There are many factors that could lead an individual to retire early, such as job loss, personal health, or disability. If you retire before the age of 65, finding health insurance may be complicated. You may lose health coverage from your employer and may not be eligible for Medicare until the age of 65.
However, there are other options to finding health insurance for early retirees, such as using the health insurance marketplace, COBRA, Medicaid, and enrolling in short-term health insurance. Even if you lose your health coverage outside of the annual health enrollment period, you may still qualify for a special enrollment period.
The Health Insurance Marketplace
If you’re under 65, you may not be eligible for Medicare, as Medicare is a federal health program for those who are 65 and older. Exceptions may apply if you are diagnosed with end-stage renal failure or have certain disabilities. Another government health program is Medicaid, but only low-income households or individuals may qualify. Therefore, private health insurance and the health insurance marketplace are one of the strongest options for those who are retiring early and are in need of health insurance. Private health insurance consists of individuals paying for their own health coverage and is offered by insurance companies or other outside entities instead of the government.
The health insurance marketplace, also known as the “marketplace” or “exchange”, is a place (online and in-person) for individuals to purchase private health insurance for themselves. The marketplace may offer income-based subsidies to make an individual’s health coverage more affordable. In the marketplace, you may compare plans with various health insurance companies to see which is the most suitable and affordable for you and your family.
Bear in mind that there’s an annual enrollment period each year that allows you to enroll or change your health insurance coverage for the following year. The next enrollment period is on November 1, 2022. In the case that you lose your employer-sponsored health coverage due to early retirement, you may qualify for a special enrollment period (SEP). An SEP is a period outside of open enrollment where you may enroll in health coverage. Special enrollment periods may only apply to qualifying life events, and loss of health coverage is one of them.
The Consolidation Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law that allows you to keep your employer-based health coverage for 18 months after retiring. After the 18 months are up, you may have the choice to enroll 60 days before or 60 days after for your own health insurance through the health insurance marketplace.
It’s important to keep in mind that the special enrollment period may only apply if you run out of your COBRA coverage outside of the annual open enrollment period. You may not drop your COBRA coverage outside of the open enrollment period and apply for private health insurance.
Medicaid is a federal health program for low-income families and individuals. What contributes to the eligibility for Medicaid may include your age, income level, if you’re pregnant or disabled, and the number of people in your family.
Advantages of Medicaid
- Allows those who cannot afford other health care insurance to receive medical care
- Lower copays or even no copays at all for certain treatments
- Medicaid covers nursing home care if the patient is in a Medicaid-certified nursing facility
Disadvantages of Medicaid
- Some procedures are denied, as Medicaid may see these procedures as unnecessary coverage
- Medicaid facilities may not always be available to patients
- Limited choice of a long-term care facility
Short-term Health Insurance
In the case that you lose your permanent health coverage, short-term health insurance provides you with temporary coverage. Short-term health insurance provides emergency coverage for those who change jobs, are waiting for the annual enrollment period to enroll again, and for early retirees who lose their health coverage.
Short-term health policies may have terms up to one year and may be renewed for up to three years.
Advantages of Short-term Health Insurance
- Lower premiums compared to private health insurance
- You may cancel coverage at any time without facing any penalties
- Provides coverage for doctor visits, emergencies, and hospitalizations
Disadvantages of Short-term Health Insurance
- Does not provide plans for individuals with preexisting conditions and may only provide coverage for prescription drugs if they were prescribed during a hospitalization
- May not provide coverage for preventative or maternity
- High deductibles may limit how much they may cover your care
- If your short-term health coverage expires, you may have a gap in health coverage until the annual enrollment period
Part-time jobs may offer health insurance that includes medical, dental, and vision insurance. Depending on what the part-time job is, some jobs may require a minimum set of hours each week to qualify for their health insurance, such as 20 hours.
Although you retire early, it may not be a bad option to consider a part-time job in a field you enjoy in order to remain covered. There are various part-time jobs such as tutoring, being a barista, or working as a part-time driver.