Early Retirees' Path to Medicare

Dreaming of retiring early? You’re not alone. The COVID-19 pandemic has forced many Americans to reevaluate their work-life balance.

Market research company Hearts and Wallets reports that about one in four Americans plan to retire before age 65 – a much higher percentage than in years past.
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If you’re one of the “one in four” and you think you’ve saved enough to retire early and cover your living expenses, there’s one more expense you should consider – health insurance. 

Once you leave your employer-sponsored insurance, you will be responsible for paying for your own health coverage until your Medicare coverage takes effect.

Medicare, the federal health insurance program, is for people who are 65 years or older and for those who have disabilities or End-Stage Renal Disease.  

So, what are your options? Fortunately, you have several. Here are options you may want to consider.

Your Spouse’s Employer-Sponsored Coverage
Many employer-sponsored health insurance plans allow spouses to get coverage. According to a 2019 Morning Consult-CNBC Make It poll, 71% of American couples share the same insurance plan. To request coverage if you retire and lose your employer-sponsored coverage, have your spouse talk to the company’s human resources departments. You may need to provide a copy of your marriage certificate, Social Security card, birth certificate, etc., to complete an enrollment form.

COBRA
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows employees to extend their current health care plan for up to 18 months. The upside is that you’re familiar with the coverage, the downside is that your employer no longer is subsidizing part of the cost and you might have to pay an additional 2% administrative fee. COBRA for many former employees is just too expensive.
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Private or Marketplace Plan
Like with COBRA coverage, many early retirees find that a private insurance policy can be pricy. What you pay will depend on your age, whether you smoke, where you live and how many people will be on the plan.
 
The Affordable Care Act (ACA) Health Insurance Marketplace offers major medical coverage and no one who applies can be denied coverage for having a pre-existing health condition. Keep in mind that an ACA plan can be very expensive unless your income is between 100 percent and 400 percent of the federal poverty levels – then you may be eligible for a Premium Tax Credit.
 
Short-Term Medical
Short-term health insurance is temporary health coverage that, depending on the state you live in, will provide you with coverage for one month to one year. You can enroll any time and there is no waiting period.
 
Short-term plans are cheaper than standard health insurance but may have lower benefits that can lead to substantial out-of-pocket costs. If you have a pre-existing condition, that is excluded from coverage for a certain time period or it may mean you won’t be accepted for coverage.
 
Direct Primary Care
For a monthly membership fee, you can get coverage for basic physician primary care services and you don’t have to pay monthly health insurance premiums. However, you will need to enroll in a high deductible health plan to get the coverage you’ll need if you require extensive care.  
 
Regardless of which coverage option sounds best, it’s to your advantage to confer with an insurance agent or broker to make sure you know all of the details.

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Allied National

Founded in 1970, Allied is one of the nation's oldest and most experienced third-party administrators. As the small group benefit experts, Allied works with small business employers to provide unique and affordable group health benefits..