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Retiring Early? 7 Ways to Stay Covered Until Medicare Kicks In

Many people dream of retiring early. Yet, this decision often comes with one hurdle — bridging the gap in health insurance coverage before Medicare kicks in. When you retire early, you may lose access to employer-sponsored health insurance, and you'll need to find alternative coverage until you become eligible for Medicare at age 65.

A survey shows that the percentage of large employers offering health insurance for retirees has plummeted from 66% in 1988 to just 21% in 2023, a decline from 29% in 2020. Some employers, among this 21%, may still not extend health benefits to early retirees under the age of 65. However, staying covered until Medicare kicks in is much more accessible nowadays. Join us as we explore the available options and include expert opinions on the matter.

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Early retirement options for health insurance before Medicare

For many people, having reliable health insurance can determine whether they feel comfortable leaving the workforce early. However, it doesn’t have to. Here are some options to consider:

1. Employer retiree benefits

Asking your employer about early retiree health insurance coverage is an excellent place to start. You might be pleasantly surprised to learn that your employer has a plan for employees who retire before Medicare eligibility. Mike Collins, a chartered financial analyst (CFA) and CEO of WinCap Financial, discussed this topic in an email interview with Healthnews.

[Employer retiree benefits] coverage may be similar to what is offered to active employees or may have different plan options.

Mike Collins

Plus, some employers might even chip in and pay some of your monthly premiums, which can help keep your costs down.


COBRA (Consolidated Omnibus Budget Reconciliation Act) is a federal law that helps employees and their families keep their employer-sponsored health insurance when they lose coverage due to qualifying events, such as voluntary or involuntary job loss.

Collins said if you retire early and lose your health benefits, COBRA allows you to continue your coverage for a limited time. This ensures you maintain healthcare access while looking for another insurance option or until you become eligible for Medicare at age 65.

After your early retirement, your former employer will send you a COBRA election notice, giving you 60 days to decide if you want to enroll. If you choose to enroll, you'll be responsible for paying the entire premium plus an administration fee. “COBRA coverage can cost up to 102% of the group premium rate,” explained Collins. This coverage typically lasts for 18 months, but in some cases, it can be extended to 36 months.

3. Marketplace health plans

An option for early retirees is purchasing individual health insurance plans through the Affordable Care Act (ACA) marketplace, often called Obamacare. You can enroll in an ACA plan anytime if you have a qualifying life event. Leaving a job and losing employer-sponsored health coverage is considered a qualifying life event, allowing you to enroll in an ACA plan outside the regular open enrollment period. Stacy Edgar, CEO and Founder at Venteur, a firm that helps individuals find high-quality health benefits, also shared her insights on the subject with the Healthnews team.

You get more subsidies (types of financial assistance from the government) as you get older, especially if you're not working or working part-time.

Stacy Edgar

This increases the likelihood of reduced premiums and cost-sharing if you qualify. You cannot be denied coverage or charged more due to pre-existing conditions.

Edgar said these plans are continuously improving and will provide coverage for doctor visits, major medical events, and prescriptions at a minimum. Some plans may also be eligible for a health savings account (HSA), allowing you to set aside money for added flexibility in managing your healthcare expenses.

The cost of individual health insurance plans varies widely depending on your financial situation. With subsidies, Edgar noted that you could pay as little as $20–30 per month on the low end. Still, premiums can reach up to $2,000. If you're earning a higher income, you'll likely pay more, but she added that you can still easily find plans without subsidies in the $500–600 range.

To sign up for health insurance through the marketplace, visit HealthCare.gov or your state's marketplace website during the open enrollment period (usually November 1st to December 15th). If you qualify for subsidies, they will be applied to your monthly premiums, reducing out-of-pocket costs.

4. Spouse insurance

If you're married and your spouse is still working, joining their employer-sponsored health insurance plan can be a convenient and cost-effective option when you retire early.

Most employers offer family coverage, which allows you to be added to your spouse's plan as a dependent. Collins explained that this approach can provide comprehensive health insurance coverage until you become eligible for Medicare.

5. Short-term plans

Edgar explained that these are usually lower cost but are only available for a limited period. And things are changing. Short-term health insurance plans issued on or after September 1, 2024, will be limited to three-month terms, with a maximum duration of four months.

One drawback of short-term plans is that they may not cover pre-existing conditions. Still, short-term plans can be an excellent option to bridge the gap between early retirement and Medicare eligibility.

6. Health share

Health share plans were an alternative to traditional health insurance before Medicare. They are membership-based programs in which participants share medical expenses.

Essentially, you pay a monthly fee or "share" amount, which is pooled together to cover the healthcare costs of those in need within the community. So, rather than paying premiums to an insurance company, the members directly cover each other's healthcare expenses. “But depending on how they're regulated, they don't always pay out claims consistently,” Edgar noted.

7. Medicaid

Medicaid is a government-sponsored health insurance program for low-income individuals and families. Eligibility for Medicaid varies by state, but obtaining health insurance for retirees who meet the requirements can be an option.

As an early retiree, eligibility for Medicaid coverage may hinge on whether your state has expanded its Medicaid program and if your income and assets fall below their state's eligibility criteria. Still, Medicaid eligibility rules can be complex, and not all early retirees may qualify.

If you do meet the eligibility requirements, Medicaid can provide comprehensive health coverage, including doctor visits, hospital stays, preventive care, and prescription drugs, often with little to no out-of-pocket costs.

To see if you're eligible, contact your state's Medicaid office directly or check their website for the criteria and how to apply.

What to consider when choosing a health plan

When you're choosing a health plan before Medicare kicks in, consider the following:

  • Your personal health needs. Use that as a starting point if you have a good idea of what kind of care you'll require. Edgar explained that health plans are essentially financial tools, so look for options that will give you the coverage you need without breaking the bank. Some people want a plan that covers everything, while others are okay with taking on a bit more risk in exchange for lower premiums.
  • Network access. If something happens and you need medical care, you want to be sure you can see the right doctors. Collins said to check that your preferred healthcare providers are included in the plan's network.
  • Limitations and exclusions. Are there any limitations or exclusions in the policy that could affect your coverage down the line?
  • Budget. Consider the premiums, deductibles, copays, prescription medication coverage, and out-of-pocket limits.

While securing pre-Medicare coverage, watch for your Medicare Initial Enrollment Period (IEP). This is a seven-month window around your 65th birthday, during which you can sign up for Medicare without facing penalties or coverage delays.

What are the consequences of staying uninsured during the gap period before Medicare begins?

Staying uninsured during the period before Medicare begins may seem like a cost-saving measure, but it’s a risky move. “The biggest issue is that you’re putting yourself — or worse — your family at financial risk,” Edgar said.

If you get sick or injured, you’ll be on the hook for paying all your medical expenses out of pocket. These costs can quickly add up, potentially amounting to tens of thousands. In some cases, medical debt could push you into bankruptcy.

And it’s not just the financial aspect. Not having health insurance also means you may not receive necessary healthcare services and medications. According to Edgar, health issues that could have been preventable may worsen.

Besides that, Collins also noted that you may face penalties for not having minimum essential coverage under the ACA.

Determining the health insurance piece is often a significant hurdle if you’re considering retiring early. The good news is that options such as COBRA, individual marketplace plans, spousal coverage, short-term plans, health share programs, and Medicaid can help you bridge the gap. Carefully consider your health needs, preferences, type of coverage needed, and budget when choosing a pre-Medicare health plan.


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Rene Welton
prefix 8 days ago
I retired early and cannot afford my health plan premiums, is there a
penalty if i dont have coverage until i get Medicare in Jan 2025