Hostage to health care
31 03 08 - 15:03
Boomers hoping to retire before age 65 are finding plans derailed by soaring insurance costsBy Tom KiskenScripps Howard News Service
VENTURA, Calif. - There are many reasons H. Gene Hansmeier wants to retire. He has worked since he was 10 and delivered the Waterloo Courier newspaper in Iowa. He wants to restore antique Fords, build his own furniture and travel to Ireland with his wife.
There is one reason the 59-year-old man continues to work 10-hour days as the director of a training program for apprentice electricians: health insurance.
"I'd have to pay for it out of my own pocket," he said. "It'll be somewhere around $900 a month. It's a good reason not to retire."
Many public and private employers that once helped retirees pay for health care have either cut or eliminated the contributions.
The Supreme Court last week gave employers an official green light to reduce health benefits for millions of retirees who turn 65 and become eligible for Medicare. The justices turned away a legal challenge from AARP, the nation's leading senior citizens lobby, which had contended that the lower benefits for older retirees violated the federal law against age discrimination.
People who want to retire before they qualify for Medicare have to find insurers willing to cover them. They have to pay premiums that for a couple ages 60 to 64 average $9,200 a year, according to a study from the insurance industry. They'll have out-of-pocket costs of close to $1,500 a year, according to the National Institute of Aging.
The numbers form a roadblock. Teachers, administrators, attorneys, maintenance supervisors and nurses who invested wisely and now want to retire are realizing they have no choice but to wait until they're 65.
It's about money. Employers say they can't afford the unfunded liability of health insurance retirement benefits. Health insurance companies say their rates have to be high enough to cover rising medical costs.
Neither trend appears likely to change.
"This is the first generation that is almost completely going to be away from the tether of employer-based health insurance," said William Frey, a researcher from the Brookings Institution think tank in Washington, D.C.
Baby boomers already face increased financial pressures in retirement because more of them are divorced or separated than previous generations, Frey said. Insurance costs make things even harder.
"There are going to be a whole bunch of people that need to work, and health benefits will certainly be part of that," he said.
People 55 to 64 can be looking at premiums ranging from $300 to $1,600 a month, said Chuck Rosen, a leader of the Ventura County Association of Health Underwriters. Pre-existing conditions ranging from cancer scares to high blood pressure can make it more difficult to find a policy.
"Good luck if you're 50 to 64 and you're trying to buy insurance for yourself," said Mark Beach, state spokesman for AARP.
Some retirees create their own detour. They form businesses that don't produce or sell anything. They pay minimum wages to a friend or two hired to do nothing. They end up saving money because they qualify for health insurance at a group rate.
"You're not supposed to set up a business for the sole purpose of setting up group insurance. That's kind of a no-no," Rosen said. "I won't tell you it doesn't happen. I've seen it."
Roger Johnson, a maintenance supervisor who worked for one company for 37 years, retired about three years ago at the age of 60.
He and his wife, Ellen, cashed in on the skyrocketing real estate market. They sold their home in Ventura for $450,000 and moved to Chino, Ariz., buying a three-bedroom home for less than half that price.
Johnson paid about $850 a month in health insurance premiums. His coverage was solid, but his wife qualified only for limited benefits because she suffered a heart attack about seven years ago.
She was diagnosed with a fast-moving liver cancer early last year. She died in April.
After 42 years of marriage, Johnson was alone. He had to deal with his grief and find a way to pay off $70,000 in hospital bills.
He's thought about bankruptcy. He's thought about applying for a job.
"I'm just trying to negotiate with all the creditors, the doctors and the hospitals," he said. "It may just keep me from having to sell out and live in a trailer. ... It's not what I looked forward to."
Some say the trend is one more argument for health care reform.
"We're the only industrialized country in the world where you and I are having this discussion," said Steve Bennett, a supervisor in Ventura County. "Everyone else has some national health insurance policy. We have a completely broken system that's held hostage by the insurance companies."
Chris Ohman, president of the California Association of Health Plans, said insurers are caught in the same trap as everyone else. They have to cover costs.
"As long as medical costs are increasing at two to three times the rate of inflation, health care coverage is going to take an increasing bite out of everyone's wallet," he said.