Let’s say you’re a 65-year-old man, finally qualified for Medicare, and nearly ready to retire. Only one problem. Your 62-year-old wife is covered by your employer’s health insurance plan. Generally, unless she is disabled, she will not be eligible for Medicare until she, too, turns 65. Medicare simply does not offer a plan for dependent spouses. Does that mean you need to keep working for three more years until she can be covered by Medicare?

Working longer is one possibility, but chances are, it’s not what you were hoping to hear. What are your other options?

Here are some ideas for ensuring your younger spouse has the coverage she needs. Though, be prepared because chances are you will end up paying considerably more for her coverage than you have been.

First, does your wife work? If so, does her employer offer a health insurance plan? You may have kept her on your plan in the interest of getting better coverage for less money. But compared to buying insurance for her yourself, her employer’s plan may seem like a bargain.

You can also ask your benefits advisor at work if the company offers a retiree health benefit plan, and if they do, will they allow your wife to be on that plan until she turns 65?

COBRA

If the company you work for employs at least 20 people, COBRA coverage must be provided for at least 18 months, possibly up to 36 months. This can be a real life saver to departing employees, but it’s not cheap. Employees who have had good coverage often think of the cost of their health insurance as much lower than it actually is. That’s because your employer pays a good portion of your policy, plus admin fees, and may pay part of your family coverage too. If you take the COBRA option, your employer will continue to pay your premiums, and you will pay the full policy cost plus a 2% admin fee directly to your employer.

One great advantage of taking the COBRA option is that once COBRA coverage expires, your spouse will qualify for HIPAA, which is the Health Insurance Portability and Accountability Act. This means that when you go to purchase insurance from a private insurer, your spouse cannot be denied coverage or offered only limited coverage based on a pre-existing medical condition. Ask your employer about a conversion policy with the same insurer. This is a policy that should bridge the gap to Medicare eligibility, but it does not have to provide the same benefits and will generally be more expensive.

Important point: If you are still working at age 65 it may be tempting to go straight onto Medicare and drop the employer coverage. But for your spouse to be COBRA eligible, she has to be still covered by the employer plan at the time you change your employment status.

No COBRA

What if your employer is too small to offer COBRA? The answer depends on where you live. Thirty-nine states offer Mini-COBRA, which would allow you to get continued coverage. Call your state insurance department, or log onto NAIC.org to find out what is available in your state.

Individual Policy

Of course you can shop around and buy an individual policy, but unless your spouse is half your age, this is likely to be quite expensive. If she has serious health issues like diabetes, cancer, heart problems, she may not be coverable at all, and if she is, expect the premiums to soar. A licensed independent agent should be able to give you some guidance. Or log onto healtchcare.gov for some options.

Check out short-term policies, which many cost you less, particularly if you need coverage for 12 months or less. Log onto ehealthinsurance.com for details of what you can get.

Suppose your wife has pre-existing conditions that make her ineligible for an individual policy. It is true that the health care reform bill will prohibit insurers from denying anyone coverage based on pre-existing conditions. However, this sweeping provision does not fully kick in until 2014. In that case, you may be able to tap into a state or federal high risk pool. Thirty-five states have these pools for individuals who cannot get coverage because of existing health problems. Again, this won’t be cheap. Expect to pay about 150 percent of what you’d pay for an individual policy. Check at naschip.org for more information.

The last resort may be the federal Pre-Existing Conditions Insurance Plan (pcip.gov), available nationwide. It was created as part of the health care reform law, as a bridge to get you to 2014 when most of the health reform bill will be fully in effect. One caveat. Your spouse must be uninsured for six months before she applies. If nothing changes on the horizon of the health reform bill, in 2014 insurers will not be able to deny anyone coverage based on pre-existing medical conditions.

Let’s face it. There simply is no inexpensive option when it comes to health insurance, but options do exist. Before you jump into Medicare and before you turn in your resignation in favor of retirement, sit down with your spouse and find out how you can get the coverage she needs without draining your nest egg.

[Note: This article is based on information provided by Jim Miller, author of “Savvy Senior,” and a regular contributor on the Today Show.]

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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