Health Insurance for Early Retirement

If you’re planning for early retirement, it’s important not to overlook one of your biggest costs, healthcare. Seniors are spending more on healthcare today than ever before, and finding the right health insurance plan can save you thousands.
Health Insurance for Early Retirement

With more Americans opting for early retirement, healthcare is a growing concern. According to recent studies, roughly 15 million retired Americans are currently uninsured – a startling and concerning statistic. In this article, we will explore the different types of health insurance options available to those who have chosen early retirement and how they can best protect themselves and their families.

Planning for retirement can seem like a daunting task, especially if you are hoping to retire early. For many, it will be the first time they will live on a fixed income, which means stricter budgets, and financial preparations for the unexpected. Unfortunately, for seniors, the unexpected has become synonymous with healthcare.

If you’re looking to retire at the age of 60, or anytime before you turn 65 years old, you probably won’t qualify for Medicare yet. Medicare is the federally funded and managed healthcare program for seniors that helps offset the rising cost of healthcare. However, even with Medicare, most Americans are still spending a fortune on out-of-pocket costs, according to the Kaiser Family Foundation. So what does that mean for those trying to retire early who don’t qualify for federal or state assistance?

Projecting Health Insurance Costs For Your Early Retirement

Today is serving to be a particularly difficult time to project your healthcare costs, especially since the future of the Affordable Care Act (ACA) is in jeopardy. Under the ACA, you may be eligible for health insurance subsidies, or premium tax credits, that would help offset your health insurance costs, and those subsidies can be huge.

For example, Kaiser Family Foundation (KFF) did a study to see exactly how much seniors would pay with and without a subsidy through the marketplace, and what they found was shocking.

The Kaiser Family Foundation looked at a low-income senior, who was 60 years old and lived in Knox County, Ohio. When the 60-year-old senior would be able to purchase a Silver Plan for a mere $83 a month after subsidies are taken into account. However, that same 60-year-old senior would be spending around $775 without those subsidies.

Understand that the example above only applies to those who are eligible for premium tax credits or health insurance subsidies. Seniors who aren’t low-income, or don’t meet the subsidy requirements may still be shelling out the full price for health insurance. What’s worse is health insurance rates increase every year, so budgeting accordingly can prove to be difficult.

According to a 2015 CNN report, senior couples will end up paying at least $250,000 for healthcare over the course of their retirement, and that’s only accounting for people who don’t retire early. Expect those figures to jump with you retiring every year before age 65.

Factors To Consider

People are like snowflakes when it comes to healthcare because medical costs won’t be the same for anyone. Here are some factors to consider when budgeting for your early retirement health insurance.

  • Your Income: Remember, when you retire your income will be fixed, and you may not adjust for inflation or the rising costs of healthcare. Also, if you make too much money, or don’t qualify for health insurance subsidies, expect to pay more for health insurance.
  • Medical History: If you are already taking daily prescriptions, or have a family history of disease or health issues, it’s important to consider associated costs. For example, if you have a history of arthritis in your family, and you are at a higher risk, it’s important to budget whatever extra costs are associated with arthritis just in case.
  • Medicare Supplemental Insurance: You may get cheaper health care once you turn 65 years old, and are eligible for Medicare. However, Medicare only covers about 80% of your medical expenses, so it’s recommended to purchase Medicare Supplemental Insurance to cover the remaining 20% of your healthcare costs.
  • The Unexpected: The unfortunate reality is that as you age, your body won’t perform as well as it used to do. Seniors are at higher risk for a number of medical conditions that they may not have planned for, like Alzheimer's, arthritis, or diabetes. Make sure to plan according.

Early Retirement Health Insurance Options

Early retirement can be an attractive option for those looking to escape the hustle and bustle of the 9-5 lifestyle. But as with any major life decision, it’s important to make sure you have a good grasp of all your options when it comes to health insurance. In this article, we will look at the key facts you should know about early retirement health insurance options so that you can make an informed decision.

What is Considered Early Retirement?

Early retirement is generally considered to begin around the age of 60, though this can vary depending on your individual circumstances. Unfortunately, those who choose early retirement are not eligible for Medicare coverage until they turn 65 – leaving them to take more personal responsibility for their healthcare coverage. There are many health insurance options available to those looking for early retirement coverage and we will explore the different choices in detail in the following sections.

Health Insurance Marketplace

One option for those looking for health insurance in early retirement is the Health Insurance Marketplace. Through the Marketplace, you can shop and compare plans side by side to make sure that you are getting the best coverage for your needs at an affordable rate. Additionally, you may be eligible for subsidies and cost-saving measures that can significantly reduce your monthly premiums. It’s important to note, however, that the Health Insurance Marketplace is only available to those living in states that have not opted out of the program.

