A Quick Guide to Coronavirus Healthcare Planning for Pre-Retirees

A Quick Guide to Coronavirus Healthcare Planning for Pre-Retirees

Healthcare costs related to coronavirus/COVID-19 are not always covered by your insurance.

Stephanie Faris

Published October 30th, 2020

Table of Contents

Key Takeaways

  • The pandemic has driven awareness of the costs associated with medical care.
  • Many insurance plans will cover COVID-19 testing, although you may be responsible for copays and deductibles.
  • It’s important to examine your retirement savings and make sure it’s protected.

The coronavirus has given the world plenty to worry about, from the economy to the health of themselves and their loved ones. As the number of cases increases by the day, the entire healthcare system is taking a fairly big financial hit. By the time all of this is over, consumers may find their premiums increase as insurers struggle to make up for their losses.

But the present danger has everyone wondering if their health insurance will cover them should they catch the disease. Unfortunately, it isn’t guaranteed. There are some things you can do to protect your assets, as well as your retirement, during this time.

Coronavirus Test and Healthcare Costs

Even if you work hard to stay home and practice social distancing, you’re probably concerned about catching COVID-19. Few Americans have a bank account that can handle a big health expense, and hospitalization can be extremely expensive.

The good news is, you may not need to spend money at all. Many of those who contract the disease are urged to simply quarantine at home, with no treatment necessary. If you do require testing, the cost of the test itself will be free under the Families First Coronavirus Response Act. If you have insurance, the cost of the visit should be covered, as well.

Now for the bad news. If you’re one of those affected who require hospitalization, you may find yourself dealing with some steep out-of-pocket costs. This applies to you if you have a high deductible and required copays for various services.

And if you don’t have health insurance? While the test may be free, hospitalization and healthcare likely won’t be, unless the government enacts a major to the way healthcare works within the next few weeks. Your best bet at this point is to avoid getting the virus, through social distancing and protective measures like washing your hands and wearing a face mask. Some states are also re-opening their health insurance marketplaces. While not ideal, a cheap plan that puts a cap on your out-of-pocket expenses is better than no coverage at all.

A Jump in Insurance Premiums

COVID-19 is new, so data is limited, but the Peterson Center on Healthcare estimates that the average total cost of an inpatient admission for COVID-19 could exceed $20,000. Those costs are based on the average hospitalization expenses for someone with pneumonia. While health insurers deal with pneumonia hospitalizations on a regular basis, the extreme surge in cases is likely to have a negative impact on the insurance industry.

Insurers are expected to cover these extra costs in the form of an increase in premiums. You likely won’t see any difference until next year, but it will be noticeable. Some are predicting premiums to increase by as much as 40%. Start preparing now for this expected increase, so you’re not surprised when you see a big jump in your bill next year.

As for your current coverage, while you’re safe in your home, pull up those policy documents your insurer gave you. If your insurance is employer provided, you may need to make a call to HR. Verify your copays and estimate what you’ll need to pay if hospitalization becomes necessary. If you’re on Medicare, Part B covers testing and Part A covers both testing and hospitalization. With Medicare, though, you’ll have a $1,484 deductible in 2021 for hospitalization, so keep that in mind.

Financially Preparing for Coronavirus

Although experts have been predicting a pandemic for years, few consumers have prepared financially for it. Obviously, health warnings are everywhere, but what can you do to protect your bank account?

If you still have money coming in, it’s a great time to take stock of your savings. The economy is predicted to be in rough shape for the foreseeable future, so anything you can do to set money aside will help. Right now, it’s important to have money in the bank to cover any medical expenses you might encounter during this crisis. Take a look at your insurance coverage, assuming you have insurance, and make sure you have enough to cover your own out-of-pocket costs if you catch the virus and require hospitalization.

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Retirement Planning and Coronavirus

Once you’re protected for the near future, it’s time to start thinking about your retirement. How you handle this, though, depends on your own age. If you’re close to retirement, you have a more pressing need to ensure you have savings than if you have decades to recover from an economic setback.

For those nearing retirement, it’s important to ensure you can access your funds should you need them. This means making sure you have enough to cover at least a year’s expenses, and that money needs to be in an account that allows withdrawals. This may mean withdrawing funds from a 401(k) or cashing out CDs at the next expiration date to ensure you’re protected.

If, however, you have plenty of working years left, your approach will need to be dramatically different.

  • Grow and maintain emergency savings. This applies both during the pandemic and after. You should have enough money set aside to cover at least three months of living expenses.
  • Don’t drop investments. IRAs, 401(k)s, and other investments are experiencing volatility right now, and will likely continue to, due to the economic impact of the coronavirus. But don’t forget that you don’t necessarily cash in your 401(k)s or IRAs all at once, and you’ll have some time to let these assets potentially recover their value. If you liquidate investments now you will ensure that you realize losses. You will also get a tax penalty for early withdraw from retirement accounts if you are under 59 ½ years old.
  • Now’s a good time to consider what your healthcare expenses will be when you retire. If a pandemic hits when you’re relying on Medicare, for instance, will you have the extra funds you need to cover your share of the hospitalization cost?
  • Consider Medicare supplements. When the time comes to select your retirement healthcare, you’ll have the choice to pay extra for Medicare Part B, which pays for lab tests, doctor visits, and more, or to purchase supplemental insurance.
  • Stay healthy. Remaining active, especially when you’re trying to stay away from others, can be tough. But you can still eat healthy and exercise each day, and talk to friends virtually through video chats. Staying mentally and physically fit is a crucial part of being happy in retirement.

Bottom line

The pandemic is still in the early stages, but more information is likely to emerge with each week. To determine how the coronavirus will affect your own retirement planning, it’s best to consult a Certified Financial Planner® for tips customized to your own unique situation.

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Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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