What Happens to a Pastor's Health Insurance at Retirement

You've spent years caring for your congregation. Now retirement is 12 months away, and you're staring at a question that keeps you up at night: What happens to my health insurance?

You know things will change. Your active coverage ends when you retire. But what does that mean in practical terms? Do you have options?

In this blog, you'll find answers to those questions and more, so you can feel more confident and less stressed about this significant life change.

I'm 65 (or older) and ready to retire.

At 65, you become eligible for Medicare, the federal health insurance program that most Americans use in retirement.

You don't have to retire just because you turn 65. You can keep your active church coverage as long as you're working. But when retirement does come, here's what happens.

First, enroll in Medicare Parts A and B:

• Part A covers hospital stays

• Part B covers doctor visits and outpatient care

However, those don't provide full coverage, out-of-pocket maximums, or prescriptions. Most large employers don't offer retiree medical coverage anymore. Only 13% still provide it for Medicare-eligible retirees, according to Mercer. But church benefit providers often do, recognizing the value it provides to ministry workers.

You have three main options:

Option 1: Choose a Medicare Advantage plan

Some providers, like RBA, offer group Medicare Advantage plans specifically for retiring members. This bundles hospital, medical, and prescription coverage through a private insurer. It works more like the employer plan you're used to.

Option 2: Build your own coverage

Add a Medicare Supplement plan (Medigap) to fill the gaps, plus a separate Part D plan for prescriptions. You choose each piece separately.

I'm going to retire, but my spouse isn't yet.

This gets more complex. You might be ready for Medicare, but your spouse isn't eligible yet. In most scenarios, you'll be paying the entire premium for your spouse along with yours, so plan your finances carefully.

Here are the four most common scenarios:

1. If your spouse works and has their own employer plan, you may be able to join their family coverage. This is usually the most affordable path if it's available.

2. Your spouse can keep their current plan for up to 18 months through COBRA. But this comes with high costs since you pay the full premium plus administrative fees.

3. Your spouse can shop the ACA marketplace for individual coverage. This provides flexibility and lets you choose the level of coverage you can afford.

Which scenario fits you? Each option has trade-offs in cost and coverage, so be sure to plan ahead. Talk to your benefits administrator at least six months before you retire.

I'm retiring early (before 65).

Early retirement means you're not yet eligible for Medicare, but your church coverage will still end at that time.

COBRA lets you continue your church health insurance plan for up to 18 months, but you'll pay the full premium plus a small administrative fee. It's expensive; however, it keeps your current coverage intact.

The ACA marketplace is another option. Plans vary by state, and you might qualify for subsidies based on your income.

If your spouse is still working and has employer coverage, you might be able to join their plan.

The 12-6-3 Retirement Planning Timeline

Retirement and health insurance decisions should happen together, not separately. But during this time, make sure you take note of these very important deadlines:

• Medicare's initial enrollment period starts three months before you turn 65 and ends three months after. If you're still working with creditable coverage, you can delay. But when you retire, you only have two months to enroll without penalty.

• COBRA must be elected within 60 days of losing coverage. After that, the option disappears. You can plan on typical costs of around $1800 to $3,000 per month for family coverage.

• Open enrollment for ACA marketplace plans runs from November 1 to January 15 each year, with some state exceptions. Losing employer coverage qualifies you for a Special Enrollment Period outside those dates.

In the end, you'll want to follow the 12-6-3 rule when it comes to planning:

• If you're 12 months out, start asking questions. What are your options? What will it cost? What gaps might you face?

• At six months, confirm your eligibility and narrow your choices.

• At three months, it's time to enroll.

Don't wait! The worst time to figure this out is the week before you retire.

Need Help Planning Your Retirement Coverage?

If you're an RBA member planning to retire and have questions, contact your benefits team. We'll walk you through your options, confirm your eligibility, and help you navigate every step of the transition.

 The information contained in this blog is for educational purposes only. Please seek professional advice before acting on the information you have read above.