Insurance premiums paid from your pension income can only be deducted as a Medical Expense on Schedule A, if you itemize. As you pointed out, there are severe limitations on how the Medical Expense deduction is treated for tax purposes.
Gross pension income is pre-tax, meaning that the entire amount is subject to tax (unless you made after-tax contributions to the plan). From that point forward, you can only deduct insurance premiums as a Medical Expense on Schedule A.
When you obtained insurance through your employer, you were able to pay the premiums with pre-tax dollars. Your gross income was first reduced by the cost of the premiums before being subject to tax.
