TRANSCRIPT

Introduction to Retirement Health Insurance Costs in Mississippi

Many Mississippi public employees assume that their health insurance costs will increase after they retire, and generally that is the case. However, how much costs increase depends heavily on:

• Your age at retirement

• Your household income

• Whether you cover a spouse

• And once you turn 65, which Medicare supplement coverage you select. 

What to Expect in This Video

By the end of this video, you will understand how monthly health insurance costs for retirees differ across COBRA, the State Retiree Health Plan, ACA Marketplace and Medicare. I will walk you through the monthly premium insurance amounts for single and married PERS retirees before and after age 65 across various household incomes ranging from $50,000 all the way up to $500,000. 

How to Get Your Personalized Health Insurance Cost Estimate

As you watch this video, keep in mind that these figures are for illustrative and educational purposes only and are not to be used as personalized tax, health insurance, or financial advice. However, I am a vested PERS member and financial planner that specializes in retirement planning for Mississippi public employees, so if you want to explore your own personalized estimate of how much your health insurance premiums will increase or decrease in retirement, you can start the conversation with me by using the link in the show notes below.

Single PERS Retiree Health Insurance Premium Analysis for Those Under Age 65: State Health Plan vs. COBRA vs. ACA Marketplace

Let's dive right into how monthly health insurance premiums change pre and post-retirement for a single PERS retiree who is under the age of 65.

This table shows how monthly health insurance premiums would change for a Mississippi public employee who is under age 65 and is going from coverage under the state health plan as an active employee to either COBRA, the state retiree plan, or an ACA plan. There are two rows. The top row is for someone with $50,000 of modified adjusted gross income and the bottom row is for someone with more than $100,000 of modified adjusted gross income.

Let's start with the premium they pay as an active employee. Assuming they are a legacy employee choosing Select coverage, an active single employee under age 65 pays $20 per month for subsidized health insurance. Upon retiring and while under the age of 65, the state retiree plan costs $614 per month, regardless of income level. This is a fairly large increase of $594 per month compared to while working.

Now compare the $614 to what's available on the ACA marketplace. In general, state retiree health insurance is significantly cheaper than the ACA marketplace, even taking premium tax credits into account while under 65 for those with lower incomes. The ACA premiums listed here are assuming the PERS retiree lives in Madison, Mississippi, and selects gold EPO coverage with a $2,000 deductible.

As you can see, at age 50, this single PERS retiree can expect to pay $928 to $1,405 per month for ACA coverage depending on their income. At age 55, they can expect to pay $1,057 to $1,755 per month depending on their income. And at age 60, they can expect to pay $1,195 to $2,135 per month depending on their income.

One important thing to note here is age does not impact health insurance premiums under the state retiree health plan. The monthly cost remains fixed at $614 per month, whether you retire at age 50 or age 60. However, age does impact ACA marketplace premiums with health insurance costs increasing as you get older. 

You might have noticed that COBRA continuation coverage, which is highlighted in red, is $545 per month for a single PERS retiree, which is slightly lower than the state retiree plan rate of $614 per month. However, it can typically only be used for up to 18 months following retirement, making its use case fairly limited to only those either retiring within 18 months of becoming Medicare eligible or for those that missed the 31-day enrollment window for the state retiree plan.

Single PERS Retiree Health Insurance Premium Analysis for Those Over Age 65: State Health Plan vs. Medicare

Now let's see how health insurance premiums change for a single PERS retiree who is over age 65. This table shows how monthly health insurance premiums would change for a Mississippi public employee who is single and over age 65 and going from coverage under the state health plan as a retiree to Medicare plus choosing a secondary or supplement policy. 

Just as with our single PERS retiree under 65 table there are multiple rows showing different levels of modified adjusted gross income. Let's start with the second column highlighted in gray. This shows how much a single PERS legacy retiree who is not eligible for Medicare and chooses select coverage will pay for health insurance under the state plan as a retiree. This is the same amount from the previous table and should be used as the benchmark for a single PERS retiree transitioning from the state health insurance plan as a retiree to Medicare. 

The third column highlighted in green shows how much our single PERS retiree, who is now 65 or older, would pay to enroll in Medicare Part A, Part B, and Part D. In general, this would cover doctor visits, hospital stays, and prescription drugs with certain deductibles, co-pays, and coinsurance still coming out of your pocket. The monthly premiums you see here in green are assuming the single PERS retiree lives in Madison, Mississippi, and enrolls in a Part A, Part B, and Part D preferred plan. 

