Retiree health insurance coverage covers most medical bills for Americans who exit work at 65 or later. You have Medicare Part A, B, and a Part D drug plan as a base and Medigap or retiree union plans fill the gaps.
It costs $170 a month for Part B plus any add-on premium. The following sections outline these decisions and demonstrate how to maintain doctor and drug coverage without overpaying.
What is Retiree Health Insurance?
Retiree health insurance is the coverage that kicks in once your gig is up. It starts the very day you lay down your arms and protects you from the doctor’s office billing you huge tabs. Most people pick it up between their last day working and when Medicare kicks in at 65, but others hold onto it as a backup well beyond that.
The main places you can land coverage are:
- Your former employer’s group plan, if they allow retirees to remain on.
- COBRA is the 18-month version of the same work plan.
- An ACA Marketplace policy you buy yourself.
- Medicare plus a Medigap wrap-around.
- Medicaid, if income and assets fit your state rules.
Let’s say you clock out at 62. You stick on COBRA for 18 months, then switch to an ACA plan for the last six months and then onto Medicare. Each slice comes with its own card, premium, and doctor list, so circle the switch dates on a calendar.
Retiree plans come in three flavors. Fee-for-Service looks like the old Blue Cross you had at work: pick any doctor, then the plan mails you a check after Medicare pays first. Non-Medicare Managed Care, such as HMO or PPO for those under 65, requires referrals and network doctors, but the monthly bill is lower.
Medicare Advantage packages hospital, medical, and drug coverage into one card. Many of these union plans, like the California Public Employees’ plan, offer an HMO that doesn’t cost a penny more, but it has a 180-day limit on hospital stays each year.
Premiums are shared in various ways. One automaker plan charges retirees $136 a month for single coverage, and the company pays the other 70%. Some towns give you a menu: bare-bones single for $0, family dental for an extra $42, or a full PPO at $210. Review the sheet every November. The price can leap if the city council shifts its budget.
Mind the details. The vast majority of retiree plans start over every 12 months, so you sign up again each fall. Deductibles range from $250 on a union Medigap to $2,000 on a skinny ACA bronze. Even a handful of ex-employer plans still have lifetime caps.
Five hundred thousand dollars is common on legacy coal-miner benefits. If you maintain a fee-for-service plan, it pays only after Medicare denies or pays. An unpaid $1,600 Part A hospital deductible could still come your way.
In other words, retiree health insurance is the coverage that keeps you protected once the workday is done.
Your Retiree Health Insurance Eligibility
Your retiree health insurance isn’t automatic. You need to check off every box your plan requires before the office gives you a farewell cake. Check these four items first:
- Age: 55, 62, or 65 depending on plan
- Service: usually 10–30 years of credited work
- Pension: must start within 30 days of last paycheck
- Enroll: sign up during the 31-day special window after you leave.
Save any letter that says you had “creditable coverage.” Medicare will come looking for it later and one missing form can cost you months of back premiums.
1. Employer Rules
Download the Summary Plan Description from the HR portal. It specifies who receives a card. Some companies provide retiree coverage in the union agreement. Others provide it only if the board approves annually.
Find out if the company check covers 5 percent or 100 percent of your premium. At Boeing, a 30-year engineer gets 85 percent paid, but a 15-year clerk pays full price. When you turn 65, the coverage switches to Medicare as primary. Your ex-employer picks up whatever Medicare doesn’t.
2. Service Years
Don’t actually count the years you enrolled in the pension system – count only the years it counts. Your retiree health insurance eligibility can change based on this.
A California teacher who buys back two years of out-of-state work jumps from 18 to 20, unlocking full benefits. Sick-leave hours can add months; 2,000 unused hours equals about one year. Print your service credit statement six months before you sign. Errors take weeks to repair and retirement boards meet once a month.
3. Age Requirements
Medicare kicks in at 65 for the majority. Quit at 60 and you’ll gap-fill with COBRA or a Marketplace bronze plan. You will spend $550 a month in L.A. For a single nonsmoker.
