How will you pay for health insurance until you qualify for Medicare if you want to retire before age 65–or are compelled to do so due to medical issues, downsizing, or family circumstances? whether it’s due to necessity or want, a large number of Americans retire before turning 65. These early retirees typically pay more for health insurance than they had budgeted for. The monthly charges for coverage for a pair might be between $1,700 and $2,200. Although, this is dependent on their age, where they live, and type of insurance. Hundreds of dollars may be spent on prescription drugs, coinsurance, deductibles, and copays in addition to premiums.
Covering Health Insurance
Many people continue to work because of health insurance, even though they would prefer to retire early and have adequate funds. Before the Affordable Care Act, patients with major pre-existing conditions were frequently denied self-purchased coverage. Regardless of their medical history, they can now receive self-purchased coverage in all states. Furthermore, the Affordable Care Act’s income-based subsidies considerably reduce the price of insurance in comparison to what it would have otherwise been.
Meanwhile, the American Rescue Plan (ARP) and the Inflation Reduction Act strengthened the Affordable Care Act until the end of 2025. To extend it into the future, Congress would have to pass additional legislation. The majority of Americans* have health insurance through their work. A direct transfer from employer-sponsored health insurance to Medicare is common. Depending on their situation, many people, whether retired or employed, 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, consider a few healthcare options in the meantime. Today, we’ll go over each of them:
State Health Insurance Marketplace
As a result of the Affordable Care Act, each state now has its own health insurance marketplace/exchange where individuals and families can purchase health insurance policies. All of these subsidies are guaranteed-issue.. This means you can join regardless of your medical history, and any pre-existing conditions will be covered once your plan is in effect. Enrollment is limited to either the annual open enrollment period or a special enrollment period triggered by a qualifying event. You may be able to switch to a marketplace plan after leaving your job and terminating your employer-sponsored health plan.
Premium Subsidies
The Affordable Care Act (ACA) provides income-based premium tax credits (premium subsidies) via your state’s exchange or marketplace. These subsidies assist the great majority of people who purchase health insurance on the marketplace. 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 requirement for subsidy eligibility, which was previously set at 400% of the poverty line, has been temporarily lifted. Congress could decide to prolong these provisions past 2025. If they don’t, the income eligibility for premium tax credits will be reset to being 400% of the poverty line.
COBRA or State Continuation
The Consolidated Omnibus Budget Reconciliation Act (COBRA) and the coverage it offers may be worth considering if you are eligible for it. 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 could be extremely beneficial for you.
Your Spouse’s Health Plan
If your spouse is already employed and has access to a health insurance plan that includes spousal coverage, you may switch after your current coverage expires. The termination of your coverage will result in a unique registration period for your spouse’s policy. Even if your plan previously covered both you and your spouse, you can transfer to your spouse’s plan when 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
After retirement, you can qualify for Medicaid if your income declines dramatically. Adults under 65 who make less than 138% of the federal poverty threshold are eligible in the majority of states. Unlike Marketplace premium subsidies, which are only based on yearly income, Medicaid eligibility can also be determined based on monthly income. Therefore, regardless of how much you made earlier in the year, you may be eligible for coverage. This is assuming your monthly income does not exceed one-twelfth of the annual income level for Medicaid eligibility.
Where to Learn More
To find out more about your options for an early retirement, visit HealthCare.gov. You will be directed to the exchange if your state has one. You can look through the different plans and compare them based on your income, age, zip code, and smoker status. Check the relevant provider networks and prescription formularies if you are currently receiving medical care. Don’t expect them to be exactly the same as your current plan, even if they are provided by the same carrier.
If you retire before the age of 65, you will have several alternatives for health insurance until you are 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 permits you to continue to use your employer’s health insurance. If you need to retire sooner, one of these options should provide you with reasonable health insurance.
*Source: The Wall Street Journal
