Health Insurance Options When Retiring Early


If You Retire Before Age 65

Health Insurance in Early Retirement

If you’re retiring before age 65, the good news is that you can’t be denied coverage for preexisting conditions due to the Affordable Care Act , which was signed into law in March 2010. You can purchase ACA plans through your state’s health insurance marketplace, which may be or a state-specific site like Covered California. These plans are required to provide 10 essential benefits, including prescriptions, preventive care, and emergency services.

ACA plans can be expensive, but you may be able to keep your premium costs down by opting for a high-deductible option. Your deductible is the amount you pay for covered services before the plan starts paying benefits. A higher deductible typically means a lower monthly payment, but it also means higher out-of-pocket costs before your health care is covered. It may be worthwhile to pay a higher premium if you don’t have the income or savings to cover out-of-pocket costs.

Evaluating Health Insurance Options For Early Retirement

One of the most common concerns I hear from readers is finding health insurance options for early retirement. Insurance is something most of us have received for years from our employers, and the thought of having to replace that on our own is a major reason many people wait until age 65 to retire.

John doesnt want to wait until age 65 to retire, but his problem is even harder than most folks are facing.

Today, John comes back with his second guest post to share what hes learned working with an insurance professional to evaluate his health insurance options.

He even of the various options hes considering.

If youre struggling to find health insurance options in early retirement todays post is a must-read.

Health Insurance Options When Retiring Early

If you retire before Medicare eligibility begins at age 65, you will need to purchase health insurance. It is important to find coverage for routine medical checkups and prescriptions as well as hospital stays and unexpected health conditions.

“An early retiree can expect to budget between $500 and $1,000 per person for health insurance each month prior to the age of 65,” says Sahil Vakil, a certified financial planner and CEO and founder of MYRA Wealth, a remote wealth management firm in Jersey City, New Jersey. Your exact cost may be more or less than that, depending on your income, eligibility for subsidies and employer situation.

Consider these health insurance options for early retirees:

— Your former employer’s insurance.

— A health sharing plan.

— A part-time job.

Here is how to set up early retirement health insurance if you retire before age 65.

Stay on Your Former Employer’s Insurance

Look Into COBRA

The Consolidated Omnibus Budget Reconciliation Act created a program that allows former employees and their spouses and dependent children to continue receiving health insurance coverage from a former employer. “The rule generally applies to employers with 20 or more employees, and it applies to both employers in the private sector as well as state and local government,” Lerman says.

Join Your Spouse’s Insurance

Check If You Qualify for Medicaid

Shop the Marketplace

Look at a Health Sharing Plan

Get a Part-Time Job

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Remember To Also Sign Up For Medicare Part D

Whether you are currently taking prescription medications or not, you need to know the ins and outs of Medicare Part Dthe Medicare Prescription Drug Plan. Prescription drug coverage may be included as part of a Medicare Advantage plan. There are lots of options to compare. When you first enroll in Medicare, it’s important to plan for your future needs. Take the time to look into Medicare Part D prescription drug coverage.

Keep these 2 additional things in mind when enrolling in Medicare Part D:

  • If you don’t enroll in Medicare prescription drug coverage when first eligible, you may be hit with a late-enrollment penalty, which will apply for the rest of your life. If you waited for more than 63 days since you were first eligible for Part D coverage and did not have “creditable coverage” , you will be subject to permanent financial penalties of an additional 1% per month that you go without coverage. This penalty is added to the premium for the plan you enroll in.Tip: Don’t delay signing up for Medicare Part D if you don’t have other prescription drug coverage. Say you delay enrolling for 20 months from when you no longer have creditable prescription coverage when you finally sign up, your premium will be 20% higher.
  • Early Retirement Health Insurance Options

    For years, health insurance was a major roadblock to early retirement ...

    Retiring early can come with some changes to the benefits you receive. While a seniors Social Security benefits can be collected starting at the age of 62, Medicare benefits do not kick in until the age of 65.

    This means seniors need to bridge the gap in health insurance until Medicare can apply. While it may be more affordable to wait, having health insurance while aged 62 to 65 is crucial to avoid hefty medical fees.

    Fortunately, there are several ways to get health insurance for retirees under 65, including COBRA, short-term retirement insurance plans, Medicaid and marketplace plans.

    Different Workplace Insurance

    If your spouse is still working, you may be able to join their employer-sponsored health insurance plan. However, note that there may be cost implications, such as an increase in your spouses premiums. You may also get employer-sponsored insurance if you get another job after retirement.


    Under the Consolidated Omnibus Budget Reconciliation Act , employers are required to offer the option to let retirees continue their health benefits for a limited time. However, eligibility depends on your circumstances, such as if you voluntarily or involuntarily lose your job, reduce your hours worked, switch jobs or lose a spouse. Those who qualify will have to pay the premium or up to 102% of the policy’s cost.

