By Dennis J. Rogers, CPA, CFP®
Many people today find themselves in a good financial position to retire before age 65. However, their one major concern is how to obtain health insurance coverage prior to Medicare eligibility. There are several options to consider in this situation.
Some large companies (21% with 200 or more employees in a recent study) offer their employees post-retirement insurance benefits[1]. The coverage can be expensive since the employer is no longer paying for it, yet it can be especially beneficial if there are existing medical conditions. For those whose spouse will continue to work it might be a good option to go onto their plan. There should be no waiting period for the retiree as retirement would be a qualifying event.
Companies with 20 or more employees are subject to federal COBRA law. This law requires employers to extend coverage for 18 months after separation from employment. Of course, the retiree must pay the premiums. This could be a good option to cover the gap until Medicare eligibility or until switching to another plan. Several states (including Arizona) have mini-COBRA laws, which extend similar coverage to those whose employer has fewer than 20 employees[2].
If you are not eligible for an employer based or COBRA plan, you will have to utilize a state or federal health exchange. These were established under the Affordable Care Act. The normal open enrollment period is between November 1st and December 15th, but if you leave or lose your job at any other time, you have 60 days to sign up. These plans are not cheap. However, they are guaranteed issue so there are no health restrictions. You can shop for a plan and see if you are eligible for cost reducing subsidies at healthcare.gov.
If you are considering early retirement, now is the time to determine your health care strategy.
Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Neither United Planners nor its financial professionals render legal or tax advice. Please consult with your accountant or tax advisor for specific guidance. This page contains links to third-party websites. By selecting a link, you will be leaving our website and launching a new browser window. Links are provided for informational purposes only and should not be viewed as an endorsement or affiliation with respect to any third party.
Dennis J. Rogers, CPA, CFP® is a Registered Principal offering securities and advisory services through United Planners Financial Services. Member FINRA/SIPC. FireSky Financial and United Planners Financial Services are separate companies. He is a partner in a financial advisory practice in Phoenix that focuses on helping clients make smart decisions about their money based on their personal core values. He can be reached at drogers@fireskyfinancial.com or 602-748-1900
- [1] 2022 Kaiser Family Foundation Employer Health Benefits Survey; October 27, 2022
- [2] Arizona mini-COBRA law; A.R.S. §20-2330 Sources: “Retiring Before Medicare Eligibility;” Louse Norris; verywellhealth.com
- “Early Retirement Means Finding Health Insurance before Medicare;” Kiplinger Personal Finance, November 20, 2020
