If you want to retire before age 65 or are forced to retire due to health issues, downsizing, or family circumstances, what will you do for health insurance until you qualify for Medicare? Many Americans retire before the age of 65, whether through choice or necessity. And health insurance for these early retirees is typically more expensive than they expected. A couple’s monthly coverage premiums might range between $1,700 and $2,200. However, this is dependent on where they live, their age, and the source of their insurance. In addition to premiums, there are deductibles, copays, prescriptions, and coinsurance payments, which can add hundreds of dollars to the overall cost.
Covering Life Insurance
Many people continue to work because they of health insurance, even if they want to retire earlier and have enough money. Before the Affordable Care Act, patients with serious pre-existing conditions were regularly denied self-purchased coverage. Self-purchased coverage is now available in every state, regardless of medical history. The Affordable Care Act also includes income-based subsidies, which make insurance far more affordable than it would otherwise be.
Meanwhile, the Affordable Care Act was strengthened by the American Rescue Plan (ARP) and the Inflation Reduction Act, up until the end of 2025. However, to extend it into the future, Congress would need to pass another legislation. The majority of Americans* get their health insurance through their jobs. A direct move from employer-sponsored health insurance to Medicare is a common practice. Depending on their circumstances, many people—retired or still working—may be able to continue receiving supplemental coverage from their employers until they qualify for Medicare. If you need or want to retire before the age of 65, you should consider a few healthcare options in the meantime. Today, we’ll talk about each one:
State Health Insurance Marketplace
As a result of the Affordable Care Act, each state now has a health insurance marketplace/exchange where private individual and family health plans can be purchased. These plans are all assured-issue. This means you can join regardless of your medical history, and any pre-existing conditions will be covered the moment your plan goes into effect. Enrollment is limited to the annual open enrollment period or a special enrollment period triggered by a qualifying event. You may be able to switch to a plan on the marketplace after leaving your job and the termination of your employer-sponsored health plan.
Premium Subsidies
The Affordable Care Act provides income-based premium tax credits (premium subsidies) through your state’s marketplace or exchange. The majority of consumers who buy health insurance through the marketplace receive these subsidies. They cover a significant portion of the premiums. The American Rescue Plan and Inflation Reduction Act extended the scope and availability of these subsidies through 2025. Subsidies now account for a larger share of total premiums. Furthermore, the income limit for subsidy eligibility, which was previously set at 400% of the poverty line, has been temporarily abolished. Congress could choose to prolong these provisions beyond 2025. If they don’t, however, the income eligibility for premium tax credits will be reset to 400% of the poverty line.
COBRA or State Continuation
Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage may be worth considering if you are eligible. This will depend on a number of factors, including:
- How long it will take before you become eligible for Medicare
- How you have spent on out-of-pocket expenses this year
- Are you qualified for subsidies in the marketplace or exchange?
- Will you be able to keep your existing medical providers if you change plans?
- If you can afford to pay the entire cost for your coverage while on COBRA
However, if you’ve already reached your out-of-pocket maximum for the year or are in the middle of complex medical treatment, and don’t want to worry about switching health insurance, COBRA or state continuation can be extremely beneficial.
Your Spouse’s Health Plan
If your spouse is currently employed and has access to a health insurance plan that includes spousal coverage, you can transfer to it once your current coverage expires. The termination of your coverage will result in a unique registration period for your spouse’s plan. Even if your plan previously covered both you and your spouse, you can transfer to your spouse’s plan once your current one expires. This assumes, of course, that coverage is accessible. It is important to note, however, that if you are qualified to enroll in your spouse’s plan, you may not qualify for a marketplace premium subsidy. The IRS addressed the “family glitch” in 2023.
Medicaid
If your income drops significantly after retirement, you may be eligible for Medicaid. In most states, adults under the age of 65 who earn less than 138% of the poverty line are eligible. Medicaid eligibility can be assessed based on monthly income (unlike Marketplace premium subsidies, which are only based on annual income). So, if your monthly income does not exceed one-twelfth of the yearly income maximum for Medicaid eligibility, you may be eligible for coverage regardless of how much you made earlier in the year.
Where to Learn More
Visit HealthCare.gov to learn about your choices for early retirement. If your state has its own exchange, you will be referred there. You can compare your options, and browse the various plans by age, zip code, tobacco status, and income. If you are presently receiving medical care, make sure to review the applicable provider networks and prescription formularies. Even if they’re offered by the same carrier, don’t expect they’ll be necessarily the same as your existing plan.
If you retire before the age of 65, you will have various choices for health insurance until you become eligible for Medicare. Your specific circumstances will dictate which solutions are best for you. Alternatively, depending on your situation, you may decide that it is best to simply keep working until you are eligible. This allows you to continue using your employer-sponsored health insurance. If you need to retire sooner, one of these options will probably provide you with reasonable health insurance.
*Source: The Wall Street Journal