Q&A: Health sharing plans don’t work for everyone

Dear Liz: I read your column about healthcare options for couples planning for retirement today. I’ve recently learned about and signed up for health sharing. The benefits are closely comparable to traditional insurance and less expensive. If you haven’t heard about this, I think it’s worth looking into.

Answer: Christian health sharing plans are an alternative to traditional insurance, but they’re not actually health insurance. Members agree to pay each other’s medical bills, up to certain limits. Members typically must be Christians who attend church regularly and don’t use tobacco, among other restrictions. These plans often don’t cover preventive care such as mammograms or colonoscopies and may not cover mental health care, addiction treatment or other so-called “essential services” that are typically required of health insurance.

The plans can help with some healthcare costs, but the amounts that can be paid out are typically capped. That means that an accident or illness could still bankrupt you. In addition, the plans typically don’t cover preexisting conditions or limit the coverage they offer. Since few people reach their 50s and 60s without a preexisting condition or six, these plans aren’t a viable substitute for many people approaching retirement.

Q&A: Healthcare costs and retirement

Dear Liz: You usually don’t give me such a laugh, but today’s letter was from someone who’s 41 and her husband is 51. They now have $800,000 saved and want to retire early. You told them they might do better leaving the country since it will be so bad for them with health insurance.

My husband was a teacher in Los Angeles, with no Social Security. We have $60,000 in the bank and together we bring in $3,400 a month. We have Kaiser insurance that totals $2,400 a year for both. We have a house, a car, not so much money, but are happy. He’s 82, I’m 79. What planet do you live on? I guess people who have so much money can’t imagine people like us.

Answer: You’re living on Planet Medicare, so perhaps you can’t imagine what people are facing who don’t have access to guaranteed medical coverage.

Currently, those without employer-provided insurance can buy coverage on Affordable Care Act exchanges, but that option may soon be going away. Congress ended the ACA’s individual mandate, which requires most people to have insurance, so costs are expected to rise sharply.

In addition, the future of so-called “guaranteed issue” is in doubt. The ACA currently requires health insurers to accept people with preexisting conditions and limits how much people can be charged, something known as “community rating.” The U.S. Department of Justice recently announced it would not defend those provisions against a lawsuit filed by several states.

When health insurance is unavailable or unaffordable, it doesn’t matter if you have $1 million or more in savings. A hefty retirement fund can disappear in a few months without coverage.

Q&A: Paying for a younger spouse’s health insurance until Medicare kicks in

Dear Liz: My husband and I have started discussing when he’ll retire. I’d like him to retire somewhere around 65 or 67. He thinks he’ll have to work until at least 70, if not longer, for health insurance coverage for me. (It’s possible that he could do so, since his is an intellectual job where experience is highly valued. Several of his colleagues are in their 70s now, and one retired last year in his 80s.) My husband is 51, and I will be 41 this year.

We’ve used retirement calculators, and even restricting the rate of return to 3% or 4%, we’ll have at least $800,000 in his 401(k) by the time he’s 67. If we use the historical return rate, we get well over $1 million. We then made a rough guess of what minimum distributions would be based on current IRS tables. This number alone will cover 70% or more of our retirement budget.

I think we can do this, even if we have to pay for my health insurance, and even if we have to start withdrawing from the 401(k) at 65. Is this a bad idea? If he gets there and wants to keep working, then no problem, but if he’s fed up at age 64 and 355 days, I want him to feel able to walk away.

Answer: That’s a wonderful goal, but you may be underestimating the cost and difficulty of securing health insurance for your future self.

Currently, people without employer-provided insurance can buy coverage on Affordable Care Act exchanges, but the future of those is in doubt. Congress ended the ACA’s individual mandate, which requires most people to have insurance, so costs are expected to rise sharply next year. If enough healthy people opt out, the exchanges will collapse.

It’s not hard to imagine a future that looks like the past, where people had to keep working at jobs that offered employer coverage until both they and their spouses were old enough for Medicare. Under current rules, that would mean your husband working until he’s 75 and you’re 65.

Your husband might be able to quit a bit earlier thanks to COBRA rules, which allow people to continue employer-provided coverage for 18 months if they can pay the full cost of the premiums, plus a 2% administrative fee. The average annual premium is $6,690 for single coverage and $18,764 for family coverage, according to the Kaiser Family Foundation. The cost is likely to be substantially more in the future if medical cost inflation isn’t brought under control.

If you really want to give your husband the option to quit at 65, you may need to look into employment for yourself that includes health insurance benefits. Another option is to move abroad to one of the many countries that offer affordable healthcare for expatriate retirees. Sites such as International Living at www.internationalliving.com and Live and Invest Overseas at www.liveandinvestoverseas.com can help you identify potential options. You could plan to return home once you’ve qualified for Medicare.