Many states are making significant cuts to healthcare options for retirees as the costs of medical care raise, a new article from the Wall Street Journal reports.
The article, released on May 1st., 2019, highlights the issues many states share when it comes to fulfilling promised pension benefits that include healthcare coverage.
History of State and Federally Covered Healthcare Benefits
Historically, pensions were a savings vehicle for employees to plan their retirement, including healthcare coverage once they left the workforce. Pensions were available in both private and public sector jobs, only becoming less attainable by companies and organizations once vehicles like 401(k)s emerged as attractive options.
If states were formerly employed by either the state in which they reside or the federal government, those entities would provide coverage for retirement benefits and even cover healthcare to some extent.
How the 2008 Financial Crisis Impacted Retiree Healthcare
Following the financial crisis of 2008, states began to closely audit their benefits for retirees and other beneficiaries, frequently concluding that the gap between what was promised and what funds on hand could cover was significant.
The gap for so-called post-employment benefits, which mainly consist of retiree health care, amounts to roughly $600 billion, according to government data compiled by Eaton Vance Corp.
Although the history of states providing healthcare coverage has been around since the second half of the 20th. century, many state governments are seeing this as a less sustainable option for their long-term financial plan, leaving some retirees struggling to fill the gap.
According to the article, following the crisis, states began to take cost-savings measures, including charging retirees for healthcare coverage as was the case in Kansas. In that state, the article says, over 2,000 retirees received a bill for their full healthcare coverage beginning in 2017, and about two-thirds of those retirees dropped out of enrollment.
In addition to sharp cuts for those already retired, many states are changing their benefits incrementally for employees still working. It is possible this practice could cause some strife amongst workers who are covered and those who miss out on benefits simply from joining the workforce later.
What Retirees Can Do Now to Cover Healthcare Costs
If you or your spouse has been historically enrolled in a state or federal health pension plan and you are nearing retirement, it’s time to reevaluate your options. Your state’s coverage may or may not include those enrolled but not retired, so be sure to check your benefits to determine if other measures can be taken.
Questions you might be asking yourself include:
- What will my healthcare out of pocket costs be once I retire?
- Will my plan cover prescriptions?
- If the state or federal government changes or cancels coverage, what is my next step?
If retirement is coming up and you have concerns your healthcare needs won’t be met, there is hope! Medicare is open to those who want a more stable plan for their healthcare coverage, and the annual enrollment period (AEP) is coming up soon! There are many plan options to choose from, including options for prescription drug coverage.
Contact a Licensed Medicare Insurance Broker
If you have questions or are ready to enroll in Medicare, contact the knowledgable Medicare insurance brokers at Steinlage Insurance Agency today to discuss your options!