5 Ways to Fill The Health Care Gap Before Medicare

When Martha Thomas was laid off from her job as a medical editor in San Jose, California, in November 2009, she was four months shy of her 65th birthday and Medicare eligibility. To tide her over, she enrolled in her company’s retirement plan, which offered her health insurance for $450 a month. And she got 18 months of dental coverage through COBRA for $50 a month.Whether you’re four months away from Medicare eligibility — or even four years — filling the health care gap before Medicare eligibility is neither easy nor cheap. The advent of state health exchanges under health reform should ease the process, but those won’t be up and running until 2014.

In the meantime, if you are laid off or experience some other job loss prior to your 65th birthday, there are several techniques you can use to simplify your search for a plan, and to ease the cost burden.

Scrutinize your employer’s offerings.

All employers with more than 25 employees must offer COBRA, which will provide the same health, dental and vision coverage you had when you were employed there, but at a higher out-of-pocket cost. In addition, many large employers still offer retirement health plans. Depending on your employer’s choices, you may be smart to mix and match, as Thomas did by getting her dental plan through COBRA and the rest through her employer’s retirement plan.If you need to cover a gap that’s longer than a few months, though, you may be better off shopping on the open market. In 2009, the average premium paid by individuals age 55 to 64 on the open market was $314 a month, according to eHealthinsurance.com, one of the many sites that sells individual health plans. The average cost of COBRA, on the other hand, was $410 for an individual, according to the Kaiser Family Foundation.

Amir Mostafie, a consumer health insurance expert for eHealthinsurance.com, believes anyone in the middle of being treated for an illness should stick with COBRA, because it allows patients to keep the doctors they already use. Co-pays and other cost-sharing arrangements also stay the same.

But COBRA might not be the best option for everyone in the family. When Mostafie’s father retired recently, he enrolled Mostafie’s mother in COBRA because she was being treated for kidney disease and they wanted to stick with the doctors they had. “But my dad was healthy when he retired, so he bought a bare-bones plan on the open market,” saving the couple hundreds in premiums, Mostafie says. “Run your quotes both ways — as a family and separately,” he advises.

Shop around — but not necessarily for the best price.

If you look for a plan on the open market, it’s a good idea to consult a few different websites, as well as insurance brokers in your city, says Dale Yamamoto, a member of the Society of Actuaries. You can get free quotes from a number of websites, including eHealthinsurance and HealthInsuranceProviders.com.

If you see a Web site advertising health plans for lower prices than its competitors, however, take the claim with a grain of salt. Premium rates are governed by state departments of insurance, so you’ll get the same price from every broker you consult.

That said, it’s worth shopping around, because some brokers and online sites don’t have access to the same insurance providers that others do. What’s more, “someone else may have different plan designs available,” Yamamoto says.

Buy the lowest-cost plan you can find.

If you are generally healthy, consider purchasing a high-deductible plan. That way, you’ll be covered for major catastrophes, but you won’t be over-paying for the rest. Helen Darling, president of the National Business Group on Health estimates that the average 55-year-old would pay premiums of $1,000 per month for a low- or no-deductible plan, but under $400 a month for a high-deductible plan.

Think carefully about your medical needs, Darling advises. A routine office visit — perhaps to get a nagging cough checked out — generally only costs about $200, she says. And under health reform, all health plans launched after March 23, 2010, must offer physicals and other routine preventative tests free of charge. So if you expect you won’t need much in the way of healthcare, a high-deductible plan may make the most sense. “Agree to pay the first $5,000 in expenses and know that if anything goes really wrong, you’ll be covered for that,” she says. “When all you’re buying is protection from financial catastrophe, it’s pretty cheap.”

Check with your state insurance commissioner.

One source of information you should always check out is the website for your state insurance commissioner. Some state sites list all the individual plans that are available in that state. Others will fill you in on specific state laws, pertaining to factors such as pre-existing conditions, which may impact how insurable you are and what your rates will be.

Get a part-time job with benefits.

Several well-known companies offer benefits to part-timers, including Starbucks, Barnes & Noble and Target. And while brewing up lattes or ringing up books for a few hours a day might seem like a step down from what you were doing before, it might just provide the easiest possible route to a reasonably priced health plan. Says Darling: “For some people, it would make sense to find a temporary, part-time job — just for the benefits.”