What you'll immediately see is that the Medicare premiums increase as income increases. However, it's also important to point out that although not shown, Medicare premiums do not increase with age.

The fourth, fifth, and sixth columns highlighted in yellow are different Medicare secondary or supplement policies available to our single PERS retiree who is enrolled in Medicare Part A and B. In order to replicate coverage that is somewhat similar to the state health plan, you would have to select one of these three options highlighted in yellow in addition to the Medicare plans highlighted in green. 

Let's review what each of these options highlighted in yellow is before analyzing the premiums and why they may be different.

BCBS Secondary Insurance is a group policy administered by Blue Cross Blue Shield and governed by the Mississippi Department of Finance and Administration, or DFA. This policy acts as a secondary payer to Medicare, which means in the event Medicare doesn't pay for services, Blue Cross Blue Shield will, as long as it would otherwise be covered under the state plan. For the monthly premium shown under the BCBS Secondary Insurance column, we assume the single PERS retiree is a legacy retiree with Select coverage. 

Moving on to the next column, PERS Medicare Supplement is a group Medicare supplement policy issued by Trans America in partnership with PERS. This policy is a supplement to Medicare and covers Part A deductible and coinsurance amounts, plus 16 to 20% of Part B eligible expenses, plus some other benefits. For the monthly premium shown, we assume the single PERS retiree chooses plan option number two. 

And finally, in the last column, Individual Medicare Supplement is a Medicare Part G plan available on the Medicare.gov marketplace. This policy is a supplement to Medicare Part A, B, and D and covers Part A, deductible and coinsurance amounts, plus Part B, coinsurance and co-payment amounts, plus some other benefits. For the monthly premium shown, we assume that the single PERS retiree lives in Madison, Mississippi, and the monthly premium shown is the average between the highest and lowest cost across 29 different insurance carriers that offer Part G coverage in Madison, Mississippi. 

Looking at these three options in yellow, we can make several observations.

1. First, the PERS Medicare supplement is generally the lowest cost if you select plan option number two.

2. Second, Blue Cross Blue Shield secondary insurance is generally in the middle in terms of cost if you are a legacy retiree with Select coverage. 

3. Third, an individual Medicare Part G supplement is generally the most expensive if residing in Madison, Mississippi and taking the average of the highest and lowest premium plans. 

However, these are simply generalizations. This will not always be the case, and you definitely will want to do your own homework or work with a professional to obtain cost estimates considering your own unique circumstances. For example, there are individual Medicare Part G plans that are cheaper than than the PERS Medicare supplement. As another example, although not shown in the table, the PERS Medicare supplement actually becomes more expensive than the Blue Cross Blue Shield secondary insurance over the age of 90. 

Another thing to note is how these premiums in yellow change as your income or age increases. With the Blue Cross Blue Shield secondary insurance, the rate does not change regardless of age or income, which is a huge benefit the older you are and the more retirement income you have.  Contrast that with the PERS Medicare supplement and individual Medicare supplement, which do increase with age, though they remain fixed as income increases. 

So at a high level, will health insurance premiums increase or decrease once a single PERS retiree transitions from state retiree health insurance to Medicare? Well, the answer depends on your age and income and the Medicare secondary or supplement coverage you select. 

What we can see in the table is that for those single PERS retirees with $200,000 or more of modified adjusted gross income, their primary Medicare coverage costs for Part A, B, and D alone will be more expensive than the retiree state health plan they were previously enrolled in, without even taking into account the cost for Medicare secondary or supplement insurance coverage. For those single PERS retirees with $150,000 of modified adjusted gross income, their total Medicare Part A, B, and D premiums, plus their secondary or supplemental coverage, will put them over the amount they were paying as a retiree under the state plan. For those single retirees with $100,000 or less of modified adjusted gross income, there are many paths that lead to lower health insurance costs once you turn 65 and are eligible for Medicare.

It's also important to point out that for those single PERS retirees with more than $100,000 of modified adjusted gross income, there are still paths that lead to lower health insurance costs once you turn 65 and are eligible for Medicare compared to the retiree state health plan, but to get there will require you to make trade-offs of choosing less coverage and or higher deductibles.

Married PERS Retiree Health Insurance Premium Analysis for Those Under Age 65: State Health Plan vs. COBRA vs. ACA Marketplace

For the second half of this video, let's look at how health insurance premiums change pre and post retirement for a married PERS retiree, starting with a married PERS retiree under the age of 65. This table shows how monthly health insurance premiums would change for a Mississippi public employee and their spouse, who both are under age 65, and going from employee plus spouse coverage under the state health plan as an active employee to either COBRA, the state retiree plan or an ACA plan. 

