Retiring before the age of 65 is an American dream come true. The chance to leave work early lets you enjoy traveling, volunteering or hitting the golf course – provided that early retirement health insurance doesn’t trip you up.
You can go to pasture ahead of schedule, but any health insurance plan that your company provides will end on your last day of employment. Since your Medicare eligibility doesn’t start until age 65, you’ll need to purchase healthcare coverage on your own. Thankfully, there are plans that will make it easy to wait until Medicare rolls around.
Retiring at 63? Stay on Your Former Employer’s Health Insurance Plan
You’ve worked hard your entire life, and you can keep some benefits for doing so. If you leave a company, you may stay on their health insurance plan thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA), which went into effect in 1985. COBRA coverage lasts for up to 18 months after leaving your employer, allowing you to transition from your employer’s healthcare plan over time.
There is no cost-sharing from your former employer, so the entire cost of your health insurance plan becomes your responsibility. However, if you’ve already met your deductible for the year, this becomes a compelling option to consider, especially if you anticipate needing additional medical services or prescription drugs before the next Open Enrollment Period.
Under this option your current health insurance coverage is terminated, and then reinstated as a COBRA plan. However, your coverage stays exactly the same and will appear as if nthoing changed. You get full credit for deductibles that have already been met.
There is processing time to get your health insurance reinstated, and if you need medical services before your COBRA coverage is in effect, you will be required to pay for your services out of pocket, and then file a claim for reimbursement. If your former employer makes a change to its healthcare coverage for employees, your coverage will also change.
Retiring Earlier? Enroll in a Health Insurance Plan Online
If you need a more affordable health insurance option, you can shop on private websites to get a major medical Affordable Care Act plan. Once you lose your employer-sponsored health insurance, you have 60 days to join a plan without penalty, no matter what time of the year it is. This is known as a Special Enrollment Period.
Many retirees qualify for a financial subsidy to help pay for their health insurance costs because their income level drops upon retirement. It’s important to note when calculating your Obamacare health insurance subsidy that you take into account your total income for the year.
If you don’t qualify for a subsidy because your income is above the financial subsidy threshold, you may be able to find less expensive health insurance. Health insurance companies typically offer identical but discounted plans to people who don’t qualify for subsidies.
Counting Down the Days? Apply for Short-Term Health Insurance
If you retire less than a year shy of your 65th birthday, you might want to consider short-term health insurance. Short-term health insurance does not have to provide each of Obamacare’s essential health benefits. However, if you just need coverage for a few months until you age into Medicare, short-term can fill the health insurance gap. The cost of short term insurance is traditionally one-third the cost of a major medical health insurance plan, making it a financial lifesaver.
In some states, you can purchase a short-term plans designed exclusively for those between age 62 and 65. These plans automatically renew each year, even if you develop an expensive chronic medical condition when on the plan.
Go Without Health Insurance – for a Price
No one can force you to buy a health insurance plan, but your bank account will take a hit anyway. If you try to get medical services out-of-pocket, you won’t have access to discounted health insurance rates. You can try to negotiate similar rates on your own, but this will take some of your newfound time.
As you settle into your retired lifestyle, take comfort in knowing that you have choices when it comes to protecting your financial future – and you have a little bit of flexibility. The most important step for your health insurance decision is to consider all your options.
For More Reading:
- Does Medicare Automatically Start at Age 65?
- 6 Types of Supplemental Insurance to Fill Your Coverage Gaps
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