Expanding Health Care Options For Early Retirees Act

Can First Responders Get Medicare

The term first responder can mean different things to different people. For the purposes of Medicare eligibility and the proposed legislation, a first responder includes people with the following jobs:

• emergency medical technician or paramedic

If youre in one of these occupations, you may have specific health concerns, including:

• exposure to asbestos or other dangerous chemicals or substances
• certain cancers

First responders generally receive the same benefits as everyone else while actively employed. But when active employment ends, healthcare coverage ends as well. Plans like COBRA can help for a limited amount of time, but theyre often very expensive.

Brown Reintroduces Legislation Allowing Retired First Responders To Buy Into Medicare At 50

WASHINGTON, DC U.S. Senator Sherrod Brown reintroduced the Expanding Health Care Options for Early Retirees Act, a bill to allow retired first respondersincluding police officers, firefighters, and EMS personnelto buy into Medicare beginning at age 50. Congressman Tom Malinowski , introduced the companion measure in the House.

Ohio firefighters and other first-responders wear their bodies out protecting our families and communities, and they should have access to affordable health care when their service comes to an end, said Senator Brown. This is a simple solution for first responders who are forced to retire but arent yet eligible for Medicare.

First responders always come when we need them, and they have stepped up in truly heroic ways throughout the course of the pandemic, said Congressman Malinowski, a member of the Congressional Fire Services Caucus and the Congressional Law Enforcement Caucus. This bill would ensure that when first responders retire, they have access to the quality, reliable health coverage they have earned and deserve.

First responders often retire earlier than other workers and can experience gaps in coverage until they become eligible for Medicare at 65. This legislation ensures that retired first responders who are 50 and older will have access to affordable, comprehensive health insuranceregardless of whether their pension plan provides for coverage upon retirement.

Policymakers Need To Monitor Policy Effects On Retirement Behavior And Insurance Coverage

In sum, the policy environment will influence both what employers will do regarding retiree health benefits and what individuals will do regarding the retirement decision. Given a decision to retire early, policies that affect access to continued health benefits after retirement also have implications for whether an early retiree has health insurance coverage.

In the future, policymakers need to continue monitoring the effects of policies both on retiree behavior and on employer decisionmaking. If reforms make insurance more accessible and less costly after retirement and before Medicare eligibility, an increased incentive to retire early will exist. Also, policies that make affordable insurance available upon retirement should reduce the prevalence of the near elderly who are uninsured. At the same time, some policy initiatives may have the opposite effect if they reduce the health insurance coverage options of early retirees, either through changes in employer offers of retiree health benefits or through changes that affect insurance access by other mechanisms.

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Early Retirees And The Affordable Care Act

For millions of Americans, retiring early has meant losing the security and the peace of mind that come with employer-sponsored health insurance. Today, fewer and fewer employers offer coverage for workers who retire early. In fact, only 1 in 3 large employers offers retiree health coverage of any kind.

Buying private insurance is often impossible due to very high premiums or common exclusions on account of pre-existing health conditions like high blood pressure or diabetes.

The Affordable Care Act helps early retirees by controlling costs for them, their families and their former employers, improving the quality of care for everyone, and strengthening Medicare. The Early Retiree Reinsurance Program provides much needed relief for early retirees and for businesses. Heres how:

• The Affordable Care Act provides $5 billion in financial assistance to employers to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare, and their spouses, surviving spouses and dependents.
• Employers can use the savings to reduce their own health care costs, provide premium relief to their workers and their workers families, or a combination of both.
• This will make it easier for employers to sustain benefits for the workers who made their companies strong–and give retired workers the peace of mind that comes with employer-sponsored health insurance.

Learn more about the Affordable Care Act and Early Retirees

How Are Aca Premiums Calculated

Since its inception in 2014, the ACA has provided tax credits to subsidize health insurance costs. Originally, those subsidies were only available to people making between 100% and 400% of the Federal poverty level. Then in March 2021, the American Rescue Plan expanded the subsidies to improve health insurance affordability during the COVID-19 pandemic.

For the 2021 and 2022 tax years, the new act increased the amount of the premium tax credits and capped the premiums at no more than 8.5% of modified adjusted gross income , making the tax credits available to some people whose incomes exceed 400% of the poverty level. The expanded subsidies were set to expire at the end of 2022, but the recent Inflation Reduction Act extended them through 2025.

The higher your MAGI, the lower your ACA tax credits and the higher your health insurance premiums. At first glance, this suggests that if your income is high even in early retirement, you may not qualify for the tax credits and could be hit with a large health insurance bill. But proactive financial planning can help you optimize the health insurance premium tax credits while still generating enough income to enjoy the retirement lifestyle youve always envisioned.

