Author Topic: Retiring Co-worker, "Health insurnace is expensive!"  (Read 4347 times)

tips^up

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Retiring Co-worker, "Health insurnace is expensive!"
« on: December 18, 2020, 01:02:20 PM »
I have a lovely little old lady co-worker (literally little, about 4'10").  She's 70 years old, many pre-existing conditions; like a previous stroke, brain stints, head trauma (these are just since we've been working together for about 10 years).  After pushing her retirement 3 more months 4+ times, she finally retired.  This is sort of a relief to me, as she was likely the highest risk covid candidate that I am forced to interact with.

On her last week, like 2 days before she retires, at age 70, with pre-existing conditions, she gave me a stressed look and I asked what's up?  She's like, "Health care insurance is so expensive!  I hadn't even looked and I am amazed at the cost.  It's like double my car payment at $1800/month."

I nodded and said yeah, sucks.  Internally, my jaw hit the ground and I wanted to scream!!  So I came on here instead and wrote this blog post.

She recently traded in her (bought brand new) Jeep Grand Cherokee for a brand new Ford Explorer.  We do live in a steep snowy area of the rocky mountains, so an SUV is not a terrible vehicle choice for this area, but I believe the Jeep dealership took grotesque advantage of her trust and charged her an arm and a leg for unnecessary repairs until she finally got rid of it. 

First of all, by the time someone is ready to retire, I hope hope hope they've thoroughly researched the anticipated the changes in revenue/expenses for EVERYTHING, especially no longer having employer-subsidized healthcare coverage.  Especially if they are old and have health issues!

Second, I hope hope hope that I am fortunate to not have a car payment at time of retirement, especially if it's like $900/month.  I plan to have a new (used, low mileage, proven reliable) vehicle, or $$$ for one saved up, before retiring with no car payment - just as I do now.

Her statement blew me away.  I feel sorry for this lady about double my age but probably half as ready for retirement?!  I wish her the best.  I wish financial conversations were not awkward, I would sit down with her and go over some things with her.  Like buy a used Toyota; research and financially plan for health insurance; review her 401 options (no idea on that last one, but I'd guess they're not the choices you or I would make even at that stage of life).

Rant over.  We're fortunate to have resources like MMM to help guide each other to better financial futures!

Adventine

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #1 on: December 18, 2020, 05:28:39 PM »
I worry about people like that too. Too late to change her trajectory (not that it's appropriate for a coworker to get involved in her finances), but as you mentioned, we here have the tools and resources to do better.

ender

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #2 on: December 18, 2020, 06:35:48 PM »
fwiw we are financing a car we just got at 2.49%/75 months which seems silly to not keep, even though we could pay it off tomorrow.

SwordGuy

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #3 on: December 18, 2020, 07:04:32 PM »
$1800/month is crazy for someone her age.  My wife is (ahem) knowledgeable about medicare costs plus supplemental insurance costs in that age range and it's nowhere near that bad for her here in NC.

That lady may need some guidance from a social worker.

PDXTabs

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #4 on: December 18, 2020, 07:47:16 PM »
Second, I hope hope hope that I am fortunate to not have a car payment at time of retirement, especially if it's like $900/month.  I plan to have a new (used, low mileage, proven reliable) vehicle, or $$$ for one saved up, before retiring with no car payment - just as I do now.

I'll see your no car payment and raise you no car.

AMandM

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #5 on: December 19, 2020, 08:07:14 AM »
If she's 70 years old, isn't she eligible for Medicare? My father pays his own premiums for Medicare and they're much less than  $900/month.

Dicey

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #6 on: December 19, 2020, 08:16:27 AM »
If she's 70 years old, isn't she eligible for Medicare? My father pays his own premiums for Medicare and they're much less than  $900/month.
This. Is it possible she thinks Medicare is only for the poor?

expatartist

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #7 on: December 19, 2020, 10:07:13 AM »
Second, I hope hope hope that I am fortunate to not have a car payment at time of retirement, especially if it's like $900/month.  I plan to have a new (used, low mileage, proven reliable) vehicle, or $$$ for one saved up, before retiring with no car payment - just as I do now.

