If you're planning on retiring early, one of the major considerations you'll need to take into account is figuring out your health insurance options. Individuals who retire before the age of 65 are still too young to enjoy the benefits of Medicaid, but it’s still important to have early retirement health insurance to cover unexpected health conditions, routine checkups, prescription drug costs, or any hospitalizations. Fortunately, there are some early retirement health insurance alternatives available in the interim. The following health insurance options can help to bridge the gap between early retirement and Medicaid eligibility.
Ask Your Former Employer About Insurance
A huge perk of employment is group health insurance for employees. Unfortunately, typically, when employment ends so do the benefits. However, there are some companies that do continue to offer coverage even in retirement. A 2019 Kaiser Family Foundation survey of employer health benefits found that 28% of large firms offering health benefits also offer retiree health insurance benefits, up 10% from the previous year. It’s especially worth looking into for employees of governmental organizations, universities, and large companies as they tend to offer this option. Contact your human resource department to find out if this program is available. If it is, it is highly likely that coverage will cease when Medicare eligibility begins.
Check Your Spouse’s Insurance
If your spouse’s employer-sponsored plan covers families, you may be able to sign up as a dependent. This is also contingent upon your retirement dates not being aligned. Typically this is the most efficient and cost-effective option for obtaining health insurance in early retirement. If this is a viable option, and you are not currently enrolled on your spouse’s plan, your spouse needs to verify with human resources when this change can be made. Some employers only allow amendments to health insurance during a certain period.
Browse the Marketplace
The Affordable Care Act created a public marketplace for health insurance in 2010 to make healthcare more accessible. You can purchase a policy through your state's exchange up to 60 days before or after your official retirement date up until you turn 65. Typically most people wait for the open enrollment period to get a policy, but the loss of coverage due to retirement may qualify for a special enrollment period. Retirees may also be eligible for a subsidy to help cover the monthly insurance premium if their household income falls below a certain level. More information can be found at HealthCare.gov.
Try a Health Sharing Plan
These are faith-based programs where, unlike traditional health insurance plans, the costs of expenses are shared with others. Members pay a monthly contribution, much like a premium, and may be required to belong to a particular church or prove religious affiliation. Some medical costs could be excluded from coverage including those associated with preexisting conditions, which will pose a problem for those suffering from chronic illness. Other potential restrictions include long term prescription coverage and tobacco use. So while the monthly payment may be lower than the average health insurance premium, the coverage is much less comprehensive and you may wind up paying out of pocket for medical needs.
Take Advantage of COBRA
Named after the Consolidated Omnibus Budget Reconciliation Act of 1985, COBRA stipulates that employers, with 20 or more employees, must continue to offer group health insurance enrollment to an employee despite termination or retirement. Coverage can last for up to 18 months. This allows someone to retain the same health coverage they've been getting from their employer even after their departure. COBRA can cost considerably more because the individual is usually required to pay both the employer and the employee's share plus other associated administrative fees. The Kaiser Family Foundation estimates that on average, covered employees contribute 18% of the premium for the cost single coverage and 30% for the cost of family coverage. It is rare for an employer to subsidize COBRA premiums. An alternative in the open market may offer a better deal.
Get a Part-Time Job
Although the point of early retirement is ostensibly to leave the work-life behind, some early retirees take on a part-time job for the health insurance benefits. If you are interested in a side hustle to generate some extra income, be sure to ask if health insurance is available. While some employers are generous with the benefits, others impose restrictions on eligibility. This could include working a minimum number of hours or several days per week to qualify for eligibility. According to the Affordable Care Act, part-time employees work an average of fewer than 30 hours a week.
Buy Directly From a Health Insurance Agent
If you’re still in good health or your household income is too high to qualify for a subsidy under the Affordable Healthcare Act, you might want to take your chances in the private marketplace. These are also known as off-exchange plans. This can be purchased directly from a health insurance company or broker. The premiums can be significantly more expensive than an ACA plan and it’s not eligible for tax credits, but it’s still a good option if you don’t qualify for marketplace subsidies. If your finances allow for spending a bit extra, the flexibility and comprehensive nature of private insurance make it a worthwhile investment.
Consider Moving Abroad
Moving abroad requires uprooting your life but it might be worth it for more affordable healthcare. Routine medical and dental procedures can be considerably cheaper in countries with a lower cost of living and high-quality medical systems. According to U.S. News, the top ten countries with the best healthcare systems are Canada, Denmark, Sweden, Norway, Germany, the United Kingdom, Japan, Australia, the Netherlands, and Switzerland. It’s a bold move but the ex-pat life may save lots of money on healthcare costs in the long run.
In the interim, as you mull over multiple options, invest in preventative healthcare, or open a Health Savings Account (HSA) while you are still employed. Not only are you saving for future health expenses but there are extra benefits—pre-retirement income deposited into an HSA reduces your federal and state income tax liability and is tax-free when spent on medical expenses. The key is to research your health insurance options well in advance of planning an early retirement.