More early retirees are having tough times to get health insurance
01 12 08 - 11:52
Hidden Cost of a Buyout
By ANGIE C. MAREK - The Wall Street Journal
Almost everyone fantasizes about swapping the cubicle and BlackBerry for a life of leisure while they're young enough to enjoy it.
Millions work long hours to make the fantasy a reality, and in these rough economic times, others have simply taken buyouts. But America's patchwork health-care system is making those transitions harder.
Too young to qualify for Medicare and rarely covered by employers, early retirees can face premiums they never dreamed of -- triple or more what they paid while working.
And that's for the healthy ones. Others, who suffer from middle-age ailments like arthritis or back pain, wind up paying far more -- if they aren't simply rejected. Researchers at the Commonwealth Fund found that in 2007 about 35% of people between the ages of 50 and 64 were uninsured or underinsured, up from 26% five years ago.
Bought Out, Left Out
In the decades after World War II, most retirees could count on generous health perks. But over the past two decades, the situation has changed. Today, just 29% of large private companies provide insurance to younger retirees, according to the Kaiser Family Foundation. This spring, the Society for Human Resource Management found that less than half of workers laid off or bought out were offered health benefits.
That leaves many younger retirees with only one place to go: the individual-insurance market, which is hardly friendly terrain for fiftysomethings.
Unlike in employer plans, where all members pay similar premiums, here each consumer gets examined for risk. Insurers often react to minor pre-existing health conditions the way an auto insurer reacts to accidents -- by charging steep rates or rejecting the applicant.
Health-care advocates have documented instances of older people being denied coverage because of high blood pressure or mild depression after the death of a spouse. "I used to joke that just living past 45 was a pre-existing condition," says Anthony Wright, executive director of the advocacy group Health Access California.
Higher Age, Higher Risk
Insurance executives defend underwriting practices as necessary to keep up with the costs of care, pointing out that age makes customers riskier to insure. "It's not like we're running a pirate ship," says Richard Collins, president of UnitedHealthcare's individual-insurance unit.
Although states prohibit insurers from dropping consumers who develop health problems after enrollment, they do let insurers purge those who allegedly commit fraud on applications -- leading some companies to comb patients' medical records for signs they should have known a problem was looming.
Fortunately, some younger retirees tame the frontier. Holding on to group coverage helps: Retirees willing to work self-employed can get group rates in 13 states.
For those with health issues who must use the individual market, Carolyn McClanahan, a financial planner in Jacksonville, Fla., recommends applying for a special insurance pool that each state holds open to consumers for the 36 days after they exhaust their COBRA coverage -- while benefits there can be spotty, the pools can't reject anyone.
Early retirees also can boost their underwriting odds by losing belly fat and going over their medical records with physicians for errors.