Health Insurance for Retirees Under 65: What Are Your Options?

Retiring before you’re 65 might sound like a dream, until you’re faced with the health insurance coverage gap. You thought you left the daily grind behind and were on your way to living life on your terms, then reality sets in: you’re no longer covered by an employer group plan, and you are too young for Medicare. At the same time, the costs of premiums can shock you.

There’s good news for you, though. You have choices: health insurance marketplace, COBRA, health savings accounts, and so on. However, the key is finding the best option that suits your budget, schedule, and health condition. Let’s compare your health insurance options so you can enjoy retirement without losing sleep over potential medical bills.

Health Coverage Options for Early Retirees

So, what are your options once the employer plan is no longer available? Here are some ways to stay insured: 

1. Marketplace Health Insurance (ACA Plans) 

If you retire before age 65, a Health Insurance Marketplace plan might be your best option. These Affordable Care Act (ACA) health plans provide coverage for all your essential health care services, including prescriptions, preventive care, hospital visits, and more. These plans are not allowed to exclude you for any preexisting conditions and, like other insurance policies, they offer several tiers of coverage to choose from. 

Plans are categorized as Bronze, Silver, Gold, and Platinum based on the level of coverage and the services they provide. The advantage here is that your retirement income may still qualify you for government subsidies, which can lower your monthly premium.

2. COBRA Continuation Coverage 

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that allows you to continue your employer’s health insurance coverage for a set period after you retire, typically 18 months. You have to pay the entire premium yourself, but it’s an easy way to maintain the same coverage and doctors you’ve always had while you research your long-term choices. There’s no gap in coverage, no new forms to fill out, and no health questions. 

Of course, COBRA is only a temporary measure. It’s best used for a few months while you’re just months away from 65 or planning to enroll in an ACA plan later in the year. Your premium costs may be high, so be sure to compare them with the expenses of Marketplace plans before making your decision.

3. Spouse’s Employer-Sponsored Plan 

If your spouse is still working, one of the easiest and least expensive solutions may be for you to join their employer’s health plan. Many employers permit spouses to be added to the plan during open enrollment or in response to a qualifying life event, such as retirement. 

The coverage is often less expensive than an individual health plan, and it’s convenient, since your premiums are deducted directly from your spouse’s paycheck. Check to see how much the employer pays toward the cost of covering dependents. Also, ensure the plan includes your preferred doctors and hospitals. 

4. Part-Time Job With Health Benefits 

Some companies provide health insurance for part-time employees, and if you can find one that does, it’s a pretty smart option. Retail store chains and universities often offer part-time work for seniors with access to group health plans. Hospitals have this too, though less so now. 

Generally, you’ll need to work a certain number of hours each week, but in exchange, you’ll get the benefit of group rates and an employer contribution, both of which you won’t get with an individual plan. This is a good option for early retirees looking for structure or social interaction. The added benefit is that you will make a little extra money while keeping healthcare costs low.

5. Private Health Insurance Plans

Another option is to purchase directly from a private insurance company. You are not limited to the coverage levels and add-ons offered through the ACA Marketplace. Depending on the insurer, you may have a wider variety of networks to choose from, as well as extras such as dental or vision coverage. Keep in mind that private plans will be more expensive because the ACA does not subsidize them. 

The significant advantage, though, is customization. You can find a plan that is a closer fit to your lifestyle, health needs, and travel plans. Some insurers, for example, offer a wider nationwide network or better international coverage for nomads and retirees on the go. However, be sure to compare quotes and read the fine print, as companies vary significantly in their premiums and deductibles.

6. Health Savings Account (HSA) Paired with a High-Deductible Plan

If you are relatively healthy and seeking to keep premiums low, consider pairing a high-deductible health plan with a Health Savings Account. You’ll have lower monthly premiums, but the trade-off is a higher deductible. The HSA allows you to save pretax dollars to pay for medical expenses, and any unused funds roll over year to year, including into retirement. 

After 65, you can even use the account for non-medical expenses (taxed as income, with no penalties). It’s a good option for those who prefer more control over their spending and are willing to pay out of pocket for smaller expenses. You can think of it as setting aside a personal safety fund for health costs while saving on taxes.

Conclusion

Retiring early means you can spend your days as you please, but it also means you’re on your own when it comes to health insurance. The silver lining is that you have several choices. ACA plans, COBRA, and private health insurance carriers offer policies for retirees. The goal is to find one that matches your health needs and budget, and provides you with peace of mind in the event of an unexpected medical issue.