- Where to look for health insurance in early retirement depends a lot on your income.
- Options include Medicaid, and the Affordable Care Act's marketplace.
- Continuing your existing coverage through COBRA could also be an option for some.
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Healthcare is a cost you simply can't avoid in retirement.
If you're looking to get healthcare coverage for early retirement, there are a variety of places to look. But, they all come with their own benefits and drawbacks. With healthcare tied to employment in the US, it can be difficult for early retirees to find coverage that's both affordable and works for their health needs. Until Medicare eligibility at age 65, you'll need to find – and budget for – a way to cover yourself.
Healthcare expert and founder of insurance marketplace Healthcare.com Jeff Smedsrud said there are several ways to get health insurance if you find yourself in this situation.
Get coverage through your state or Medicaid
If you're retiring earlier than age 65, you may qualify for Medicaid. There are strict income limits, however, so make sure you qualify based on your state.
States calculate who's eligible based on a percentage of the federal poverty level, and you can find your state's percentage here.
While it's not the right fit for everyone, it's worth checking out if you know your income in retirement will be small.
Get coverage through the healthcare marketplace
For most people, the Affordable Care Act's healthcare marketplace will be the place to turn for coverage.
"The Affordable Care Act is an excellent option," Smedsrud said. And, it's a bit cheaper now. "The ACA recently changed under President Biden to limit the cost of health insurance to 8.5% of your income," Smedsrud said. This was made possible by the American Rescue Plan Act of 2021.
With subsidies to bring down the cost, it could get cheaper to get your own plan through the healthcare marketplace. To find a plan, visit the federal health insurance marketplace at Healthcare.gov. With these plans, there's no limit on how long you can keep them, and coverage is available to almost anyone who needs a health insurance plan.
Get coverage through your old employer with COBRA
For anyone leaving a full-time position with benefits, COBRA could be another option.
This type of insurance lets you keep the health insurance you had through your employer by paying the premium yourself. "If they recently left their job, and had employee health coverage, they're eligible for COBRA for up to 18 months," Smedsrud said.
But, there are caveats. Firstly, COBRA is only available for a certain number of months, which may not help you reach all the way to age 65, depending on how early you're retiring.
Smedsrud said it also may not be available to everyone. "COBRA is only for employees who work for a company with 20 or more employees," he said, which could exclude some small business employees.
COBRA also comes with a cost – it can be as much as of your previous premium, your employer's portion of your premium, and a 2% fee out of pocket, totaling 102% of your full premium. In some cases, it could be cheaper to choose a marketplace plan for healthcare coverage.
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