10 ways early retirees can get help paying for healthcare

Congratulations! You’ve worked hard, and are ready to spend the rest of your life pursuing whatever your heart desires. But, unless you have a disability, you might have a few years left before you’re eligible for Medicare at age 65. How will you get help paying for your healthcare in the mean time? You have plenty of options – but not all of them are good. We’ll help you weigh them.

Individual and family coverage options

Consider a Marketplace plan from Healthcare.gov

Your first stop might be to explore the Health Insurance Marketplace. While the benefits typically aren’t as rich as what you’d see on an employer-sponsored plan (think higher deductibles and out-of-pocket maximums), you may be eligible for some premium savings.

As an early retiree, you’d likely be drawing a smaller income than when you were working. That smaller income, combined with your smaller household size, may make you eligible for Advanced Premium Tax Credits. Lower-income individuals may also be eligible for Cost-Sharing Reductions, which lower the costs of deductibles, copays, and out-of-pocket maximums.

If this is an option, you’d want to enroll as soon as possible after you separate from your employer-based insurance. In some special cases, a health insurance agent may be able to help you carry over your deductible and out-of-pocket maximum spending to another plan with the same carrier. You’d have a limited window to secure coverage via a Special Enrollment Period. Otherwise, you might have to wait for the annual Open Enrollment Period, which begins on November 1.

Medicaid may be an option for some early retirees

If your retirement income is not large enough to qualify for an Advanced Premium Tax Credit on the Marketplace, you may instead qualify for Medicaid.

Designed to cover healthcare costs for low-income Americans, Medicaid is a federal program. However, each state oversees the coverage and programs within its own borders. You’ll want to check with your state Medicaid agency to determine whether you qualify for any programs it offers.

Private, underwritten insurance

On occasion, you may see ads boasting the use of a private plan that uses a well-known insurer’s PPO network. While these plans will generally cover the same benefits a Marketplace plan would, there are some important caveats.

First, these plans are not compliant with the Affordable Care Act. This means they may deny you coverage if you have pre-existing conditions, or if your BMI does not fit within their build chart. They may also charge you a higher premium based on your pre-existing conditions.

And, because these plans are not compliant with the Affordable Care Act, you would not be eligible for advanced premium tax credits to help pay those premium costs.

Short-term health insurance plans

You might also run into ads advertising low-premium health insurance coverage for short periods of time. And, if you’re within a few months of becoming Medicare-eligible, these could sound enticing. But again, there are a few caveats to weigh.

These plans, too, are not compliant with the Affordable Care Act. You could be denied a policy, or charged more based on your medical history.

If you are covered by one of these plans, you may find the coverage excludes treatment for pre-existing conditions like heart disease, chronic obstructive pulmonary disease (COPD), diabetes, and Crohn’s disease, among a slew of others.

Preventive care and maternity care may also be excluded from your policy. Prescription drug coverage may be included, but drugs may not be covered the same way they are on ACA-compliant plans.

And again, because these plans are not ACA-compliant, you would not be eligible for advanced premium tax credits to help pay for those costs.

Health sharing plans

You may be able to get coverage through a health sharing plan, sometimes known as a health sharing ministry. Be careful, though: these plans aren’t actually health insurance. Instead, members agree to pool their money to cover each other’s medical costs.

Generally, coverage is limited to routine healthcare and catastrophic care. Many plans will also exclude preexisting conditions, or not cover care related to them for a specific period. For anyone with a chronic condition, like high blood pressure, asthma, or the like, that may not bode well.

You should also note that your ability to appeal coverage decisions may be limited: these plans are not subject to the same state and federal laws that licensed health insurers are.

What about concierge care?

Concierge care, or an arrangement where you subscribe to a local physician’s office for primary and preventative are, could be an option. But be warned that there are drawbacks here, too. These plans are not health insurance either, and so you would bear the full cost of any prescription drugs, specialty care, or urgent care that you may need.

If you choose to pair concierge care with a traditional health insurance plan, know too that what you spend at your doctor may not count toward your plan’s deductible or out-of-pocket maximum. This is because these agreements may not allow your doctor to charge your insurance for his/her services.

Employer-sponsored coverage options

Take your spouse’s health insurance

If your spouse is still working, the simplest way to maintain health insurance coverage is by joining their plan. Separating from your own employer-based plan may qualify you for a Special Enrollment Period. Depending on plan rules, you may have to wait until your spouse’s Open Enrollment Period to join.

But that’s not very helpful if you’re both eyeing early retirement. And it doesn’t help at all if you’re not married.

Consider COBRA continuation coverage

Most employers with over 20 employees are required to offer COBRA continuation coverage. This allows recently separated employees to maintain their existing health plan for up to 18 months after the termination of employment. This could be useful if you’ve already satisfied your deductibles or out-of-pocket maximums, or if you believe you would have trouble getting an expensive prescription covered on another plan.

However, there are some big caveats here.

First, your employer is not required to pay any portion of your premium if you elect this coverage. That will put you on the hook for the full sticker price of your plan – plus a nominal 2% processing fee that your employer may be entitled to.

Second, if there are more than 18 months between your retirement date and when you’ll become Medicare-eligible, you may be left with a coverage gap. In that case, you’ll need to turn toward one of the other options.

Enroll in your employer-sponsored retiree plan, if available

As healthcare and health insurance costs continue to skyrocket, employer-sponsored retiree plans are becoming increasingly rare. Or, even if a retiree plan is offered, the employer may choose not to contribute any portion of your premiums.

You should also note that benefits on these plans are generally designed to supplement Medicare coverage. As such, these benefits might not be as rich as what you’d see on what’s offered to regular employees. But, when you do become Medicare-eligible, you might choose to remain enrolled in this plan as a supplemental policy.

Part-time employment, or Barista FIRE

We know. Part of the allure of the Financial Independence, Retire Early (FIRE) lifestyle is that you no longer have to work. But, if you find yourself in a spot where healthcare expenses are taking an outsize bite of your nest egg, taking on part-time work could be an option.

Because you’ll be earning an income, you’ll be drawing less from your retirement accounts. And, several big-name firms, like Amazon and Starbucks do offer health insurance benefits to part-time employees.

What makes sense for you?

Your readiness to retire is completely up to you – and your financial advisor, if you have one. But, there are some clear upsides and downsides to each of the health insurance approaches outlined above. Before you ride off into the sunset, be sure to talk to a licensed health insurance professional to help weigh options and help you make an informed choice.

Our team of licensed professionals has a combined 50+ years of experience in the field. And, we’ve helped over 4,500 satisfied clients make decisions that fit their needs and budget. Contact us for your no-obligation consultation.