Are you getting ready to live the dream of early retirement? If so, you have a lot of company. In fact, 38 percent of Americans under age 54 say they plan to retire by age 55, according to a 2021 survey by the research firm Hearts and Wallets. So if you’re planning to turn this major chapter on your life before the standard retirement age, then congratulations!
Early retirement brings plenty to think about, however. One of your pressing concerns should be making sure you have health insurance. As you won’t be eligible for Medicare until age 65, you may have a gap of several years between your date of retirement and the date your government health insurance kicks in.
The good news? There are several options you can explore to keep you insured during these years, including COBRA, government marketplace plans, and more. Here are just a few.
Keep your employer’s group health insurance
If you’ve enjoyed the benefit of group health insurance through your employer, it’s worth checking to see if you can keep your coverage after you retire. According to a 2019 report by the Kaiser Family Foundation, 28 percent of large companies (which are required by law to provide group health insurance to active employees) continue to offer coverage to their retired employees, at least until eligibility for Medicare begins.
Contact your company’s human resources department to find out if the retiree coverage option is available to you.
If your employer doesn’t offer retiree coverage, it may offer you insurance through the Consolidated Omnibus Budget Reconciliation Act (COBRA).
COBRA was developed to help people remain insured for a short period of time after leaving their employment (whether they’re terminated, or leave on their own volition). Basically, you’ll get to keep your employer-provided coverage for up to 18 months after you retire. The catch is that you’ll have to pay the full premium and any administrative fees — your employer will no longer contribute. COBRA policies are thus quite expensive.
So think of COBRA as a bridge to stay insured until you get new coverage, either through Medicare or through one of the other methods described in this article. Contact your company’s human resources department to see if this option is available.
Your spouse’s group health insurance
If your spouse works for a company that provides a group health insurance benefit, it may be worth checking to see if you can be insured on their policy as a dependent.
Timing comes into play here. Your spouse will need to continue to be employed and covered with a group health insurance plan. Even if dependent coverage is available, you might not be able to enroll until the company’s open enrollment period. This usually takes place near the end of the calendar year, for coverage in the following year.
Of course, if at some point your spouse decides to join you in early retirement, you’ll once again need to review your health insurance options. Ask your spouse to check with their company’s human resources department to find out if coverage might be available.
Health insurance through a government exchange
You can also shop for a policy on a government-run online exchange. The U.S. federal government’s exchange is at healthcare.gov. Additionally, 15 states (as of 2021) run their own exchanges.
With an online exchange, you’ll key in some information about yourself, then will be presented with policy quotes from multiple health insurance companies. These companies are required to offer policies with multiple coverage options and premium levels, so you’ll likely have several choices to consider. Once you’ve chosen a policy, you’ll be able to complete the purchase online.
Another advantage of buying a policy through an exchange is the availability of tax credits and government subsidies. These credits and subsidies can help bring down your total insurance cost. However, know that there may be some limitations on these credits if you decide to purchase a policy through an exchange when you’re also eligible for retiree coverage from your employer.
As an early retiree, you’ll qualify for special enrollment with the federal government’s exchange. This means you won’t have to wait until the year-end open enrollment period to purchase a policy.
Health insurance outside of a government exchange
You can also consider buying a policy from a health insurance company that does not participate in a government exchange. In this case, you’ll buy directly from the company; through a health insurance agent or broker; or through an online, independent health insurance marketplace.
Companies selling policies this way are not required to provide multiple prices. While this means you’ll have fewer options, it may also mean you’ll find a policy cheaper than any of the options on the government run exchange. Note, however, that you’ll be ineligible for any tax credits or subsidies.
Insurance through a faith-based health sharing plan
With a health sharing plan, you’ll be joining a pool with other members of your faith-based organization to share the costs of group insurance. You’ll pay a monthly contribution, which may be lower than the average health insurance premium.
Be aware, however, that these plans may exclude preexisting conditions and restrict long term prescription coverage. So if you have a chronic condition or need certain medications, you could end up paying some of your healthcare costs out of pocket. Check with your faith organization to see if this option is available to you.
Get a part-time job that offers health insurance
For many, early retirement doesn’t necessarily mean they’re no longer working. Often, it can be about taking a part-time job in a less stressful, non-corporate environment; more of a “shifting gears” than a complete stoppage.
If this is your approach, be sure to consider employers who offer health insurance. Just be aware that coverage may be contingent on your working a certain number of days or hours per week to qualify.
Prevention is worth a pound of cure
While perhaps not a health insurance option in the strictest sense, it’s important that you take care of your physical and mental health after you retire. According to the U.S. Department of Health and Human Services, average annual healthcare costs for those aged 45 to 64 are more than double the costs for those aged 18-44.
So be sure to exercise and stay active, eat right, see your doctor regularly and follow their instructions. Make your early retirement something you can enjoy to the fullest, rather than a time to stress over health issues and how to pay for them.