Retiring early? Nail down health insurance

By Lisa Gerstner

Kiplinger’s Personal Finance

If you’re 65 or olderwhenyou retire, you can rest easy knowing that you’ll be eligible forMedicare. But if youwant to leave the workforce earlier than that, you’ll have to findaway to bridge a health insurance gap. Here are some options.

Getonyourspouse’splan. If your spouse is stillworking and has access to employer-sponsored group coverage, check whether you can enroll in the plan, too. If so, joining the employer planmay provide solid coverage at an affordable price.

You typically have 30 days fromthe time you leave your job to request special enrollment in your spouse’s plan. Theemployer may subsidize less of the premiumfor a spouse than for the employee. Some employers levy a surcharge— say, $100 a month— to add a spousewhohas other coverage available through his or her own employment. But that shouldn’t be an issue if you’re retired.

UseCOBRA. This federal lawallowsworkers to continue their health coverage after leaving their job. If youwork for afirm with at least 20 employees, itmust allow you, your spouse and dependent children to stay on thecompany’s group health plan after your employment ends (unless youwere terminated for gross misconduct). Usually, you can stay on the plan for up to 18 months. Somestates have "mini COBRA" lawsthat require small employers to provide extended coverage, too, but term lengths and events that allowyou to qualify for it vary.

COBRAis a pricey prospect formost. Typically, youmust pay the full premium — including the amount the employer coveredwhenyouwere an employee— plus a2% administrative fee.

If you have less than 18 months to go until you turn 65, COBRAcoverage will take you all theway toMedicare eligibility, which canmake it a relatively seamless choice if you can afford it. You typically have 60 days fromthe date you receive notice to electCOBRAor the date you would lose coverage (whichever is later) to enroll. Coverage is retroactive as long as you pay any back premiums that you owe.

ExploreACAplans. Atwww.healthcare. gov, you can apply for insurance through a marketplace established under the Affordable CareAct. These marketplace plans must cover essential benefits, including hospitalization, prescription drugs, and preventive andwellness services, and the plans can’t deny you coverage or charge you more if you have a preexisting condition.

Marketplace plans often have higher deductibles and out-of-pocket limits than employer plans. Because marketplace-plan premiums are age-related, if you are in your early 60s, you can expect a marketplace premiumto run at least $1,000a month if you don’t qualify for a premium tax credit, says KarenPollitz, senior fellow at the KaiserFamilyFoundation. Thegood news is thatmore people currently qualify for the income-based subsidies thanks to provisions of aCOVID-19 relief lawthat were recently extended through 2025.

You generally have 60 days fromthe time you lose job-based coverage to enroll in a marketplace plan. Otherwise, you can sign up during open enrollment; for 2023 plans, it’s fromNov. 1, 2022, to Jan. 15, 2023.

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