I'll see your no car payment and raise you no car.

+1. During university I realized my in-state tuition would cost about the same as a new car, so in my mind from then on a car wasn't an option. What some spend on their cars I guess I've always spent on travel for art / research projects.

Josiecat

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #8 on: December 19, 2020, 07:21:24 PM »
Why is she not on Medicare?  It is not that expensive.  I think she is confused.

iris lily

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #9 on: December 19, 2020, 07:37:00 PM »
Why is she not on Medicare?  It is not that expensive.  I think she is confused.

Agreed. Something doesn’t add up.

Paul der Krake

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #10 on: December 19, 2020, 10:30:23 PM »
Three options:
1) she doesn't know Medicare is a thing
2) she needs to go on COBRA to cover something specific
3) she got talked into buying every medigap product under the sun

iris lily

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #11 on: December 20, 2020, 12:07:27 PM »
Three options:
1) she doesn't know Medicare is a thing
2) she needs to go on COBRA to cover something specific
3) she got talked into buying every medigap product under the sun

I thought about cobra, but $ 1800 monthly seems a little high but I suppose not out of the range of possible.


Ockhamist

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #12 on: December 20, 2020, 12:26:29 PM »
Three options:
1) she doesn't know Medicare is a thing
2) she needs to go on COBRA to cover something specific
3) she got talked into buying every medigap product under the sun

I thought about cobra, but $ 1800 monthly seems a little high but I suppose not out of the range of possible.

It's just about impossible for anyone eligible for Medicare to buy a health insurance policy where Medicare isn't the primary insurer.   Any policy she would buy would be some form of supplement to Medicare.

Many if not most people buy a wrap-around policy that supplements Medicare.  But those policies vary a lot in what they cover and can cost anywhere from $0 to a pretty hefty amount.   The more bells and whistles the higher the price.

For $1800 though I'd bet that she's looking at continuing her current health plan.   A lot of employer health plans allow people on Medicare to be covered under the plan (but also require you to have Medicare as your primary coverage, though that's all behind the scenes for you other than enrolling in Medicare itself -- the employer plan handles all the claims and administration.).  In fact, almost all employer plans do that to cover active employees still working but on Medicare.   

Some employers allow retirees to continue on that same plan (not just as COBRA, but as a retiree benefit.)   The cost is often insane, though.   That really sounds like what she's looking at.

She can almost certainly find a plan with benefits that are just as good if not better for a much lower cost.   Obviously you don't want to get too involved in her business, but you'd be doing her a favor to suggest that she stop around.

As for the $900 a month car payment, well, there's some room for improvement on that too ...

« Last Edit: December 20, 2020, 12:42:41 PM by Ockhamist »

Retireatee1

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #13 on: December 20, 2020, 02:40:09 PM »
I'm baffled by the $1800/month figure and would like to see an analysis.  Medicare is more expensive if you apply with high income, but once you are fully retired with lower income you can have it reduced.

Paul der Krake

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #14 on: December 20, 2020, 03:33:22 PM »
$1,800 is well within the realm of possibility for COBRA for a 70 year old, assuming there is a spouse in the picture.

Box 12 code DD your W-2 indicates how much employers pay for the coverage. Spoiler: it's a lot.

The cost for the typical nuclear family of two middle aged parents and two kids is over 20k.

iris lily

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #15 on: December 20, 2020, 04:48:50 PM »
$1,800 is well within the realm of possibility for COBRA for a 70 year old, assuming there is a spouse in the picture.

Box 12 code DD your W-2 indicates how much employers pay for the coverage. Spoiler: it's a lot.

The cost for the typical nuclear family of two middle aged parents and two kids is over 20k.

Oh yes, COBRA coverage with a spouse could be that i suppose.But COBRA should not take into account anyone’s age because it’s the employers group coverage that she’s getting.

Paul der Krake

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #16 on: December 20, 2020, 05:05:54 PM »
$1,800 is well within the realm of possibility for COBRA for a 70 year old, assuming there is a spouse in the picture.

