4 Ways to Get Health Coverage If You Retire Before 65
Is this you?
- You are not yet 65 years old.
- You are retiring early.
- You need health insurance.
If it is, congratulations!
The old standby that people retire when they turn 65 years of age no longer holds true. For one reason or another, people are hanging up their work boots well before they reach that age when Medicare kicks in.
What is the problem then? The problem is when you quit working, you gave up health benefits from your employer. But because you have not yet reached the age of 65, you are too young to qualify for Medicare and you need insurance to cover your medical costs until you hit 65. Finding health insurance for early retirees is job No. 1.
It is possible that you have been forced into retirement, and your need for health insurance coverage is even more dire because you may need it quickly. On the flip side of this, you may have been offered an early retirement package that includes health care. Consider yourself lucky if this is the case.
Other Coverage Scenarios
There are standard answers to the question of how early retirees can get medical coverage. If your spouse or partner has medical insurance, you can move your coverage needs to that policy. This is the best possible scenario for many people but not a reality for single folks or those whose partners don’t work or do not have insurance from a job. They may have been depending on you for their own health insurance needs.
Another option is to extend your employer’s insurance benefits through COBRA for 18 months, although that is expensive.
The cost of COBRA averages from $400 to $700 per person per month. If you are going to depend on COBRA to cover health care for your family, you must figure your costs based on the number of people the coverage is designed to protect. More on that is in the COBRA section below.
4 Options for Health Insurance for Early Retirees
Health benefits are a big consideration when you leave a job and this is especially true of older Americans who likely need more health care. It will take some work by you to figure out the best option for you and your wallet.
The following information about each option can point you in the right direction.
1. Don’t Retire Completely
“Retire’’ means different things to different people. You may be interested in accepting a part-time job that offers benefits that include medical insurance.
Do such jobs exist? The answer is yes. We found seven places, including the federal government, that offer benefits to people who work part time.
According to the rules of the Affordable Care Act, companies of a certain size must offer their employees health coverage if they work 30 hours a week or more. But some employers who depend on part-time workers who work fewer than 30 hours a week actually trumpet the fact that they offer part-timers health benefits.
Costco and United Parcel Service are among the largest places that offer health insurance coverage to part-time employees.
2. Get Private Health Insurance Coverage
You certainly can get health insurance through private insurers on your own. Such policies often provide less coverage than more standard insurance policies you would get through the ACA, but they would also be much less expensive.
Short-term health insurance can be a bridge until Medicare kicks in because you do not want to have a major health crisis and have no insurance to help with the high costs of medical care. A short-term health insurance policy can provide that kind of coverage to benefit your mental health and reduce anxiety.
If you are several years away from age 65 when your Medicare coverage kicks in, you can buy long-term private health insurance. The cost will depend on your age, your location, your finances (income and expenses), the number of family members you are going to insure, and your health history.
However, it is possible to get an estimated cost of your coverage at the website of nearly every private health insurance company. A bit of research on your own will save you time and allow you to make decisions before you consult with a private health insurer or a health insurance broker.
3. Get COBRA Coverage
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act and was designed for people exactly in your situation: those who have left a job either willingly or otherwise and are not eligible for Medicare or Medicaid.
COBRA is administered through the U.S. Department of Labor with the goal to prevent anyone from going without health insurance for the first 18 months after losing a job.
There is one advantage and two disadvantages to COBRA coverage. The advantage is that you get to keep all of your current doctors and other medical contacts because your coverage does not change. The two disadvantages are that COBRA only lasts for 18 months under most circumstances, and it is expensive, since the company is no longer covering their share of the costs.
COBRA is offered by employers with at least 20 employees to any employee who was covered by the employer-sponsored health insurance at the time of the loss of the job.
The former employees must receive notice of COBRA availability within 14 days of the qualifying event, and the former employee has 60 days to decide if they want to access COBRA. COBRA starts immediately upon accepted signup.
4. Find Coverage Through The Affordable Care Act
The Affordable Care Act was designed for people who do not get healthcare through their employer, a population that has grown over the years as companies have gone to more contract or freelance employees than full-time ones.
The health insurance marketplace can be complicated, and there is a tight window of two months — Nov. 15 to Jan. 15 — when the open enrollment period is in operation. If you sign up by Dec. 15, your coverage usually begins Jan. 1.
There are four tiers of coverage under the ACA — Bronze, Silver, Gold and Platinum. Those tiers differentiate themselves by how much insurance covers (60 percent for Bronze up to 90 percent for Platinum) once you have exhausted your deductible.
The average cost of Bronze coverage (lowest premiums, highest deductibles) for 2021 was $374 a month, and the average cost for Gold coverage (higher premiums, lower deductibles) was $502. In California, the average cost was $487 per person, and in Florida the average was $467.
The best way to attack the health insurance marketplace is to do your due diligence by determining just what you believe you are going to need in terms of coverage before you reach the age where you are eligible for Medicare.
Here is an easy to use marketplace cost calculator.
Help With ACA Plans
The ACA website provides chat capabilities for anyone with questions about acquiring health insurance through the federal marketplace.
There are also private agents and brokers who can help find insurance for people who do not have employer-sponsored insurance and are too young to qualify for Medicare.
The federal website healthcare.gov explains the difference between an agent and a broker (agents usually work for one firm, while brokers can compare rates for you from several private insurance companies) and provides a link to a list of approved agents and brokers in your area.
For the best result, have all of your information in front of you, from personal financial and health history to the needs you have for health insurance coverage.
Frequently Asked Questions (FAQs)
There is a federal law that states that your health insurance coverage cannot be more than 8.3% of your household income. According to AARP, that means a household with an annual income of $50,000 would pay as much as $346 a month or $4,150 annually. But all plans, whether through the ACA or from private insurers, vary depending on how much you want to pay in premiums versus how much you want to pay when you get medical service. Basically, the more you pay in premiums means the more insurance covers when you have a medical cost. The range is from Bronze, where you pay 40% and insurance pays 60% are copays, to Platinum, where you pay only 10% and insurance pays 90% after copays. The Platinum monthly premium will be much higher than the Bronze monthly premium.
In most states, Medicaid is available to adults under the age of 65 if their income is below 138% of the poverty level. The poverty level for the 48 contiguous U.S. states is $26,500. The poverty levels for Alaska and Hawaii are slightly different.
The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960, until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67. However, your Social Security benefits continue to increase after you reach full retirement age until you begin receiving Social Security payments.
Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.