Pros and Cons

The Health Insurance Marketplace was created as part of the Affordable Care Act and is designed to help people find quality and affordable health insurance. Through the Marketplace, individuals can easily compare and shop for different plans to find the right one for their needs and budget. The open enrollment period is when people are able to enroll in or change their plan through the Marketplace. Healthcare.gov is a government website where people can go to learn more about the Health Insurance Marketplace, get questions answered, calculate estimated premiums, and even apply for coverage.

Private Health Insurance

Private health insurance is another option for those looking to insure themselves in early retirement. It can be purchased through insurers directly, or through an employer-sponsored plan. Private health insurance gives individuals more control over their coverage and costs, as they can choose between different plan levels and riders tailored to their needs. It is important to become familiar with the different private plans available and understand the limitations associated with each one. By taking the time to learn more before making a decision, you will be able to find the right plan for you that provides both quality care and affordability.

Pros and Cons

Private health insurance is an attractive option for those looking to insure themselves in early retirement. The main benefit of private health insurance is that individuals have more control over their coverage, allowing them to adjust the plan levels and riders to best fit their needs. Additionally, private plans typically come with lower premiums than those offered on the Health Insurance Marketplace. However, there are some potential drawbacks to consider when it comes to private health plans. Private plans tend to be more limited in terms of coverage options and not all providers will accept the same insurers. It is important to weigh these pros and cons before selecting a plan to ensure you are making the best decision for your financial and medical needs.

Short-term Health Insurance

Short term health insurance is another viable option for those looking to insure themselves in early retirement. Short term plans generally provide coverage for a period of time typically up to 6-12 months, allowing individuals to bridge any gaps in coverage as they transition between jobs or when waiting for other types of coverage to kick in. These plans are often less expensive than longer-term insurance and offer some flexibility with plan choices and riders. However, it is important to understand the limitations associated with short term plans, including that they won't cover pre-existing conditions, prescriptions medications, or preventive care. Taking the time to learn more before making a decision will ensure that you have realistic expectations on what your plan will cover and make sure that you are selecting the best option for your needs. Each will require you to spend more out-of-pocket, but if you couple a high-deductible plan with a supplemental insurance plan, you could save big. Read more about gap health insurance options here.

Pros and Cons

Short-term health insurance plans are often cheaper than longer-term coverage and have some added flexibility with plan choice and riders. Additionally, they bridge the gap while transitioning between jobs or waiting for other types of coverage to kick in. However, it is important to understand the limitations associated with short term plans including that they won't cover pre-existing conditions, prescriptions medications, or preventive care. In addition, short-term plans do not meet the minimum essential coverage requirements of the Affordable Care Act so individuals will still be subject to penalties for not having qualifying coverage. Taking the time to learn more before making a decision will ensure you have realistic expectations on what your plan will cover and make sure that you are selecting the best option for your needs.

COBRA

COBRA is a health insurance option available to those looking for coverage in early retirement. Through COBRA, individuals are able to maintain the same health plan they had through their employer if they leave or lose their job. This can be an attractive option since it's familiar and potentially provides more comprehensive coverage than other options. However, it comes with added costs as COBRA plans require individuals to pay both the employee and employer contributions into the plan, plus an administrative fee. It is important to understand what your plan covers and estimate associated costs before making a decision. Learning more about this option will help you make sure you're selecting the best option for your needs in early retirement.

Pros and Cons

One of the main advantages of COBRA is that you are able to keep the same health plan you had through your employer if you leave or lose your job. However, there are some drawbacks to consider including added costs as individuals need to pay both the employee and employer contributions into the plan, plus an administrative fee. Additionally, it's important to understand what your plan covers and estimate associated costs before making a decision as it may be more expensive than other options available. Taking the time to learn more about this option can help ensure that you select the best option for your needs in early retirement.

Medicaid

Medicaid is a health insurance option available to those looking for coverage in early retirement. It provides health care services to those who qualify, including low-income individuals, people with disabilities, and pregnant women. In most cases, Medicaid covers more medical and preventive services than other types of health care insurance plans. However, it's important to understand the specifics of your state’s Medicaid coverage so you can make an informed decision about whether this option is right for you. Learning more about this option will help ensure that you select the best plan for your needs in early retirement.

Pros and Cons

One of the biggest advantages of opting for Medicaid is that you may be able to receive comprehensive coverage and preventive services at no cost or with low out-of-pocket costs. Additionally, unlike private insurance plans, there are no pre-existing condition clauses associated with Medicaid. On the other hand, there are several drawbacks to consider such as limited coverage depending on your state and potential wait times due to high demand. Taking the time to learn more about this option can help ensure that you select the best plan for your needs in early retirement.

