“What are my options for healthcare in retirement?” This is a question many people have. Around 70% of older Americans retire before they are eligible for Medicare, for various reasons. While early retirement has many benefits, there are also some costs.
Healthcare is one of the biggest retirement expenses. The majority of employers don’t offer continuing health benefits after your employment ends. Only 21% of companies that offer healthcare coverage to employees also extend it to retirees. This is why one in six American workers remain in jobs they might otherwise leave.
Fortunately, you have some options for healthcare coverage during this gap period. Here we will describe these options and some important things to know about each, so you can make an informed decision.
Below are your options.
Continue your employer’s health coverage for up to 18 months. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows you and your family to continue health benefits provided by your employer for a limited period of time if you lose employment. COBRA applies to employers with 20 or more employees. You likely will have to pay more for health insurance than you did as an employee.
Get on your spouse’s health plan. If you spouse is employed or retired and covered by an employer’s health plan, you may be able to get coverage on that plan. Not all employer plans offer this benefit, and there may be extra charges.
Purchase private health insurance. About 10% of Americans purchase their own health insurance. While often the most expensive choice, it’s also the most flexible because you can choose the plan and features that meet your needs. A health savings account (HSA) can help with the copays and deductibles and enables your savings to grow tax-free. You can shop your state’s online marketplace or the federal marketplace, or buy insurance through a private exchange or directly from an insurance provider.
Get group health insurance. Many professional societies and membership organizations offer group health insurance to their members. The cost is lower than purchasing an individual policy because the insurer can offer group rates. Professional associations like the Affiliated Workers Association, Association for Computing Machinery, Freelancers Union, Writers Guild of America, and even Costco, the discount warehouse, offer healthcare coverage to their members.
Enroll in health care sharing programs. These are relatively new arrangements in which groups of people join together and voluntarily share one another’s medical expenses. These programs are much less expensive than most health insurance plans but have specific conditions and limitations that many health plans don’t.
Get a part-time job with health benefits.Not many national companies offer this anymore, but getting a low-stress, part-time position with health benefits has long been a popular option for many retirees. Usually you have to work a certain number of hours per week and have worked at the company for up to a year in order to receive health benefits.
You could even start a business and get health insurance that way, even if you have no other employees.
Get Medicaid. Medicaid is a joint federal and state health insurance program that provides coverage to over 72 million Americans. It covers more than 20% of Americans and is the leading source of long-term care coverage in the U.S. The Affordable Care Act of 2010 (ACA) enabled states to expand Medicaid to cover almost all low-income Americans under age 65. Medicaid is available in all states, but the covered services vary between states.
Table of Contents
Stay on Your Former Employer’s Health Plan
What Does COBRA Do?
If you leave your job for any reason, COBRA allows you to stay with your former employer’s health plans for a period of time if:
- Your former employer has 20 or more full-time employees, and
- You were enrolled in an employer-sponsored medical, dental, or vision plan
COBRA also covers health insurance for your spouse and dependent children.
When Can You Enroll In COBRA?
You have 60 days from the date you lost your job to enroll in a healthcare plan under COBRA. Your former employer will send details about how to enroll and will notify its plan administrator if you choose to enroll. When you first elect COBRA, you continue with the same policy you had before. This allows you to see the same doctors and pharmacies as when you were an employee. If your employer has open season while you’re enrolled under COBRA or you experience another qualifying life event, like getting married or divorced or having a baby, you can change to another healthcare plan at that time.
How Long Can You Keep Your Employer’s Health Plan?
The federal law allows you to stay with your employer’s health plan for up to 18 months as long as you do not enroll in another group health, dental, or vision plan and do not become eligible for Medicare. Individual states may allow extensions under certain circumstances. Check with your state’s insurance commissioner’s office to see what the rules are in your state.
COBRA is intended to be temporary. It’s meant for workers who are between jobs and is designed to cover your healthcare needs until you find another job.
If you are still not Medicare-eligible when COBRA runs out, you can purchase private health insurance; the Health Insurance Portability and Accountability Act of 1996 (HIPAA) allows people who had COBRA to purchase private policies with no preexisting-condition exclusions after the end of COBRA coverage.
How Much Does COBRA Cost?
Under COBRA, you may be responsible for the entire health plan premium plus a 2% administrative fee. The employer typically no longer subsidizes the cost of the health insurance premiums as it did when you were an employee. So COBRA is more expensive than a healthcare plan for employees, but the cost may still be lower than buying a private health policy because you could benefit from the employer’s group rate.
For more information about COBRA, including what happens if your employer had fewer than 20 employees, visit these sites:
FAQs: Health Care Reform and COBRA (dol.gov)
COBRA Insurance | Continuation of Health Coverage
Get on Your Spouse’s Health Plan
If you’re retiring without health benefits but your spouse is still employed, you may request to be added to your spouse’s health plan. But not all employers allow this. The ACA says employers with 50 or more full-time employees must offer health insurance to employees and their children, but not spouses. Your spouse can check with their plan administrator to find out their employer’s policy. If you are added to your spouse’s employer-sponsored health plan, the premiums will increase because they are based on the number of people on the policy.
