Health Plans Boom for Early Retirees

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Making it to Medicare has become one of the biggest challenges for baby boomers who retire or are laid off before 65.

Individual health insurance can be expensive. More than half of the pre-65 boomers on such policies spend at least $300 in monthly premiums for single coverage, according to the Commonwealth Fund, a Washington policy institute.

And those with a chronic medical condition may be denied coverage related to that condition or turned down altogether.

But hope may be on the horizon. Lured by the baby boomer generation's size and affluence, a number of insurers have begun to market policies specifically geared to ages 50 to 64.

Consumer advocates are cautious about the new individual plans, wondering whether they will do any good for older adults who have not been able to buy affordable coverage because of preexisting conditions.

Prices will remain high, the advocates predict, and many chronic conditions will still be excluded.

But other industry observers predict the emerging competition will make health insurance more affordable and therefore obtainable for at least some of the seven million Americans in that age group who are without coverage.

Help cannot come too soon for Lon Orenstein of Dallas, who is 58 and runs a computer-software-design business. His yearlong search for a "reasonably priced" policy has forced him to change his expectations of health insurance.

"I started by looking for a comprehensive plan similar to what I had when I worked for someone else," he said. "Now, after suffering sticker shock, I'm just trying to find something to cover me in case I ever cross paths with a truck."

Early retirees without employer-subsidized coverage can expect to spend an average of 40 percent of their preretirement income on medical expenses, the Commonwealth Fund said.

"For the pre-Medicare crowd, one serious illness or injury could wipe out their savings and drive them into bankruptcy," said Sara Collins, a health insurance expert with the group.

It was not always so.

Early retirees once could depend on employer-subsidized health plans until Medicare began at 65, but companies hit by new accounting rules and escalating medical costs have scaled back retiree health coverage.

Only 35 percent of big employers offer retiree health benefits, down from 66 percent 20 years ago, according to the Kaiser Family Foundation.

Drawing the most attention among insurers has been Aetna Inc., which recently signed an agreement with AARP's business unit to offer a range of plans for members.

The Premier plans, for example, have been designed to provide coverage resembling employer-subsidized plans, though the insured individuals must bear the full cost and go through an underwriting process. The cost depends on the beneficiary's age, address, sex, medical history and coverage. A 52-year-old Dallas man in reasonable health will pay $295 a month for a plan with a $2,500 deductible.

Though Aetna will continue to review an applicant's medical history to determine eligibility, John Wider, vice president of health products and services for AARP Services Inc., predicted the company will be "more accepting" of certain medical conditions.

Jan Foster of Duncanville, Texas, is an AARP member who is 60 and has struggled to find affordable insurance since becoming an independent contractor in 2000.

Foster reads the sales brochures that come in the mail from AARP Services and said she would be interested in one of the Aetna plans if the cost fits her budget.

"For eight years, my only insurance has been the flu shot I get at the drugstore," she said. "I don't know how much longer that's going to work."

Another provider, Humana Inc., said it was promoting its Portrait plans to the pre-Medicare market because they come with unlimited doctor's visits, a feature the insurer believes will appeal to boomers accustomed to group plans.

Co-payments are $35 for visits to primary-care doctors and $50 for visits to specialists, said Steve DeRaleau, chief operating officer of HumanaOne, Humana's individual policy business.

Early retirees who are healthy and have a financial cushion should consider a high-deductible plan that has a lower monthly premium but still guards against a serious illness or accident, said Mike Smith, executive vice president of Brokerage Inc., an insurance marketer in Lewisville, Texas.