If you miss the 7-month Medicare sign-up that extends from 3 months before to 3 months after your birthday, the Part B penalty adds 10 percent for every full year you wait, forever.
4. Dependent Status
Include spouse/partner, domestic partner, children under 26, or disabled adult children unable to work. Mail the marriage license or court order within 31 days of the wedding; otherwise, they wait until the next open season.
A retired firefighter finds out that covering his wife on his city plan costs $420 a month whereas her own teacher plan costs $180, so they split.
5. Special Cases
Federal workers retain FEHB for life. Once Medicare A and B begin, FEHB becomes wrap-around and drug copays fall to $5.
A Navy retiree bundles TRICARE for Life with Medicare and owes nothing for hospitalizations after Medicare authorizes it. Union carpenters in Ohio tap the Central States fund. Call the trust to determine whether they require 20 vested years or just age 62.
Navigating Your Coverage Options
Start by lining up the four main paths: stay on your old group plan through COBRA, buy an ACA Marketplace policy, jump onto a working spouse’s group plan, or sign up for Medicare at 65. Each route has a different timer and cost.
COBRA gives you those same doctors you had at work, but the entire premium, usually $1,800 a month for a couple, is on you. If you leave work pre-65, you receive a one-time six-month window to select any Marketplace plan. That SEP begins the day your job coverage ends.
Right now, a Silver plan in L.A. County is about $750 a month for a 62-year-old, and tax credits can reduce it to $200 if earnings stay below $58k.
Check the fine print before you pick.
- Are your doctors in the network?
- Does the drug list cover your nightly pill?
- How much is the annual limit on bills that you pay?
Some retiree PPOs allow you to visit Cedars-Sinai but not UCLA, and some the reverse. Drug lists change in May and September. Insulin could be $47 on one plan and $130 on another.
The worst sticker shock is the out-of-pocket max. Some group plans stop at $4,000, whereas others keep going past $20,000. One fractured hip can swallow that right up.
If you have employer drug coverage as good as a basic Part D plan, you can keep it and avoid Medicare’s late sign-up penalty. Compare numbers: your old plan charges $80 a month and covers all five of your meds, whereas the cheapest Part D in California wants $28 but covers only three.
The penalty for bailing on Part D is 1% of the national base premium for every skipped month, and it’s permanent.
Fall open enrollment—October 15 to December 7—is your moment to switch. One year your heart pill goes generic, the next it doesn’t. Enter Medicare.gov, enter your zip code, enter your specific drugs, and sort by total annual cost.
Print two plans side-by-side and circle the line that says “Estimated annual cost.” If that figure increases by more than $500, leave.
HSAs do help if you established one during employed. After 65 you can pull money out for whatever without the 20% penalty. Non-medical distributions are still subject to income tax.
Keep the money invested. A $50k balance can pay for dental implants and still appreciate tax-free!
Long-term care sits outside all of this. A shared room in a Los Angeles nursing home now goes for $9,500 a month and neither Medicare nor typical retiree plans cover that.
Shop a hybrid life-LTC policy during you are still healthy. Premiums freeze once you buy!
The True Cost of Coverage
That healthy 65-year-old man who retires this year is going to incur something like $275,000 in doctors, drugs, and premiums over his lifetime. A woman the same age requires nearer to $313,000, primarily as a result of she will probably live five years longer. Those additional five years drive the bill up 41%. The figures already factor in Medicare Parts A and B, a Medigap Plan G, and a typical Part D drug plan, but they omit the cash you still pay at the counter for services not covered by your health plan.
Look in all the holes where money can leak out. Premiums get the headlines, but the silent costs sting just as much. Write these down and fill in the blanks each fall during the open enrollment period: monthly premiums for Part B, Part D, Medigap or Medicare Advantage, and any vision or dental rider; yearly Part B and Part D deductibles; doctor copays that run $20 to $50 in many Advantage plans; the 20 percent coinsurance that Medigap picks up but that you would owe on barebones plans; hospital per-day copays that can hit $400 if you pick the wrong Advantage option; hearing-aid bills that run $2,500 a pair; dental crowns that can cost $1,200 a tooth; and drug costs up to the new $2,000 Part D cap starting in 2025.
