Three Ways to Get Health Insurance Before 65 — Without Paying an Insurance Agent

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If you’re planning to retire early, you’re not alone. The majority of Americans hope to retire by 62, and many are planning to retire even earlier. Plus, the COVID-19 crisis prompted 3 million Americans to retire early (both voluntarily and involuntarily). 

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While a successful early retirement represents a huge victory, a major obstacle to early retirement is securing affordable and adequate health insurance, as most Americans don’t become eligible for Medicare until they turn 65. 

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Not only can this gap in health insurance be a large, sometimes unexpected expense, but finding the right coverage can also be overwhelming and stressful. Evaluating different health insurance options is no easy task, as there are many factors to consider when determining how to fill a gap in coverage. 

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Most Americans have three options for health insurance between the time they retire early and the time they turn 65:

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1. Joining a spouse’s employer-sponsored health plan.
2. Enrolling in COBRA insurance.
3. Purchasing an individual health plan from the Marketplace.

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We’ll cover each option below to help you determine which ones you qualify for and how to evaluate which one is right for you.

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1. Spouse’s Employer-Sponsored Insurance

If you’re married and your spouse is still working when you retire early, your best option may be to enroll in your spouse’s employer-sponsored healthcare plan. You don’t even have to wait for their next benefit election period. The loss of job-based health coverage for any reason is considered a qualifying event, so you can enroll in their insurance plan as soon as you leave your job.

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Keep in mind that the premiums you’ll owe as a covered spouse may be more expensive than the premiums your spouse pays as an employee. However, this option is usually the most cost-effective option for individuals retiring early. Plus, you’ll get the added benefit of enjoying a group healthcare plan, which typically offers more robust coverage than many individual plans. 

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2. COBRA

If you’re unmarried or your spouse isn’t currently working, another option you can consider is COBRA (The Consolidated Omnibus Budget Reconciliation Act), which is generally available to those covered under group health plans from private companies with 20 or more employees. COBRA allows you and members of your household to stay on the same employer-sponsored plan you had before you retired. Typically, this coverage lasts up to 18 months. 

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COBRA is intended for life events that result in the termination of insurance coverage, such as  job loss, a divorce, or a transition between jobs. If you retired as the sole provider of insurance in your household, then you likely have the option to continue your existing coverage thanks to COBRA. 

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However, COBRA insurance is expensive. While on COBRA, your employer will no longer pay for any portion of your insurance premiums. Instead, it’s your responsibility to cover the entire cost of your premiums plus a 2% administration fee, along with your deductibles, coinsurance, and other out-of-pocket costs up until your out-of-pocket maximum. 

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COBRA coverage can be elected up to 60 days after the last date of work, giving you plenty of time to weigh the costs and benefits before you decide to enroll. But keep in mind that COBRA may not be a permanent solution. You’re only guaranteed 18 months of COBRA coverage after you terminate your employment, so you’ll need to have a plan for what you’ll do after this period if you’re retiring well before age 65. 

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For a deeper dive into COBRA, read our COBRA Coverage Insurance Guide. 

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3. Individual Health Insurance Plan 

COBRA doesn’t make sense for everyone, and the high premiums can be off-putting for many early retirees. In this case, you can buy an individual health insurance plan from the Health Insurance Marketplace. All plans sold on the Marketplace meet minimum coverage requirements as outlined by the Affordable Care Act. 

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There are four tiers of health insurance options available — Bronze plans, Silver plans, Gold plans, and Platinum plans. The Marketplace website allows consumers to compare plan details, prices, and coverage. Most states offer insurance plans through the website linked above, but others have state-specific Marketplaces. You can use this list to determine if your state has its own Marketplace website.

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Marketplace plans typically have higher deductibles, different out-of-pocket maximums, different drug caps, and more. Be sure to read policy documents carefully so you fully understand how they differ from the employer plan you’re used to and what’s included in the plans you’re considering before you purchase them.

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Why Health Insurance Agents Aren’t Always Necessary

Many early retirees or those thinking about early retirement will turn to a health insurance agent or broker to help them evaluate their options. Indeed, a health insurance agent may be able to help consumers understand different policies and complicated jargon, and very few charge fees to the consumers themselves. 

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But it’s important for individuals to understand that health insurance agents don’t work for free. They’re paid commissions to sell you a policy, so it can be difficult to ensure if the broker you choose has your best interest in mind. 

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Consider this example of a health insurance agent who marked up a plan to his clients for $9,000 more per year than the Marketplace cost. While it’s not clear why he sold the plan at such a higher price, it is clear that health insurance agents don’t always get it right. 

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Few people know that you don’t actually need an agent to place a policy. You can enroll directly on Healthcare.gov (or your state’s Marketplace site) or through the carrier directly by visiting their website or giving them a call. 

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The time and effort spent researching health insurance plans can be daunting, but it’s worth it to fully research health insurance options before purchasing a new policy. If you understand your health insurance needs and the plan you choose, you’ll be more likely to get the coverage you need at a budget you can afford before you become eligible for Medicare. 

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Doing Your Research: A Benefit and a Burden 

When you retire early, you take on a great responsibility for yourself and your household. You want to be careful about selecting a health insurance plan that is both affordable and provides you with the coverage you need before you turn 65 and become eligible for Medicare.

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Even though it’s worth the time to research your health insurance options thoroughly, you may still be wishing for guidance from an objective professional. We have a solution that doesn’t involve commission-based health insurance agents. As an early retiree, it’s likely you’re working with a comprehensive financial advisor who has helped you plan for this big milestone.

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Your financial advisor may not be a healthcare expert, but they do have your best interest in mind. And as your healthcare plans are a huge component of your financial and long-term plans, your advisor is most likely willing and ready to help you. We encourage you to start the conversation with them sooner rather than later.

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If your advisor is unsure about helping you with this important component of your financial plan, encourage them to connect with Caribou on LinkedIn for tips and strategies about the integration of healthcare planning with comprehensive financial planning.