Early retirement and health insurance

According to a survey conducted by the Employee Benefit Research Institute, fewer Americans are retiring early. In fact, it’s estimated that only about 13% of workers expect to leave the workforce before turning 65. And it makes sense – there are a lot of important factors to consider before you can take that leap.

These may include your household budget, financial situation, health status, years left until you’re eligible for Social Security and Medicare, and much more. One of the most important things to consider is your health insurance. What are your early retirement health insurance options? How do you get insurance? Is it expensive? Will it provide the coverage you need?

This article covers health insurance for early retirees, including common insurance plan choices, average costs, when to enroll and more.

This is a common question among early retirees and with good reason. It’s possible to receive Social Security benefits at age 62 before you reach full retirement age – so is it the same for Medicare? Unfortunately, no. Medicare isn’t an option for early retirees. You’re only eligible to enroll in Medicare if you’re 65 years old or you experience a qualifying disability.

Health insurance costs for early retirees

Health care costs can add up fast, especially if you’re uninsured. And as you age, access to quality, affordable health care becomes more and more important. That’s why having health coverage is so critical. But how much does health insurance cost for early retirees?

According to a 2020 study, an individual plan can cost up to $5,500 each year – and closer to $14,000 for a family plan. For a retiree on a budget, that can be a big expense. But there are plenty of affordable options you can consider, and you might even qualify for assistance. Because of the Affordable Care Act (ACA), if you purchase insurance through the health insurance marketplace, you may be eligible for a premium tax credit that lowers your monthly premium.

Before looking at plan options, you should organize your budget and your health requirements. Make a list of your current and possible future health care needs, including chronic conditions and medicines. Then, look at your budget in terms of overall insurance costs. Come up with an estimate you think will fit your financial situation. Make sure to consider the out-of-pocket costs, such as monthly premiums, deductibles, copayments and coinsurance rates, and what kind of maximum out-of-pocket payment you can cover.

How do people who retire early get health insurance?

Now that we know what it might cost, let’s look at how you can find the coverage you need. Even though Medicare isn’t a possibility yet, there are still many types of health insurance plans for retirees under 65 to consider.

Get a private health insurance plan

Some private health insurance providers, like HealthPartners, offer affordable individual and family coverage options. These plans aren’t typically offered through your state’s Health Insurance Marketplace and can vary in price. Instead, you’ll work directly with an insurance provider or broker to find the kind of plan that works best for you.

Explore the Health Insurance Marketplace

There are many insurance options available for seniors to consider in the health insurance marketplace – an online exchange where you can shop for individual and family health coverage. Different insurers offer plans through the marketplace, so you can compare prices, coverage limitations and benefits at your own pace. In Minnesota, the health insurance marketplace is called MNsure. However, some states don’t have their own exchange and instead use the federal marketplace.

Get covered via your spouse’s plan

Is your spouse still working? If so, joining their employer-sponsored health plan may be an option. This is often a more affordable method for getting health insurance. However, it will increase the cost of your spouse’s premium. If their employer doesn’t contribute much to overall costs, this can quickly become expensive. As you gear up for retirement, ask your spouse to investigate cost changes and coverage options before adding you to their plan.

Find coverage through part-time work

A lot of seniors find themselves working part-time during retirement – whether it’s for financial reasons, a need for structure or access to health insurance. If you work part time, you might be able to join your employer’s health plan. However, this isn’t always guaranteed, as not every employer offers health insurance for part-time workers, and if they do, it might be reduced coverage.

Extend your coverage with COBRA

COBRA, known as the Consolidated Omnibus Budget Reconciliation Act, is a good temporary health insurance option for early retirees. Through COBRA, you can continue receiving health insurance benefits for up to 18 months. However, this option can get expensive – it’s why many choose to go with more affordable alternatives. Under COBRA, your past employer doesn’t have to contribute to premium costs, and that amount is your responsibility – you may even have to pay an extra processing fee.

Enroll in Medicaid

For early retirees with limited household income, Medicaid can be a helpful option. Eligibility requirements, often tied to average monthly income, can vary by state. To find out if you’re eligible, check with your state’s Medicaid offices.

When to enroll in a health plan as an early retiree

When you retire, do you have to wait for the Open Enrollment Period (OEP) starting in November to get on a new plan? No, you can enroll as soon as you retire. Retirement is technically considered a loss of employer-sponsored health insurance. This means that retiring early constitutes as a qualifying life event that triggers a Special Enrollment Period (SEP).

The time frame for an SEP varies depending on where you live. In most cases, you will likely have 60 days after you officially retire to enroll in a new plan. Some states may even allow you to enroll 60 days before your retirement. Make sure to check your state’s eligibility requirements and timelines well before your retirement date so you can have as much time as possible to get situated.

Have more questions about individual health insurance?

Our experts will help you find a health plan you’re confident in – no matter your situation.