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Representative Malinowski Introduces Legislation Permitting Retired First Responders To Buy Into Medicare

Today, Representative Tom Malinowski introduced the Expanding Health Care Options for Early Retirees Act, a bill to allow retired first respondersincluding police officers, firefighters, and EMTsto buy into Medicare beginning at age 50. He was joined by lead original cosponsor Representative Harley Rouda . Senator Sherrod Brown of Ohio introduced the companion measure in the Senate.

First responders often retire earlier than other workers, and can experience gaps in coverage until they become eligible for Medicare at 65. This legislation ensures that retired first responders who are 50 and older will have access to affordable, comprehensive health insuranceregardless of whether their pension plan provides for coverage upon retirement.

Coverage provided under this bill would be identical to the coverage provided under the existing Medicare program. And retirees would be eligible for tax credits, subsidies, and tax-advantaged contributions from their former employer or pension plan. Further, this bill specifically requires that it be implemented in such a way that it will not negatively impact the existing Medicare program, beneficiaries, or trust fund.

“First responders always come when we need them,” said Representative Malinowski. “This bill would ensure that when they retire, they have access to quality and reliable health coverage they have earned and deserve.”

Policies Can Affect Insurance Coverage After Retirement

Health insurance options after retirement have implications for the health insurance status of retirees who leave their jobs before becoming eligible for Medicare. In a recent study, Karoly and Rogowski find that policies mandating access to continuation benefits such as COBRA and HIPAA can increase the likelihood that workers who retire before Medicare eligibility will be covered by health insurance upon their retirement. More specifically, because continuation and portability mandates allow more workers to buy coverage without preexisting-condition exclusions, and, in the case of COBRA, at group rates, these policies can increase the number of workers who will be insured after retirement.

The analysis, based on data from the 1984 to 1987 SIPP, shows that since the enactment of COBRA, which became effective in 1986, early retirees are less likely to become uninsured than are their counterparts who retired before COBRA was in effect. In the post-COBRA period, the probability of retaining one’s own employer coverage after retirement increased compared to the pre-COBRA period, from 72.0 percent to 78.5 percent. At the same time, COBRA appears to have reduced the probability of moving from own-employer coverage to being uninsured. Before COBRA was enacted, this probability was 7.5 percent in the post-COBRA period, it is 2.9 percent.

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The Affordable Care Act

The ACA became law in 2010 to increase the quality and affordability of health insurance. It has brought major improvements to our health care system, giving millions of Americans access to high-quality, low- or no-cost health care coverage.

In Washington, health care reform has allowed more than half a million adults who were previously uninsured to enroll in Apple Health . In addition, the Washington Health Benefit Exchange was created to offer affordable health and dental insurance coverage that meets ACA requirements. Tax credits or financial help is available to pay for copays and premiums.

We have experienced an unprecedented 10-point drop in the uninsured rate in Washingtonone of the highest drops in the rate of uninsured in the country. In fact, Governor Jay Inslee set a goal of reducing Washingtons uninsured rate to 6 percent by the end of 2017. We reached that target two years early.

The Affordable Care Act ensures that:

• Parents can keep kids on their insurance until they are age 26.
• There is no lifetime cap to how much insurance will pay.
• There is no annual cap to how much insurance will pay.
• You cannot be denied coverage if you have a preexisting condition.
• You cannot be dropped from your insurance if you get sick.
• Insurance must cover certain essential health benefits, such as hospitalization, doctor visits, prescription drugs, pediatric services, maternity and newborn care, lab services, and mental health and substance use disorder services.

Effects Of Access To Post

Insured workers might hesitate before deciding to retire early , because of concerns about post-retirement health insurance. For many in their age bracket who might face high medical costs, the need to continue health insurance coverage can be especially important. For the near elderly who are considering early retirement, what are the choices in health insurance coverage, and how are those choices likely to influence their decision about early retirement and their health insurance coverage if they retire?

RAND researchers Lynn Karoly and Jeannette Rogowski find that policy initiatives that aim to increase access to affordable post-retirement health insurance are likely to motivate some of the near elderly to retire early. In addition, with more options for obtaining post-retirement insurance, insured workers who do retire early are more likely to be insured after retirement.

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How Team Hewins Can Help

The CERTIFIED FINANCIAL PLANNER professionals at Team Hewins will strive to help you plan for a successful early retirement, including how to prepare for the day when youre no longer covered by employer-provided health insurance. We can walk you through the various options, discuss the specifics of ACA health insurance, and develop strategies that could help reduce your MAGI without putting a crimp in your retirement lifestyle.

