Health Insurance Options for Early Retirement
Early retirement can be filled with possibilities but it also poses big challenges, one of which is health insurance. Medicare eligibility begins at 65. What are your alternate health insurance options until then?
Learning about this is important because medical treatments, hospitalization, and prescription drugs certainly do not come cheap. Further, premiums can take a big chunk of your post-retirement income. So what should you do? Below are the best options that you can consider to find good coverage at a reasonable price.
1. Group retiree coverage
The best situation is to have continued coverage from your last employer. This is rare, but it does exist. Some companies offer it as a benefit to early retirees. Even if you are retired, you remain grouped with the actively employed from your last company. This is your cheapest health insurance option since your last employer will subsidize your premiums. Make sure you bargain for this perk when negotiating your early retirement package.
2. Federal exchanges
You can get coverage from the health insurance marketplace through designated enrollees or the government’s website 60 days prior to, or 60 days after, the effective date of your early retirement. This is another affordable health insurance option, especially compared to getting an individually rated policy. Review the different kinds of plans, plus the tax credits that can help you pay for one.
3. Consolidated Omnibus Budget Reconciliation Act
If all else fails, you can obtain health insurance from the Consolidated Omnibus Budget Reconciliation Act or COBRA. This is least desirable because it is an expensive option. Essentially, employers offer coverage identical to the benefit plans before your retirement but the premiums are not subsidized. It also only lasts for 18 months. The short-term solution requires an early retiree more than a year and a half from age 65 to look for alternative coverage once COBRA benefits are exhausted. Consider the first two health insurance options before turning to this last one.