Construct a budget line for every slice. Add the Part B standard premium of $174.70 a month in 2025, then add the Medigap G premium, which is roughly $150 to $220 in LA for a 65-year-old. Drug plans cost between $15 and $90. If you choose a high-deductible Plan G, save the $2,800 deductible in a savings account dedicated to your health coverage. Do the same with dental and vision deductibles, which are typically $50 to $150.
About: The True Cost of Coverage Watch the IRMAA cliff. Single filers with modified adjusted gross income above $103,000 in 2023 pay an additional $69.90 a month on top of the base Part B premium. The surcharge escalates to $419.30 for incomes exceeding $397,750. The tier is two years old, so a big Roth conversion this year can significantly impact your 2027 Medicare bill and your overall retiree health benefits.
Pile on the pieces and build the heap. A Los Angeles couple with a $120,000 joint income who both select Plan G and Part D, along with modest dental coverage, will pay about $11,000 the first year. Increase that by 5% each year to keep even with health-cost inflation that has been running between 5% and 6% over the last ten years. Maintain the cushion in a high-yield savings account so the funds are waiting when the invoice arrives, ensuring you can cover the costs associated with your retiree health coverage.
The Early Retiree Coverage Gap
The gap between your final day of work and your 65th birthday can feel like a precipice. Most men stop working at 64, while most women at 62, but Medicare coverage begins at 65. That 2-to-3 year stretch is the gap without any health plan coverage. No boss plan, no Medicare card—just yourself and the full sticker price of doctor bills.
COBRA allows you to maintain the same health benefits as your employer for 18 months, but the employer no longer contributes. For a 60-year-old couple in Los Angeles, for instance, the premium frequently spikes from $600 a month to $1,800. The same duo can shop Covered California (the state Marketplace) once the job coverage ends.
The special enrollment period opens the day the work plan stops and remains open for 60 days. If they withdraw $60,000 from a 401(k), they end up at 330% of the FPL and are eligible for a tax credit that lowers the silver plan from $1,650 down to $850. Short-term plans sell for $400 or less, but they can skip cancer drugs or any care for a bad back you visited a doctor about last year.
Plan type | Sample monthly cost, age 64 couple | Tax credit? | Covers pre-existing? |
|---|---|---|---|
COBRA (ex-employer PPO) | $1,800 | No | Yes |
Marketplace silver | $1,650 ($850 with credit) | Yes | Yes |
Short-term 12-month | $400 | No | No |
Shop the Marketplace the minute your job plan ends. The timer on the special enrollment period starts running even though no one mails you a notice. Log in, punch in last year’s income, and see the site spew the credit out in real time.
The credit caps your portion of the premium at 8.5% of income all the way up to 400% of the poverty line, roughly $111k for a two-person household in 2024. Choose a silver plan and you get “cost-sharing cuts” that reduce the deductible from $4,000 to $800 if your income is below 250% of poverty.
Treat short-term insurance like a spare tire: good for a few weeks, risky for years. These plans can reject any bill associated with a health problem you showed symptoms for in the last 24 months, and they set dollar limits as low as $100,000. One stent in a California cath lab can top $70,000; reach the cap and you are self-insuring the remainder.
Integrating Medicare with Your Plan
Turning 65 triggers a simple rule: sign up for Medicare Part A (hospital) and Part B (doctor visits) during the seven-month window that starts three months before your birthday. Missing this open enrollment period means the Part B late fee sticks for life. Today, that translates to 10 percent of the premium for each full year you wait.
If you still work at a shop with 20 or more employees, you can bypass Parts A and B as long as the group plan remains primary. Upon departure, you have eight months to sign up for Medicare coverage without penalty.
Most retiree health benefits plans require Medicare to pay first. After that, the former employer’s wrap-around policy covers some or all of the remaining deductibles and coinsurance. Demand from the benefits desk the “Medicare carve-out” sheet; it tells you exactly what they will and won’t cover.
