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Retiring early has many benefits: more time to travel, pursue new business opportunities, and spend time with family and friends. However, if you leave your job before age 65, you will likely lose access to your employer's health insurance plan. You can still get coverage - for example, through a spouse, a new employer, or on the health insurance marketplace. But it may not be very cheap.
Still, staying insured is usually worth it - especially as you age. According to a recent study by the Consumer Financial Protection Bureau, uninsured Americans age 65 and older owe about 20% more in unpaid medical bills than those who are insured.
If you want to cover the gap between early retirement and Medicaid, here are the top health insurance options you should explore.
Option 1: Insurance of retirees at the expense of employees
As you prepare for retirement, ask your employer if they offer health insurance for early retirees. This has become less common in the last decade, thanks in part to the rising cost of health insurance, but it's possible that you may have some coverage at your former place of employment. The federal government offers retirement benefits to eligible retirees through the Federal Employees Health Insurance Program. Academic institutions such as Johns Hopkins University and the University of Michigan also offer similar coverage.
This is the easiest option for early retirees and requires minimal effort on your part. While most won't have this option, it's worth making sure you're not entitled to it before considering other alternatives.
Option 2: Your spouse's health insurance.
If you are married to someone who has health insurance through their employer, you can get coverage through their job. (This is exactly what I did when I quit my full-time job to pursue freelance writing).
You may not even need to be married to qualify, as some companies and states, such as New York, offer insurance to civil partners or civil unions. Not all companies provide this insurance, but if you live with a partner, it's worth asking them if you can be included in the coverage.
This option, along with maintaining employer health insurance after retirement, is one of the most inexpensive options available until age 65.
Option 3: COBRA
Most companies with 20 or more employees are required to offer insurance renewal when you leave your permanent job thanks to the Consolidated Omnibus Budget Reconciliation Act, or COBRA. COBRA allows you to keep the same coverage you received while employed, including benefits for a spouse or dependents. The downside? You're responsible for paying all the bills, and it may not be cheap.
The average cost ranges from $400 to more than $2,000 per month. How much you pay depends on factors such as the insurance company, where you live, how many people are covered, and whether you have extras such as basic and dental coverage. In some cases, you will have to pay a little extra if you smoke.
When I left my previous job, my COBRA rate was about $800 a month for a single adult. Prior to that, I was only paying $250. My husband and I opted to use his employer's insurance, which was about $400 a month for the two of us.
Although COBRA is designed as a short-term solution, you can stay in it for up to three years. If you don't have a partner or job that offers early retirement insurance, COBRA may be a good choice, especially if you need broad coverage. Because employers offer group insurance, they can often offer you more robust coverage at a lower rate than if you were to buy health insurance on your own.
Option 4: Insurance in the ACA marketplace
If COBRA benefits are too high, you can go to the Affordable Care Act's health insurance marketplace to purchase a more affordable plan on your own. Buying insurance through the ACA marketplace has a number of advantages. The ACA also ensures that your plan meets certain standards. All plans on the ACA marketplace are required to cover pre-existing conditions and cannot have lifetime limits on medical expenses.
Plans typically cost between $300 and $800 per month. Some plans can exceed $1,000, although such high prices are rare for early retirees. Each state operates a different market, so plans and costs vary depending on where you live, as well as other factors such as the size of the deductible, the type of plan you choose, and the number of dependents you plan to include in the plan.
However, you may qualify for a tax deduction for premiums if your income is below 400% of the federal poverty level, which will lower your monthly premium. Depending on your state, income and family size, you may also qualify for additional savings. Enter your state, family size and income into the HealthCare.gov savings calculator to see if you qualify.
How to get insurance through the ACA marketplace
Generally, you can only sign up for a new plan during the open enrollment period at the end of the year. However, new retirees are eligible for a special enrollment period: You can purchase a new health insurance policy if you do so within 30 days of leaving your job.
You have three ways to enroll in Marketplace insurance:
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Enroll online. Create an account at HealthCare.gov, compare plans for which you are eligible, and apply through the marketplace.
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Sign up by phone. Call the marketplace toll-free at 800-318-2596. This number is available 24 hours a day, 7 days a week (except holidays).
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Register by mail. Complete and print the Health Insurance Marketplace application and mail it to Health Insurance Marketplace, Dept. of Health and Human Services, 465 Industrial Blvd., London, KY 40750-0001.
You can also find local help if you need guidance, or use a third party to complete the application for you. If you decide to pursue consulting after retirement, you can also sign up for ACA health insurance through the Small Business Health Options Program marketplace, otherwise known as SHOP.
Can I drop my insurance in the ACA marketplace when I become eligible for Medicare?
Yes. You can use your plan in the marketplace to cover the gap and drop it as soon as you become eligible. Those who are newly eligible for Medicare can enroll starting three months before you turn 65 and ending three months after that.
Option 5: Part-time employment insurance
Some companies offer health insurance even to part-time workers. These are usually large corporations that rely heavily on hourly wages, such as big-box stores or coffee chains.
But to qualify for coverage, you have to work a certain number of hours every few months, usually the equivalent of 20 hours a week. With this kind of shift work, there is often no guarantee that you will work exactly that many hours per week, so there is a chance that you could lose your right to insurance at any time. Working for a union may offer better coverage and more protection.
