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The New Health Care Law and Coverage for Early Retirees

Your questions answered

Q. I am 62 years and actively exploring the possibility of retirement. If I retire this year, what type of medical coverage can I get before Medicare kicks in?

A. Your options will depend on whether or not you are eligible for early retirement benefits through your employer. Since 1993, the percentage of large employers offering health insurance to retirees 55 to 64 years old has fallen from 46 percent to 28 percent, says Paul Fronstin at the Employee Benefit Research Institute in Washington, D.C. That’s meant that waiting to join Medicare has been the only option for many early retirees, since the high cost of individual policies is out of reach for many people with fixed incomes, and especially for those with preexisting health conditions.

The new law is about to expand these choices.

First, it would encourage employers to continue to cover younger retirees by giving companies $5 billion to companies to help pay the insurance bills of these men and women until they are eligible for Medicare at age 65.

This new program, which began June 1, would affect about 2 million early retirees who still get health coverage through their former employers, says Fronstin. Some 4,500 employers are expected to apply for the money, which will be available until 2014—when health plan exchanges begin operating—or until the money runs out.

The program is beginning about three weeks ahead of schedule, Rep. John Dingell, D-Mich., said in a letter urging employers in his district to apply for the assistance. Dingell is the longest-serving member of the House of Representatives and a longtime advocate of health care reform. He also reminded employers that the federal aid comes with strings attached and can’t be used as ordinary general income.

There is some additional help for retirees and those considering early retirement, whose employers don’t offer health care benefits.

Under the health care reform law, people unable to buy their own coverage because of preexisting health conditions will be able to do so in a few weeks through high-risk pools, explained below. In addition, Congress extended eligibility for another federal program called COBRA, which allows laid-off workers to continue their employer-sponsored health coverage for 18 months by paying the total cost—both the employer’s share plus their own premiums. Congress also provides unemployed workers a 65 percent federal subsidy for the first 15 months of their COBRA policy. The U.S. Department of Labor offers more details about COBRA and the subsidy.

Susan Jaffe of Washington, D.C., covers health and aging issues and writes the Bulletin’s weekly column, Health Care Reform Explained: Your Questions Answered.

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