One city of Los Angeles retiree packet, for instance, covers the $1,632 Part A deductible but passes the 20 percent Part B coinsurance on to you except you purchase a Medigap plan.
You’ve come to a fork in the road. Road one: stay on Original Medicare, add a Part D drug card, and bolt on a Medigap plan. Plan G covers every gap except the $240 Part B deductible and lets you see any doctor in the U.S. Who takes Medicare, which is nearly every practice.
Road two: pick a Medicare Advantage plan (Part C) that folds Parts A, B, and usually D into one card. Many toss in dental, vision, and gym perks. The catch is a tight network. A well-liked Kaiser Permanente Senior Advantage HMO in SoCal might cost $0 more a month, but they want you to use Kaiser docs and facilities exclusively.
Snowbirds who winter in Arizona hate that lock-in.
Although your retiree health coverage has drug coverage, verify it using Medicare’s online Plan Finder every October. Last year a client’s union plan wanted $72 a month for brand drugs. The free-standing Part D SilverScript Choice saved her $648 for the same pills.
Don’t keep both; two premiums hardly ever come out a winner.
Employers with less than 20 retirees are required to provide you with a “Medicare Secondary Payer” notice. Medicare is primary anyway, and your ex-boss’s coverage might pay little or nothing. In that position, a lot of people drop the retiree drug layer, purchase Medigap and a stand-alone Part D, and hang on to just the inexpensive retiree dental rider.
Avoid sneaky price increases. One national grocer’s retiree plan brags of “no monthly fee,” yet fine print appends a $500 annual deductible that escalates to $750 next year. Compare that to a Medigap Plan N quote: $142 a month flat, no deductible hike, and nationwide doctors.
Line up Medicare on time, stack your old plan behind it, and recheck every fall.
Conclusion
Now you know the rules, the price tags and the gaps. Grab your final pay stub, log onto Medicare.gov and call your old HR cubicle before the week is through. Look at three actual quotes, choose a plan that covers your pills and your dentist, and set a calendar reminder for October 15 so you can adjust during open season. Lock it in, put the cards in your kitchen drawer, and get out to the beach or to the grandkids.
Frequently Asked Questions
Can I keep my L.A. County retiree health plan if I move to Phoenix?
No. Most L.A. County retiree health plans are HMOs that terminate at the Arizona border, requiring you to convert to a PPO or purchase a marketplace health insurance plan in Arizona.
Does my CalPERS retiree coverage start the day I turn 65?
Only if you signed up during the open enrollment period, 30 days prior to your birthday, and have Medicare Part A and B cards on file, your health coverage begins the next month.
How much is the penalty for skipping Part B when I have union retiree insurance?
The lifetime Part B late-enrollment penalty adds 10% to monthly premiums for every 12 months you delay, impacting your health coverage significantly. For the $174.70 standard premium, this results in about $17 extra per month indefinitely.
Is COBRA cheaper than retiree insurance for early retirees in California?
Overall, no. COBRA averages $650 for single health coverage and $1,850 for family health coverage, whereas most public-sector retiree health benefits plans charge 25 to 50 percent of the active premium, which is around $280 for single retiree coverage and $780 for family coverage.
Can I drop my school-district retiree plan during Open Enrollment and return later?
No. Most California districts shut you out once you drop retiree health benefits. Reinstatement is permitted only if you demonstrate involuntary loss of other health coverage.
Do I need a Medicare Supplement if my former employer pays 80%?
Yes, the 20% coinsurance is uncapped, making it crucial to consider a health plan that covers such costs. A week at Cedars-Sinai can run you $40,000, but a Plan G supplement can fill that gap for around $130 per month in L.A.
Where do I file a complaint if my retiree plan denies a claim?
Begin with the health plan’s consumer services, then escalate to the California Department of Managed Health Care at 1-888-466-2219 or visit dmhc.ca.gov for health coverage inquiries.