    Short-Term Insurance


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    Cobra May Be A Good Option For You

    The Consolidated Omnibus Budget Reconciliation Act created a program that allows former employees, their spouses, and dependent children to continue receiving health insurance coverage from a former employer, but only applies to employers with 20 or more employees. Under COBRA, a retired employee can receive the same health insurance coverage for up to 18 months. But you must pay the entire premium – part of which your employer probably previously covered. In some cases, people who opt to use COBRA also have to pay an extra 2% to cover administrative fees associated with it. This can be an expensive option, but maybe worth it if you wish to maintain your current coverage for up to 18 months.

    How Do I Get Health Insurance When I Retire

    When you retire, you have multiple options for health insurance:

    • Medicare: When you turn 65, you are eligible for Medicare, an insurance program operated by the federal government.
    • COBRA: When you leave your job, you have the option of extending your employer-offered health benefits through the Consolidated Omnibus Budget Reconciliation Act . With COBRA, you can continue your coverage for 18 to 36 months.
    • Health Insurance Marketplace: You can purchase private insurance under the Affordable Care Act on
    • Short-term coverage: Private insurance companies often sell short-term coverage, which is a form of temporary insurance you can use to bridge the gap until other coverage goes into effect.

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    Retired Under Age 65 Directly From Active Employment

    You become eligible for health insurance on the first of the month following your 65th birthday. You must elect health insurance before the first day of the month following your 65th birthday. If your 65th birthday falls on the first day of a month, the effective date will be the first day of the following month. Evidence of insurability is not required.

    Health Care Coverage Through Part

    Health Insurance Options in Early Retirement
    • What it is: Insurance that comes with less-than-full-time employment.
    • Consider if: You can find a job with some employer benefits and want to keep working. But part-time jobs like this are rare.
    • Your retirement budget impact: Sometimes companies limit access to the health care coverage benefit to those working 30 hours.

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    Affordable Health Insurance For Retirees Under 65

    Medicare is only available for individuals 65 and older, which makes it critical for retirees under 65 to know how to bridge health insurance until Medicare starts.

    Compare Health Insurance Rates

    Ensure you’re getting the best rate for your health insurance. Compare quotes from the top insurance companies.

    Medicare is available to those 65 or older or those who are younger but disabled or have specific medical conditions like end-stage renal disease , amyotrophic lateral sclerosis , or a severe and persistent disability. However, the majority of people retire before they qualify for Medicare.

    Fortunately, early retirees have a host of options while waiting for Medicare to kick in. These include Medicaid, short-term health insurance, insurance through employment, COBRA or private marketplace plans all of which can vary in cost. Generally, marketplace health insurance for seniors without Medicare costs an average of $970 for 60-year-olds, but this can change depending on the level of coverage.

    Key Takeaways

    The most affordable health insurance for retirees under 65 is Medicaid. However, eligibility is based on your income.

    For seniors aged 60, the average cost of health insurance on the marketplace is $1,025 per month. A cheaper low coverage plan, however, can start at around $500 per month.

    Health insurance options for early retirees include Medicaid, COBRA, short-term insurance and marketplace policies.

    Private Health Insurance Coverage

    You certainly can get health insurance through private insurers on your own. Such policies often provide less coverage than more standard insurance policies you would get through the ACA, but they would also be much less expensive.

    Short-term health insurance can be a bridge until Medicare kicks in because you do not want to have a major health crisis and have no insurance to help with the high costs of medical care. A short-term health insurance policy can provide that kind of coverage to benefit your mental health and reduce anxiety.

    If you are several years away from age 65 when your Medicare coverage kicks in, you can buy long-term private health insurance. The cost will depend on your age, your location, your finances , the number of family members you are going to insure, and your health history.

    However, it is possible to get an estimated cost of your coverage at the website of nearly every private health insurance company. A bit of research on your own will save you time and allow you to make decisions before you consult with a private health insurer or a health insurance broker.

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    Best For Supplementing Medicare: Humana


    Humana offers excellent Medigap coverage with a user-friendly website and multiple plan options to choose from. It is our choice as the best Medigap provider for its customizable coverage options and the ability to keep the healthcare providers you trust.

    • Multiple plans to choose from

    • You can choose any healthcare provider.

    • Majority of your Medicare costs covered

    • Monthly premiums can be high.

    If youre 65 or older, you may not think you need additional coverage since you qualify for Medicare. However, a 65-year-old couple that retired in 2022 can expect to pay $315,000 in healthcare and medical expenses during their retirement.

    A Medigap policy can help cover your health costs, such as your Medicare deductibles, coinsurance, or copayments.

    Medigap policies dont include prescription drug coverage, and your monthly premium may be expensive. Humana is licensed to offer Medigap policies in most states, but check to see if plans are available where you live.