Box 12 code DD your W-2 indicates how much employers pay for the coverage. Spoiler: it's a lot.

The cost for the typical nuclear family of two middle aged parents and two kids is over 20k.

Oh yes, COBRA coverage with a spouse could be that i suppose.But COBRA should not take into account anyone’s age because it’s the employers group coverage that she’s getting.
Depends on how the group coverage is structured. Some employers use age bands for setting premiums, and that ultimately gets reflected in COBRA prices. They're not allowed to pay more towards, say a 25 year old than a 60 year old, but that's in nominal dollars, not percentage.

Greatly simplified example:
- cut up your workforce in people below 40 and above 40
- actuarial cost of group 1 is 500 a month
- actuarial cost of group 2 is 800 a month
- pay 400 towards the cost of all employees, group 1's share of premium is $100, group 2's is $400

Result: you've incentivized group 2 to look elsewhere for coverage.

I used to work for a bank that used both age and compensation bands. It was essentially a 2x2 matrix, the older and more compensated you were, the higher your premiums.

TheGrimSqueaker

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #17 on: December 21, 2020, 09:43:23 AM »
I worry about people like that too. Too late to change her trajectory (not that it's appropriate for a coworker to get involved in her finances), but as you mentioned, we here have the tools and resources to do better.

Even a late-career trajectory change can lead to a much better standard of living than would be possible for a big spender once the income runs out. Can a person in this position become FIRE? Well, no. After a certain age there's no RE, just R, and without the FI it is only a matter of time before savings are depleted, if there are any savings. Meanwhile there's an involuntary drop-off in standard of living and the person in question often becomes a burden to friends and relatives by burning through social capital. None of this is pleasant or healthy. But even without FIRE as a goal I see two benefits to a late-career trajectory change.

First, a drop in standard of living is one heck of a lot easier when it's voluntary. There isn't as much of a psychological blow. Nor is there a stage of trying to keep up with a higher standard of living without having the means to do so. The difference between voluntary downsizing and bankruptcy liquidation is kind of like the difference between an emergency landing and a crash. There's enormous emotional and psychological benefit to proactive behavior.

Second, even though there's not an opportunity to accumulate much capital, liquidating unnecessary crap can create a small cash cushion and slowing down the burn rate will also help preserve whatever savings and social capital a person does have. The person will still eventually run out of resources if they live long enough. But if that point comes later in life, if the individual hasn't been draining his or her social network to support an unsustainable standard of living that social network should still be intact.

Ockhamist

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #18 on: December 21, 2020, 10:39:26 AM »
$1,800 is well within the realm of possibility for COBRA for a 70 year old, assuming there is a spouse in the picture.

Box 12 code DD your W-2 indicates how much employers pay for the coverage. Spoiler: it's a lot.

The cost for the typical nuclear family of two middle aged parents and two kids is over 20k.

Oh yes, COBRA coverage with a spouse could be that i suppose.But COBRA should not take into account anyone’s age because it’s the employers group coverage that she’s getting.

In group health coverage it is not unusual to have separate rates for Medicare-eligible employees, even if the rest of the plan rates are not adjusted for demographics.

The Medicare-eligible rate takes into account the fact that, even with group coverage, Medicare is the primary insurer.   That tends to lower the rate, since the group insurance is not on the hook for a lot of the risk. 

However, the Medicare-eligible rate also takes into account the demographics of people who are Medicare-eligible.   That tends to raise the rate.

How the actual rate compares to the rest of the group depends on how these competing factors offset each other.  Back when I was in this biz (many moons ago) it was common for the two to largely balance out for most plans, but I have no idea if that is still the case today.   That said, I don't find the $1800 a month quote surprising for continuing with the group plan.

jinga nation

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #19 on: December 21, 2020, 12:37:03 PM »
when my dad retired from BigCorp at 67.5, he had to take a mandatory retirement class prior to turning in his badge, HR requirement.

the class informed him about healthcare options (Medicare + add-ons), gym benefits (Silver Sneakers), retirement distributions (RMDs), social security, etc. Unsure if this was a company-created class or offered by a 3rd party vendor. Either way, it was pretty good as he got his finances and healthcare coverage in order so kind a seamless transition. All I did was help to consolidate his various 401k/IRAs into a single account at Vanguard and set up the minimum RMDs.