Similar to the single PERS retiree, there are two rows in this table. The top row is for someone with $50,000 of modified adjusted gross income, and the bottom row is for someone with $100,000 or more of modified adjusted gross income. 

Let's start our analysis with the premium they pay as an active employee for themselves and their spouse. Assuming they are a legacy employee choosing select coverage, an active married PERS employee under the age 65 pays $660 per month for subsidized health insurance while working. Upon retiring and while under the age of 65, the state retiree plan costs $1,349 per month, regardless of income level, for the PERS retiree and their spouse. This is a fairly large increase of $689 per month compared to while working.

Now compare this $1,349 to what's available on the ACA marketplace. In general, state retiree health insurance for married couples is significantly cheaper than the ACA marketplace, even taking premium tax credits into account. The ACA premiums listed are assuming the PERS retiree and their spouse lives in Madison, Mississippi, and selects gold EPO coverage with a $2,000 deductible for themselves and their spouse.

As you can see, at age 50, this married PERS retiree can expect to pay $1,358 to $2,810 per month depending on income for ACA coverage, including premium tax credits they are eligible for. At age 55, they can expect to pay $1,613 to $3,509 per month, depending on their income. And at age 60, they can expect to pay $1,892 to $4,271 per month, depending on their income. 

What is different about a married PERS retiree at lower household incomes is that an ACA plan can actually be cheaper, especially if there are other dependents besides the spouse in the household. Also, for those that may be vested in PERS but ineligible to retire based on service or age, and not receiving PERS benefits immediately upon retirement, there are several planning opportunities to use premium tax credits to cover a substantial portion of the health insurance premiums if that retiree has access to taxable brokerage accounts before they reach their PERS retirement age milestone. 

Like our single PERS retiree, age does not impact health insurance premiums under the state retiree health plan for employee plus spouse coverage. The monthly cost remains fixed at $1,349 per month, whether you retire at age 50 or age 60. However, age does impact ACA marketplace premiums, with health insurance costs increasing as you and your spouse get older. 

You might have noticed that COBRA continuation coverage, which is highlighted in red, is $1,197 per month for a married PERS retiree with spouse coverage, which is lower than the state retiree plan rate of $1,349 per month. However, the same rules that apply for the single PERS retiree apply to our married PERS retiree.  COBRA can typically only be used for up to 18 months following retirement, making its use case fairly limited to only those either retiring within 18 months of becoming Medicare eligible or those that miss the 31-day enrollment window for the state retiree plan.

Married PERS Retiree Health Insurance Premium Analysis for Those Over Age 65: State Health Plan vs. Medicare

Now let's see how monthly health insurance premiums change for a married PERS retiree who is over age 65. This table shows how monthly health insurance premiums would change for a Mississippi public employee who is married and both spouses are over age 65, and they are going from coverage under the state health plan as a retiree to Medicare plus enrolling in a Medicare secondary or supplement policy. Just as with our single PERS retiree under 65 table, there are multiple rows showing different levels of modified adjusted gross income for the married household. 

Let's start our analysis for the married PERS retiree over 65 with the second column highlighted in gray.  This shows how much a married PERS legacy retiree who is not eligible for Medicare and chooses select coverage will pay for health insurance under the state plan as a retiree for both themselves and their spouse. This is the same amount from the previous table and should be used as the benchmark for a married PERS retiree transitioning from the state health insurance plan as a retiree to Medicare. 

The third column highlighted in green shows how much our married PERS retiree and their spouse who both are now 65 or older would pay to enroll in Medicare Part A, Part B, and Part D. In general, this would cover doctor visits, hospital stays, and prescription drugs with certain deductibles, co-pays, and coinsurance still coming out of your pocket. The monthly premiums you see here in green are assuming the married PERS retiree and their spouse live in Madison, Mississippi, and each enrolls in a Part A, Part B, and Part D preferred plan. 

What you'll immediately see is that the Medicare premiums increase as income increases. However, it's also important to point out that although not shown, Medicare premiums do not increase with age. 

The fourth, fifth, and sixth columns highlighted in yellow are different Medicare secondary or supplement policies available to our married PERS retiree and their spouse, who each are enrolled in Medicare Part A and B. In order to replicate coverage that is somewhat similar to the state health plan for both the employee and the spouse, you would have to select one of these three options highlighted in yellow in addition to the Medicare plans highlighted in green. 