Companies that offer insurance to part-time employees
Here are some great companies that offer insurance to part-time employees:
JP Morgan Chase offers a comprehensive benefits package to employees who work at least 20 hours per week. For part-time employees, you must work for the company for at least 60 days to qualify for coverage.
Starbucks offers health insurance and many other benefits to part-time employees after you have worked at least 240 hours for three consecutive months. You must work at least 520 hours every six months to remain eligible for benefits.
American Red Cross offers health insurance through Cigna to all employees who regularly work more than 20 hours per week.
Staples offers a reduced version of medical and dental benefits for part-time employees, in addition to other benefits such as pet insurance.
Your local government may also offer insurance to employees who work at least 20 hours a week.
Option 6: Medicaid
If your income has decreased in the last year, you may be eligible for Medicaid. It depends on where you live: Although Medicaid is a federal program, you apply for it through your state government, which has its own criteria. Medicaid is generally free and covers medical bills retroactively, starting 90 days before the program officially begins.
Generally, your eligibility is based on your modified adjusted gross income (MAGI). If your income is too high but you have a medical condition that requires care, you may fall into the "medically needy" category. In this case, you have the option of reducing your income until you reach the MAGI cutoff for this type of Medicaid.
However, qualifying for Medicaid can be a challenge if you rely on your retirement account as income, which Medicaid considers an asset. It may be worth consulting with an attorney who specializes in elder law to help you understand the process.
Option 7: Short-term health insurance
Short-term health insurance is a type of health insurance available outside of the ACA marketplace. With monthly costs ranging from $100 to $300, these plans may seem like a bargain. They are also available outside of open or special enrollment periods.
However, they don't offer the same coverage as a standard plan on the marketplace and can leave you facing huge medical bills in the event of unforeseen circumstances. This is why they are sometimes referred to as "substandard insurance." Thanks to recent legislation, these plans may also only cover you for three months with a one-time one-month extension.
Option 8: Remain uninsured
While you can technically go without health insurance, doing so is not recommended. True, you will no longer have to pay ACA-related penalties for going uninsured, but it's still a risky option. In addition to pricing medical services and prescriptions based on the fact that patients are insured, a Wall Street Journal investigation found that many healthcare providers are charging uninsured patients higher rates than insurance companies. This is because large insurance companies have more leverage than individuals when it comes to negotiating how much they pay for care.
This may not be the case at public or non-profit hospitals - many offer "charity care" at reduced prices or even free for low-income patients. If you go to a hospital without insurance, always discuss medical bills before you pay them.
How much do I have to pay for health care as a senior citizen?
According to Fidelity's 2024 report, retirees will have to pay an average of $165,500 in health insurance and medical expenses. And that's if you retire at age 65.
Early retirees can expect to have to pay even more, especially if you use Social Security or other retirement funds to cover costs before you become eligible for Medicare.
Fortunately, the Inflation Reduction Act put limits on how much you'll pay under the Medicare program. Starting in 2025, there is a $2,000 cap on prescriptions - including $35 per month for insulin prescriptions.
Can I use my HSA if I retire early?
Yes, you can use a health savings account (or HSA) if you are retiring early. HSAs allow you to deposit pre-tax dollars into a savings account that can only be used for eligible medical and health expenses. Once you turn 65, you can also use these funds for non-medical expenses.
In 2024, you can contribute up to $4,150 if you have an individual plan or $8,300 for a family plan. People over age 55 can contribute an additional $1,000 per year. However, to qualify for an HSA, you must have a high-deductible plan. As defined by the IRS, this is a plan with a deductible of at least $1,600 for individuals and $3,200 for families, with expenses not to exceed $8,050 for individuals or $16,001 for families.
What are the HSA contribution limits for 2025?
In August, the IRS released inflation-adjusted HSA amounts for 2025, with contribution limits of up to $4,300 for an individual plan or $8,550 for a family plan. For 2025, the IRS defines high-deductible plans as those that do not exceed $8,300 for individual plans or $16,600 for family plans.
I participate in the COBRA program. Can I opt out of COBRA and enroll in the Marketplace instead?
In general, yes. But when you can switch from COBRA to a Marketplace plan depends on whether you're in the open enrollment period or about to lose COBRA:
During open enrollment - November 1 through January 15 in most states - you can switch from COBRA to the marketplace without restrictions.
During the open enrollment period , you can only switch from COBRA to the marketplace if your COBRA expires, your former employer stopped contributing to COBRA, or you lose a government subsidy that would result in you having to pay the full cost. In these cases, you are eligible for special enrollment.
Are there organizations that provide health care for early retirees?
No. There is a common misconception that senior-focused organizations offer health insurance, but this is not true. However, while you cannot get health insurance through these organizations, you can access health-related benefits.
For example, AARP offers its members dental insurance and discounts on prescription drugs. Joining AARP also gives you access to reduced prices on physical therapy, hearing aids, gym memberships and more.
What is a health insurance plan - and should I join one?
Also known as health care sharing ministers, health care sharing plans are an alternative to traditional insurance where members of an organization voluntarily contribute to the health care costs of other members. They are most often offered by faith-based organizations and do not have the same consumer guarantees as a standard health insurance plan.
While the idea of sharing costs with your neighbor may sound nice, these plans may not be as helpful as they seem. According to CBS News, a May 2023 report found that enrollees had to exhaust all other avenues for health care costs, such as applying for Medicaid and funding through charities, before they could access the funds. According to the report, only about a third of requests for coverage were approved in 2021, and some users who did get coverage said it took years.