former employer provides a group plan for retirees. In many instances, premiums paid by retirees are more expensive than those paid by workers, but you may be able to rely on this type of coverage until you qualify for Medicare. Employers who provide retiree coverage (not all do) may require participants to have a minimum tenure with the organization (such as 10 years or more) to qualify. Also, be aware that rising health-care costs are prompting many employers to raise premiums for retirees or to eliminate this coverage altogether.

— A partner’s plan: Many employers permit workers or retirees to elect coverage for partners. This may be a convenient option if available.

— A professional association: National organizations representing lawyers (such as the American Bar Association), accountants (such as the American Association of Certified Public Accountants) or doctors (such as the American Medical Association) may enable members to participate in group health-care coverage. If you belong to such an association, or are eligible to join, determine whether the association offers medical insurance to members. You may be required to pay dues, maintain a professional license or otherwise show evidence of professional stature.

— A new job: If you will not qualify for Medicare for several years, consider whether you may want to return to work in the interim and participate in an employer-sponsored medical plan with a new employer. In addition to obtaining medical coverage, you will have an opportunity to earn money, potentially contribute to your retirement savings and remain active.

— Insurance on the open market: This is likely to be your most expensive option. When purchasing insurance on the open market, it may cost you thousands of dollars annually in premiums, not to mention copayments and other out-of-pocket expenses. You may want to consider this option only if other avenues are not available.

Jeremy Gussick is a financial consultant with LPL Financial, the nation’s leading independent broker-dealer.* He specializes in the financial planning needs of the LGBT community and is active with several LGBT organizations in the Philadelphia region, including the Delaware Valley Legacy Fund, the Greater Philadelphia Professional Network, and the Independence Business Alliance. OutMoney appears monthly. If you have a question for [email protected].

This article was prepared with the assistance of Standard & Poor’s Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor or Jeremy Gussick if you have any questions. LPL Financial, Member FINRA/SIPC. *Based on total revenues, as reported in Financial Planning Magazine, June 1996-2009.