He said the local social security office asked him if he'd signed up for medicare, and urged to do so if not. When he called Medicare, they asked if he had signed up for getting SS benefits.

DaMa

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #20 on: December 21, 2020, 01:09:28 PM »
This might be long.  Here's why COBRA is usually crazy expensive...

Groups frequently have many classes, and different health insurance premium rates for each class.  Paul der Krake had a good example.   When someone elects COBRA, the employer will usually put them in the highest cost class.  So even if you are enrolled in the plan that costs $400 (using Paul's example), when you take COBRA, you go into the plan that is $600.  Your employer pays nothing and gets to charge you an extra 2%, so you are paying $612.

As Okhamist wrote, "In group health coverage it is not unusual to have separate rates for Medicare-eligible employees, even if the rest of the plan rates are not adjusted for demograph."  This is another class in the group.  In this case, Medicare-eligible coverage is usually less expensive since Medicare pays primary.  Groups will frequently have a class for non-Medicare eligible retirees or early retirees.  As you can image, this class is seriously expensive.  Say $2000 compared to the $400 in Paul's example.

Here's the real catch, groups will put their COBRA in the non-Medicare eligible class, so anyone going on COBRA then pays $2040 instead of the $400.

Health insurance companies are happy to set up the extra class, even for small groups.  It's always the most expensive class.

Class A (under 40)                                                 $400
Class B (over 40)                                                   $600
Class C (Medicare enrolled)                                     $450
Class D (non-Medicare enrolled retiree and COBRA) $2000

With all that being said...I suspect your friend is in an employer group that has no Medicare enrolled class (like Class C above).  She is being put into Class D and is being a charged a premium that is not adjusted for Medicare being primary.  She needs to by a supplemental plan direct and not take COBRA. 

She can use https://www.medicare.gov/plan-compare/ to compare rates, or talk to a broker.  If you are in Michigan, you can PM me for a recommendation.


tips^up

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #21 on: December 21, 2020, 03:37:02 PM »
For everyone fact-checking the figures - I have no idea, just repeating a story I heard.  Seems crazy high to me too.  So does $900/mo for a car payment.

Dicey

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #22 on: December 22, 2020, 07:33:57 AM »
For everyone fact-checking the figures - I have no idea, just repeating a story I heard.  Seems crazy high to me too.  So does $900/mo for a car payment.
You're not saying you made a thread here but have no intention of following up or helping her figure this out?

iris lily

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #23 on: January 01, 2021, 01:34:35 PM »
For everyone fact-checking the figures - I have no idea, just repeating a story I heard.  Seems crazy high to me too.  So does $900/mo for a car payment.
You're not saying you made a thread here but have no intention of following up or helping her figure this out?

Sure I agree with that. But also this thread was instructive to me because I didn’t realize that some employers made bands based on age for their employee’s contributions to their health insurance.

tips^up

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Re: Retiring Co-worker, "Health insurnace is expensive!"
« Reply #24 on: January 05, 2021, 02:22:26 PM »
For everyone fact-checking the figures - I have no idea, just repeating a story I heard.  Seems crazy high to me too.  So does $900/mo for a car payment.
You're not saying you made a thread here but have no intention of following up or helping her figure this out?

I would like to follow up to your post by saying no, I have no intention of telling this old lady how to do her retirement.

Update: she's back!  She is apparently coming back to work a few times a week, driving her SUV 30 minutes each way through a treacherous mountain canyon to work.  I don't know if she's already bored or if she realized she needs money?  Not sure if she's here enough for health insurance?  We're co-workers of vastly different generations, we don't exactly have a buddy buddy relationship where I would feel comfortable to sit down with her and talk about her assets.