Spousal Insurance

Spousal Insurance may allow you to receive coverage through a family member's policy, potentially at a lower cost than other plans. Additionally, depending on your circumstances, you may be able to take advantage of added benefits such as shared networks or discounts on specific services like dental care. It's important to understand the specifics of spousal insurance coverage and eligibility requirements so that you can make an informed decision about whether this option is right for you. Knowing more about it will help ensure that you find the best plan for your needs in early retirement.

Pros and Cons

A primary benefit of spousal insurance coverage is the potential to reduce monthly costs by taking advantage of a family member’s policy. Additionally, some plans offer extended networks or discounts on specific services like dental care which can be very beneficial for those on a budget. However, there are several drawbacks to consider such as eligibility requirements that must be met in order for coverage to apply and limited coverage availability depending on the insurer. Taking the time to learn more about this option can help ensure you are selecting the best plan for your needs in early retirement.

Can I use my HSA if I retire early?

In most cases, Yes. Using your health savings account (HSA) to pay for health insurance premiums can be beneficial as it allows you to use pre-tax dollars towards this important expense. However, in order to use an HSA for this purpose, the insurance plan must be a High Deductible Health Plan that is eligible for HSA contributions. It is important to review the details of your plan and consult with a financial advisor to confirm you are able to use your HSA funds before making any payments.

If you are eligible to continue using your Health Savings Account (HSA) after you retire early, it can be a great way to help manage the cost of healthcare in retirement. Many HSAs allow you to invest some of your funds and build up savings over time that you can use towards medical expenses. Additionally, funds in an HSA account are typically not taxed. Before retiring early, you should consult with your financial advisor or insurance provider to confirm whether your HSA will still be accessible when you enter retirement.

Employer-sponsored Retiree Benefits

Employer-sponsored retiree benefits are an important option for health insurance coverage in early retirement. These plans can provide comprehensive coverage at more affordable costs than private insurance policies. In addition, many employers offer additional benefits such as discounts on prescription drugs or access to preferred doctor networks. It is important to learn more about employer-sponsored retiree benefits as they may be the best option for your unique needs and budget.

Employer-sponsored retiree benefits are typically available to those persons who have been with a company for a certain number of years and plan to retire. It is important to research the specific rules and regulations of your employer's plan before retiring to ensure that you are eligible. You may also be able to get more information through your Human Resources or Benefits department.

Pros and Cons

An advantage of employer-sponsored retiree benefits is the cost savings they can offer. They often provide coverage at lower premiums than you would find in the individual market, and many employers offer additional discounts or access to preferred doctors or networks. Additionally, some plans may also provide protection against pre-existing conditions or a guarantee issue period which can help those who may have difficulty qualifying for private insurance options. On the other hand, employer-sponsored retiree benefits are generally not as flexible as private pay plans, so it is important to be sure that you understand the coverage offered by your chosen plan before committing to it.

Part-Time Job

For those looking for health insurance in early retirement, a part-time job may be an option. This can offer coverage through an employer plan and give you access to more comprehensive coverage. It's important to research all of your options carefully, as each employer plan is different and may have different premiums and out-of-pocket costs. Learning about the details of each plan before making a decision can help you make the most cost-effective choice for your situation.

Pros and Cons

Getting a part-time job as an option for health insurance in early retirement has both pros and cons. The main benefit is that you can get access to more comprehensive coverage through an employer plan. On the downside, you may be subject to higher premiums, out-of-pocket costs, and co-pays than if you had purchased your own health insurance policy. It's important to consider all of these factors when researching different plans and making your decision.

Is Health Insurance Cheaper for Retired People?

In some cases, health insurance can be cheaper for retired people. Medicare plans, in particular, may offer more affordable coverage than private insurance plans. However, you're not eligible to sign up for Medicare unless you're 65 or older. In addition to this, retirees who have a part-time job may also qualify for employer plans that provide more comprehensive and lower cost health coverage. It is important to research all of your options carefully to ensure you are getting the most cost-effective coverage available.

Bottom Line

Early retirement can be a great time to reassess your health insurance needs and explore new options. It's important to research your options carefully and find the right plan that fits your needs, budget, and lifestyle.

Fortunately, Coverage Guru is here to help those who have chosen to retire early with the added challenge of financing health care costs. We provide free resources that allow you to compare plans, compare prices, and find affordable coverage even if you have retired ahead of schedule. Our team creates tailored plans and helps you understand your options so you can make informed decisions when it comes to your health care needs during retirement.

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