Private Health Insurance

Too young to qualify for Medicare, many near elderly (55- to 64-year-olds) are considering retirement or gradually moving out of the workforce. These events may be related to declining health, job displacement, or simply the desire for more leisure time. Because health insurance for most Americans is an employment-related benefit, retirement may necessitate looking for another source of affordable coverage. However, insurance bought directly in the individual market or temporary continuation coverage purchased through an employer are typically expensive and may not always be available. Affordability, moreover, may be exacerbated by both declining health and the reduction in income associated with retirement. For some near elderly, an alternative to retiring without insurance is simply to continue working. This report assesses the ability of Americans aged 55 to 64 to obtain health benefits through the private market--either employer-based or individually purchased. GAO discusses the near elderly's (1) health, employment, income, and health insurance status; (2) ability to obtain employer-based health insurance if they retire before becoming eligible for Medicare; and (3) use of and costs associated with buying coverage through the individual market or employer-based continuation insurance.

GAO noted that: (1) the overall insurance picture of the near elderly is no worse than that of other segments of the under-65 population and is better than that of some younger age groups; (2) the current insurance status of the near elderly is largely due to: (a) the fact that many current retirees still have access to employer-based health benefits; (b) the willingness of near-elderly Americans to devote a significant portion of their income to health insurance purchased through the individual market; and (c) the availability of public programs to disabled 55- to 64-year-olds; (3) the individual market and Medicare and Medicaid for the disabled often mitigate declining access to employer-based coverage for near-elderly Americans and may prevent a larger portion of this age group from becoming uninsured; (4) the steady decline in the proportion of large employers who offer health benefits to early retirees, however, clouds the outlook for future retirees; (5) in the absence of countervailing trends, it is less likely that future 55- to 64-year-olds will be offered health insurance as a retirement benefit, and those who are will bear an increased share of the cost; (6) access and affordability problems may prevent future early retirees who lose employer-based health benefits from obtaining comprehensive private insurance; (7) the two principal private insurance alternatives are continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the individual market; (8) although 55- to 64-year-olds who become eligible for COBRA are more likely than younger age groups to enroll, the use of continuation coverage by early retirees is relatively low; (9) with respect to individual insurance, the cost may put it out of reach of some 55- to 64-year-olds; (10) some states have taken steps to make individual insurance products more accessible; (11) for eligible individuals leaving group coverage who exhaust any available COBRA or other conversion coverage, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) guarantees access to the individual market, regardless of health status and without coverage exclusions; (12) since the new federal protections under HIPAA hinge on exhausting COBRA, the incentives for enrolling and the length of time enrolled could change; and (13) the premiums faced by some individuals eligible for a HIPAA guaranteed-access product, however, may be substantially higher than the prices charged to those in the individual market who are healthy.