Contact us to discuss your early retirement plans and learn about effective ways to reduce your health insurance costs before youre eligible for Medicare.

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Mandatory Medicare Coverage Rule

The mandatory Medicare coverage rule of 1986 states that any state or local government employee hired on or after March 31, 1986, receives mandatory Medicare coverage.

But exceptions include:

• people hired to be relieved from unemployment
• any services performed in a hospital, home, or institution
• temporary employees providing services temporarily
• nonresident aliens, as defined by the IRS
• students who attend classes at a school, college, or university where theyre working

So, many members of Congress are urging the consideration of healthcare coverage for early retirees.

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Hr 4148 Expanding Health Care Options For Early Retirees Act

Status:Read Bill Text on Congress.gov

Establishes a Medicare buy-in option for certain qualifying first responders. Specifically, the bill allows first responders aged 50 to 64 to enroll in Medicare if they are retired or otherwise separated from service due to a disability. The Centers for Medicare & Medicaid Services must determine enrollment periods and set premiums for the buy-in option established under the bill, in accordance with specified requirements. The CMS must also award grants to states and nonprofit organizations for outreach and enrollment activities relating to the buy-in option.

Sponsors

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The bill was co-sponsored and introduced in the U.S. House of Representatives by Rep. Tom Malinowski and Rep. Harley Rouda . Ohio Sen. Sherrod Brown introduced the measure to the Senate.

Coverage provided under this bill would be identical to the coverage provided under the existing Medicare program. Retired first responders would be eligible for tax credits, subsidies and tax-advantaged contributions from their former employer or pension plan.

IAFF officials have endorsed the bill alongside the Fraternal Order of Police , the National Association of Police Organizations , the National Conference on Public Employee Retirement Systems , the New Jersey Firefighters Mutual Benevolent Association and the Professional Firefighters Association of New Jersey.

Malinowski is a member of the Congressional Fire Services Caucus and the Congressional Law Enforcement Caucus.

First responders always come when we need them, Malinowski said. This bill would ensure that when they retire, they have access to quality and reliable health coverage they have earned and deserve.

First responders always come when we need them, said Representative Malinowski. This bill would ensure that when they…

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Your Spouses Health Plan

If your spouse is still working and has access to a health insurance plan that offers spousal coverage, youll be able to enroll in that plan when your own coverage terminates. Your loss of coverage will trigger a special enrollment period for your spouses plan, just as it does for a marketplace plan.

Even if both you and your spouse were covered under your plan, youll both be able to transition to your spouses employers planassuming coverage is availablewhen your existing plan terminates.

Note that if youre eligible to enroll in your spouses plan, youre likely not eligible for a premium subsidy for a marketplace plan. As long as your spouses coverage provides minimum value and is considered affordable for just the employee, the cost to add a spouse is not taken into consideration. This is known as the family glitch. But in good news for marketplace enrollees, the IRS is working on a fix for the family glitch that’s expected to be in place by 2023.

Figure 1 Uninsured Retirees Previously Covered By Own Employers

SOURCE: Jeannette A. Rogowski and Lynn A. Karoly, “COBRA Continuation Coverage: Effect on the Health Insurance Status of Early Retirees,” Health Benefits and the Workforce, Volume 2, Department of Labor, 1998.

Among early retirees who were uninsured after retirement, the proportion previously covered by their own employers declined significantly in the post-COBRA period, from 52.1 percent to 25.6 percent . Nonetheless, more than one-fourth of uninsured retirees in the post-COBRA period had previously been covered through their own employers. Because these retirees, with the exception of those in small firms, should have been eligible through COBRA to continue their employment-based health insurance for 18 months after retirement, it is likely that they are uninsured because they could not afford the health insurance premiums.

A multivariate analysis of the loss of health insurance upon retirement confirms that COBRA does, in fact, reduce the likelihood of becoming uninsured upon early retirement. Nonetheless, a primary reason for not taking advantage of the continuation mandate is low income.

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What Are Health Insurance Choices Now If Insured Workers Retire Early

For insured workers contemplating early retirement, the choices in health insurance coverage after retirement may be limited. Before workers become eligible for Medicare at age 65, they could purchase an individual health insurance policy when they retire early. But if they do so, they might encounter some problems. First, the costs of individual health insurance can be prohibitively expensive, especially if premiums are based on the retiree’s age and health status. Second, in some cases, insurers may consider such individuals “bad risks” and refuse to extend coverage to them or agree to cover them but only by excluding preexisting conditions.

Another option for insured workers is COBRA continuation coverage, at least for the first 18 months after retirement. Under COBRA, workers in firms with 20 or more employees who have health insurance while working are eligible to continue health benefits at 102 percent of the group rate for 18 months after retirement.