Bridging the Gap Between Retirement and Medicare Eligibility

Almost seven out of 10 current retirees left the workforce before reaching the Medicare eligibility age of 65. Most current workers expect to retire at 65 or later, but retirees’ experiences suggest this may not be realistic. If so, bridging the health insurance coverage gap between retirement and Medicare eligibility could be a challenge.1

In the past, employer-sponsored retiree health insurance often provided a solution, especially for those who worked for larger companies. These plans not only offer medical coverage until Medicare eligibility but often provide benefits in coordination with Medicare for those aged 65 and older.


This has changed over the last two decades, driven by rising health-care costs and changing accounting standards that require companies to declare future health-care liabilities on their balance sheets. Only about half of large employers still offer retiree coverage, down from 80% 20 years ago.2Moreover, a recent study indicated that many companies plan to discontinue sponsoring retiree health plans over the next two years (see chart).

Health Insurance Exchanges

Many companies may provide stipends for retired workers to seek coverage on health insurance exchanges established by the Affordable Care Act (ACA) or private exchanges that operate in a similar manner. For healthy retirees who could choose a less expensive plan, this may reduce out-of-pocket costs, though it could result in higher costs for less healthy retirees.3

Finding health insurance can be critical for workers who retire before age 65 and don’t have access to employer-sponsored coverage. For this group, the ACA exchanges — which provide coverage regardless of pre-existing conditions and limit age-based premium increases — could provide a much-needed solution. The exchanges may also allow some workers to retire earlier. In 2012, before the exchanges were available, 27% of workers said they would consider retiring earlier if they had guaranteed access to health insurance.4

If you currently have employer-sponsored retiree medical coverage or look forward to it in the near future, be sure to pay close attention to any plan communications. It’s unlikely that companies would drop coverage altogether for current or soon-to-be retirees, but there may be changes in the way plans are structured. If you are further from retirement, you may see major changes by the time you leave the workforce.5

1, 4) Employee Benefit Research Institute, 2013
2–3), September 9, 2013
5), November 13, 2013

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC

Lamont Financial Services
250 Bel Marin Keys Blvd, Suite F3 Novato, CA 94949
Phone: (415)883-5200

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