Service members and military families often have a love-hate relationship with military health care and the Tricare insurance system while on active duty, but Tricare provides retirees with a welcome safety net as they transition to the civilian world.
Military retirees have the option of enrolling in Tricare Standard for Retirees or Tricare Prime for Retirees, if they live within 30 minutes of a military treatment facility. Retirees who continue using, Tricare Prime will experience an uptick in healthcare expenses since they now will be required to pay an annual enrollment fee — $282.60 in 2016 for single retirees and $565.20 for families. (Tricare enrollment fees are subject to the same annual cost of living adjustment that determines increases to retired military pay.) In addition, retirees and their family members who see civilian providers because of limited access at military hospitals or clinics are charged network copayments — $12 for outpatient visits, for example, with additional copays for other services. Your primary care manager also is the gatekeeper for all referrals to specialists.
People who do not receive health insurance though an employer or federal government must purchase a policy or be subject to a penalty in 2017 of $695 per adult, $347.50 per child, or a maximum of $2,085.
Understanding TRICARE Standard
Tricare Standard, on the other hand, is available throughout the United States and provides the most flexibility when selecting providers, but outof-pocket costs can be higher. In addition to being responsible for 20% of negotiated charges when using in-network providers, retirees also much meet an annual deductible — $150 for an individual or $300 for a family — before Tricare begins to pay. Standard’s annual catastrophic cap — your maximum out-of-pocket cost for covered services — is $3,000 per family, an increase from the $1,000 maximum active duty families face. Retired Navy submariner Doug Nordman, author of The Military Guide to Financial Independence & Retirement, says most retirees who are eligible for Tricare Prime opt for it because Prime is “cheap” and “hassle free.” Though he had to deal with his share of customer service headaches when the Tricare Western Region changed contractors four years ago, Nordman has no doubts about the value of his retiree healthcare benefit.
“Health insurance and healthcare expenses are two major worries of civilian retirees, and we military beneficiaries can easily lose sight of how good we have it compared to the rest of America’s citizens,” he says.
Military retirees using Tricare Standard also may have the option of purchasing a supplemental health insurance plan that helps pay your share of covered expenses after a deductible is met.
Navy spouse Kellie Stobie says purchasing a supplemental policy to pair with Tricare Standard quickly paid off following her husband’s military retirement. When their daughter was diagnosed with diabetes two weeks after the family moved from their final duty station to Arizona, Stobie said their medical bills went from “nothing…to having a copay when you go to the doctor, a copay for medicine, a copay for needles. It added up quickly.”
No matter whether you have served for four or 20 years, leaving the military healthcare system requires planning and confronts you with a learning curve. Options are different depending on how long you served and whether you served on active duty, in the Guard or in the Reserve. Those who qualify for medical coverage due to a disability may be eligible for Tricare or medical care from the Veterans Administration.
TRICARE and adapting to civilian health care
Sean Scaturro, Certified Financial Planner (CFP), USAA’s Director of Life and Health Protection Advice, points out that the cost of civilian health care is not the only hurdle facing veterans. He said the “bigger shock” might be adapting to a civilian health care system that includes an alphabet soup of health insurance terms and a long list of health care consumer responsibilities.
“It is so different. You are responsible for so much more as a civilian versus the things that quite frankly the military or Tricare insurance program handles for you,” Scaturro says. “When there is a glossary of helpful terms to remember that comes with your insurance plan, that is one of those key signs that OK I need to sit down and actually read this.”
After separating from the military, most veterans will purchase healthcare through a new employer or a healthcare insurance exchange. In 2015, the average monthly civilian insurance premium for single workers was $521 while the average cost for family coverage was $1,462 per month, totals that don’t include deductibles, copays and other out-of pocket costs, according to the Kaiser Family Foundation.
“When people get ready to leave the service, there are a number of things that are going to rock their world,” says Shane Ostrom, CFP, and Deputy Director, Financial and Benefits Information, for the, Military Officers Association of America. “One of them being healthcare. They’ve been getting Tricare for a very low cost for their family. Then they are going to get hit with the cost of a civilian PPO (Preferred Provider Organization) or an HMO (Health Maintenance Organization).”
High-deductible health plans (HDHP) are the fastest growing type of health insurance in the United States, with half of employers planning to make a high-deductible plan their sole choice by 2018, according to consulting firm Towers Watson. Such plans have low premiums but require you spend a lot of your own money (a $1,300 deductible for self-coverage and $2,600 deductible for family coverage) before the plan covers a portion of the cost of care.
A HDHP is paired with a health savings account (HSA) — a personal savings account that allows participants to pay for medical expenses with pretax dollars, which Scaturro recommends funding as a way to prepare for medical emergencies or future medical costs such as long-term care.
“I love HSAs. I think they are a great vehicle for people,” Scaturro says. “When it is successful and you’ve got adequate contributions going into it — hopefully you haven’t had a lot of perilous medical issues — that account blossoms and becomes a very valuable resource for you for that multiple journey to retirement or in retirement.”
TRICARE and Affordable Care Act
Transitioning military also need to be aware of the Affordable Care Act’s mandate requiring health plan coverage. People who do not receive health insurance though an employer or federal government must purchase a policy or be subject to a penalty in 2017 of $695 per adult, $347.50 per child, or a maximum of $2,085.
Separating service members who receive an honorable or general discharge temporarily can continue healthcare coverage for themselves and family members under the Continued Health Care Benefit Program (CHCBP), which can serve as a bridge for up to 18 months after military healthcare benefits end. While not a Tricare program, CHCBP offers coverage comparable to Tricare Standard. But because the federal government does not subsidize costs, premiums for individuals are $1,300 per quarter or $2,925 per quarter for families. Patients also are responsible for paying an annual deductible and cost-shares for covered services.
Reservists and Guard members who have qualified for military retirement but have not yet reached age 60 are eligible for Tricare Retired Reserve, which is similar to Tricare Reserve Select, but comes with a higher price tag since premiums aren’t subsidized. In 2016, premiums are $388.79 per month for the member only and $957.44 for family coverage. At age 60, retired Reservists receive the same healthcare benefit as their retired active duty counterparts.
When transitioning, Scaturro recommends service members prepare from the “bottom up” and view health insurance and disability income protection insurance as the “foundation” supporting their financial future.
“Having that kind of comprehensive protection strategy as your foundation allows you to build your wealth in a much more comfortable and stable manner so you don’t have big emergencies taking away all of your hard work as you approach retirement,” he said.
Once military retirees reach age 65, they are eligible for Tricare for Life, which is used in conjunction with Medicare.
A few footnotes:
- To continue Tricare Prime coverage upon retiring from the military, you must reenroll as a retiree, enroll eligible family members as retiree dependents, and pay the appropriate single or family enrollment fee within 30 after your retirement date to have continuous Tricare Prime coverage.
- Surviving family members of a sponsor who died on active duty or medically retired service members and their families are not subject to annual Tricare Prime enrollment fee increases.