Looking at these three options in yellow, we can make several observations. 

1. First, like with our single PERS retiree, for our married PERS retiree and their spouse, the PERS Medicare supplement for each spouse is generally the lowest cost if you select plan option number two.

2. Second, like with our single PERS retiree, for our married PERS retiree and their spouse, Blue Cross Blue Shield secondary insurance is generally in the middle in terms of cost if you are a legacy retiree with select coverage.

3. Third, like with our single PERS retiree, for our married PERS retiree and their spouse, an individual Medicare Part G supplement for each spouse is generally the most expensive option if residing in Madison, Mississippi, and if we take the average of the highest and lowest premiums. 

However, these are simply generalizations. Like with our single PERS retiree, this will not always be the case, and you definitely will want to do your own homework or work with a professional to obtain cost estimates, considering your own and your spouse's unique circumstances. For example, there are individual Medicare Part G plans that are actually cheaper than the PERS Medicare supplement. As another example, although not shown in the table, the PERS Medicare supplement becomes more expensive for a married PERS retiree and their spouse than the Blue Cross Blue Shield secondary insurance over the age of 90. 

Like with the single PERS retiree, these premiums in yellow may change as your income or age increases. With the Blue Cross Blue Shield secondary insurance, the rate does not change, regardless of your age or income, which is a huge benefit the older you and your spouse become and the more household retirement income you have. Contrast that with the PERS Medicare supplement and individual Medicare supplement which do increase with age, though they remain fixed as income increases. 

So at a high level, will health insurance premiums increase or decrease once our married PERS retiree and their spouse transition from state retiree health insurance to Medicare? Well, the answer depends on your age and income and Medicare secondary or supplement coverage you and your spouse select.

What we can see in the table is that for those married PERS retirees with $350,000 or more of modified adjusted gross income, their primary Medicare coverage costs for part A, B, and D alone will be more expensive than the retiree state health plan they were previously enrolled in without even taking into account Medicare secondary or supplement insurance. For those married PERS retirees with $300,000 of modified adjusted gross income, their total Medicare Part A B and D premiums plus their secondary or supplemental coverage will put them over the amount they were paying as a retiree under the state plan. For those married PERS retirees with $250,000 or less of modified adjusted gross income, there are many paths that lead to lower health insurance costs once you turn 65 and are eligible for Medicare. 

It's also important to point out that for those married PERS retirees making more than $250,000 of modified adjusted gross income, there are still multiple paths that lead to lower health insurance costs once you turn 65 and are eligible for Medicare compared to the retiree state health plan. But to get there will require you to make trade-offs of choosing less coverage and or higher deductibles.

Action Items for Mississippi Public Employees

If you are a Mississippi public employee evaluating how your health insurance costs will change in retirement, here are your action items for today.

1. Identify your working premium. Identify what you currently pay out of your paycheck for health insurance for you, your spouse if married, and your dependents if you have any. Understand the employee portion is heavily subsidized by the state while you work. 

2. Evaluate your pre-65 options. Identify what your monthly health insurance premiums would be under the state retiree health plan and go to the ACA marketplace to get estimates of what your health insurance premiums would be taking into account any premium tax credits you might be eligible for. Also be sure to compare coverages, deductibles, coinsurance, co-payments, and out-of-pocket maximums. 

3. Evaluate your post 65 options. Evaluate all three secondary payer options and get estimates of what your health insurance premiums would be. Also, be sure to compare coverages, deductibles, co-insurance, co-payments, and out-of-pocket maximums. Keep in mind income becomes a much more important factor in health insurance premiums after age 65 and educate yourself on strategies to minimize your modified adjusted gross income after the age of 65.

Preview of Next Video and Closing Remarks

I hope this video gives you a better understanding of how health insurance costs shift when you retire as a Mississippi public employee. In our next video, we will explore “What percentage of pre-retirement income does a PERS member need to sustain their working lifestyle?”  

Please make sure you subscribe so you don't miss this and other upcoming videos in our late career series. If you found this video helpful, you can thank me by hitting the thumbs up button and sharing it with other Mississippi public employees. 

And finally, if you are looking for a financial planner who specializes in helping Mississippi public employees build comprehensive retirement strategies, including modeling health insurance options, please visit our website at perspro.ms to learn more about how we help PERS members like you. 

Thank you for your valuable public service to the state of Mississippi. We'll see you next time.

Legal Disclaimer

Disclaimer: this video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified tax, health insurance, or financial professional for personal advice specific to your situation.