    Humana is one of the top Medigap providers, offering a user-friendly website that allows you to search through the companys Medigap plans easily. With a Humana Medigap policy, you can see any healthcare provider that accepts Medicare. Depending on which plan you choose, the majority of your Medicare costs may be covered. Humana has an A- rating from AM Best.

    Your Spouses Health Plan

    Retiring at 62? Ways to Cover Health Insurance in Your Early Retirement ...

    If your spouse is still working and has access to a health insurance plan that offers spousal coverage, youll be able to enroll in that plan when your own coverage terminates. Your loss of coverage will trigger a special enrollment period for your spouses plan, just as it does for a marketplace plan.

    Even if both you and your spouse were covered under your plan, youll both be able to transition to your spouses employers planassuming coverage is availablewhen your existing plan terminates.

    Note that if youre eligible to enroll in your spouses plan, youre likely not eligible for a premium subsidy for a marketplace plan. As long as your spouses coverage provides minimum value and is considered affordable for just the employee, the cost to add a spouse is not taken into consideration. This is known as the family glitch. But in good news for marketplace enrollees, the IRS is working on a fix for the family glitch that’s expected to be in place by 2023.

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    Can First Responders Get Medicare

    The term first responder can mean different things to different people. For the purposes of Medicare eligibility and the proposed legislation, a first responder includes people with the following jobs:

    • emergency medical technician or paramedic

    If youre in one of these occupations, you may have specific health concerns, including:

    • exposure to asbestos or other dangerous chemicals or substances
    • certain cancers

    First responders generally receive the same benefits as everyone else while actively employed. But when active employment ends, healthcare coverage ends as well. Plans like COBRA can help for a limited amount of time, but theyre often very expensive.

    Health Insurance Options For Early Retirees

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    People who retire early before age 65, when Medicare eligibility begins need to find a health insurance option that can cover them in the meantime. Even if you don’t retire too early for Medicare, a younger spouse might need coverage to bridge the gap until he or she can qualify, too.

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    Effects Of Access To Post

    Insured workers might hesitate before deciding to retire early , because of concerns about post-retirement health insurance. For many in their age bracket who might face high medical costs, the need to continue health insurance coverage can be especially important. For the near elderly who are considering early retirement, what are the choices in health insurance coverage, and how are those choices likely to influence their decision about early retirement and their health insurance coverage if they retire?

    RAND researchers Lynn Karoly and Jeannette Rogowski find that policy initiatives that aim to increase access to affordable post-retirement health insurance are likely to motivate some of the near elderly to retire early. In addition, with more options for obtaining post-retirement insurance, insured workers who do retire early are more likely to be insured after retirement.

    How Does The Marketplace Work

    ð´Affordable Health Insurance If I Retire Early Cost Saving Option for Retirement

    First and foremost, I recommend you work with a trusted, licensed health insurance agent to help you navigate the waters of the Marketplace, especially if youve only ever received health insurance through your employer. There is no additional cost to you to use an agent they will be compensated by the insurance company directly. You can then tell the agent any specifics you are looking for with your coverage and they can help narrow the available plans down to your liking.

    That being said, lets look at how this actually works.

    You can enroll in health insurance during open enrollment, which generally runs from November 1st December 15th for coverage starting January 1st of the following year. You also have the option to enroll during a special enrollment period, which is based upon major life events, such as a change in household or residence.

    As an early retiree, youll be rewarded a special enrollment period, so dont feel like your retirement date needs to line up with the open enrollment period. During this special enrollment, youll have a 60-day window to enroll through the Marketplace.

    During enrollment, you will fill out an application with basic personal information. Included with this application, you will give them your best estimate on what your income will be for the coming year .

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    Planning Ahead For Future Costs

    After your immediate health-coverage needs are sorted out, itâs a good idea to talk with your financial advisor about ways you might prepare for your long-term health care needs, says Storey. The cost of regular health care is often dwarfed by the cost of long-term care, which can easily top six figures per year8 and isnât, for the most part, covered by Medicare. Seventy percent of Americans who are currently age 65 or older will require some type of long-term care during their lifetime9, and long-term care insurance premiums increase the older you are when you apply for coverage. If you havenât already purchased it, your financial advisor can help you determine whether long-term care insurance makes sense for you or your spouse, factoring in age, medical history and other considerations.

    In addition, if you know youâre about to leave the workforce â whether youâve decided to take early retirement or you believe a layoff is imminent â itâs a good idea to ask your doctor and your dentist whether there are any procedures they would recommend you take care of while youâre still covered by your employerâs health plan.

    And, of course, it canât hurt to start exercising and eating right, if youâre not already. As Storey notes, âThe best health insurance is staying healthy.â

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