Retirement Before Age 65: Health Insurance Options
US citizens are eligible for Medicare at age 65, but what if you want to retire before then? Below are the options that are available. Determining the best option for you will vary based upon your health, the length of coverage needed and your budget. There are no singular issues when dealing with a retirement plan and it will be important to consider health insurance as a part of your overall retirement plan.
Continued Coverage Through Your Employer
If you’re retiring from an employer with more than 20 employees and you were receiving health insurance through your employer, you are allowed to purchase continued coverage through COBRA.
The coverage will be the same plan as before you retired, but you will be paying for the coverage to continue. The premium you will have to pay cannot exceed 102% of the cost of the plan.
The downside of this option (other than the possibility of high costs) is that the coverage can only last for 18 months.
If COBRA coverage is available, the cost should be compared to a similar plan available through the Health Insurance Marketplace (see next section).
The COBRA coverage probably makes the most sense if you are retiring a few months before age 65. The convenience of COBRA in that situation will likely outweigh any of the downsides.
It also may be worth using COBRA if you are retiring in the middle of the year and have already met (or are close to meeting) your deductible. In this case, you could continue coverage through the end of the year and then switch to a new plan.
Coverage Through The Health Insurance Marketplace
The Affordable Care Act changed the landscape for those retiring before Medicare eligibility as it increased the availability of plans and removed the issue of pre-existing conditions. It also set limits on the costs that older buyers can pay (no more than triple the premium that a 21-year-old would pay).
Additionally, it may be possible to get subsidies based upon your income.
There are a lot of variables that make choosing a plan difficult. This checklist can be a helpful tool to compare your options beyond looking at the premium:
- What are the deductibles or coinsurance payments?
- Is there a maximum limit on out-of-pocket costs?
- Can you see your current doctor or seek treatment in the same hospitals?
- How often can you expect a premium change?
- Are prescription drugs covered?
- Does the plan offer dental, vision, and/or hearing coverage?
- What is the impact on your spouse?
Other Options
While COBRA or coverage through the health insurance marketplace are the most likely options to be chosen, there are several others that deserve to be mentioned including:
- Coverage through a spouse’s plan – this is not likely to be a viable option unless only one of you were looking to retire.
- Coverage through part-time work – there are several large employers that offer healthcare benefits for part-time workers.
- If you have retired due to disability you will be eligible for Medicare after 24 months although some illnesses, such as ALS, do not require a waiting period.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.