If your spouse has private (not employer-provided) health insurance, you most likely can be added to the plan. Your spouse can add you during open season or within 30 or 60 days after you lose your employment (losing your job is considered a qualifying life event). Again, the premium will probably increase. You can check with the insurance provider for details.
Purchase Private Health Insurance
As mentioned earlier, you can purchase a healthcare plan through a federal or state government marketplace, or through a private exchange, or directly from an insurer.
Under the ACA, all health plans, whether purchased through a government exchange or privately, must cover at least 10 essential health benefits:
- Outpatient care
- Emergency services
- Hospitalization
- Maternity and newborn care
- Pediatric services including dental and vision care
- Mental health and substance abuse services
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive services and chronic disease management
Many plans, especially those offered privately, have additional benefits.
Also, under the ACA insurers cannot base your rate on your health history or gender. They can, however, use your age, location, and tobacco use in setting rates.
Advantages of Using an Exchange:
Shopping a government exchange is convenient: all of the plans are listed on the site, and you can filter by location, covered services, and cost. Exchanges also often have free customer support by phone or online chat to help you choose a plan.
An attractive feature of purchasing through federal or state marketplaces is possibility of getting premium tax credits and subsidies to help with your monthly premiums if you meet the income requirements. Typically your income must be between 100% and 400% of the national poverty level. This page can help you find out if you can save on premiums for plans purchased through the federal marketplace.
Marketplace plans often have smaller provider networks than private insurance plans. This is because of the administrative costs that insurers pay to list health plans on the exchanges. Having smaller networks is a way for the insurers to cut costs. So you’ll want to verify that your preferred doctor and treatment facility are in-network before you buy a plan.
Advantages of Buying Private Insurance:
Private plans often have more extensive provider networks than exchange plans because insurers don’t have to pay the administrative costs.
You also have a wider range of choices on plans purchased privately. Private plans may offer additional services that exchange plans don’t, such as vision, dental, wellness services, short-term coverage, and fertility services. So if you want services that exchange plans don’t include, or want greater control over what services your plan offers, you might consider private exchanges.
Additionally, if you’re shopping for a private health plan, a licensed broker can help you. Brokers have experience dealing with insurers and knowledge of the private insurance choices. They can help you sort through the numerous choices available. They can also help you enroll in a plan. Brokers can also help with government exchange plans, but their role may be more limited.
Sometimes an insurer will offer a plan on its private website and a similar-sounding plan but with fewer benefits on the government exchanges. If the exact same plan is offered in multiple places, it must have the exact same price in each place.
You can view the federal and state marketplaces at healthcare.gov. You can schedule a time to speak with an agent or broker here. Meanwhile, the finder page on the site offers help in finding private health plans. If you’re looking for a private health plan and having difficulty getting started, Investopedia suggests the best health insurance plans for retirees.
Get Group Health Insurance
Many industry and professional groups, trade unions, alumni associations, and regional chambers of commerce offer group health insurance coverage. The organization selects and purchases the healthcare plans and makes them available to members.
The main advantage of group health plans is lower premiums. Also, family members often can be added to group plans (at additional cost). While some groups have stringent membership requirements, the group rate discount might be worth the effort of joining.
Just a few of the well-known organizations that offer group health insurance are:
- AARP
- Actors’ Fund of America
- Affiliated Workers Association
- American Institute of Graphic Arts
- Association for Computing Machinery
- Costco
- Graphic Artists Guild
- Institute of Electrical and Electronic Engineers
- Small Business Service Bureau
- The Freelancers Union
- Writers Guild of America
You can review groups you might already be a member of, such as a union, alumni association, professional organization, or your local chamber of commerce, and find out about member health benefits.
You can also search online for “membership organizations that offer group health insurance.” Check which organizations offer health insurance to members. List out organizations that might be appropriate for you, for example based on your previous career, education, or a hobby.
Then consider joining. Be sure to include the cost of membership when you decide if the group’s health insurance coverage may be right for you.
Also be sure to read the plan descriptions carefully. Some organizations may offer discounts on prescriptions but not a full health insurance plan.
Enroll in Health Care Sharing Programs
Health care sharing programs are nonprofit ministries whose members share a religious faith.
Health care sharing programs have been around for several decades. Although they’re not traditional health insurance and don’t provide the same range of coverage, the cost is much lower – often less than half the cost of health insurance plans.
With a health care sharing program, you pay a certain amount each month (similar to a premium), and the program covers your health expenses after they reach a certain level (similar to a deductible).
The monthly fees are much lower than insurance premiums, typically around $480-$800 for a family, and the amount you must reach before the program chips in is around $500 for individuals and $1,000-$5,000 for families.
Health sharing programs are less expensive than health insurance because they usually offer a smaller range of basic services, from prescriptions to maternity services. This is appealing to many people because you only pay for services you might use.
Unlike health insurance, health sharing programs can choose which services to offer. Some programs just cover basic preventive and catastrophic care. But others have more services like dental, vision, and telehealth. Some even cover expenses for overseas or experimental treatments, adoptions, and funeral services.
Like health insurance, there’s a network of preferred providers, and your costs are much lower if you stay in-network. You can enroll other members of your family for additional monthly fees.
The fees paid by members are kept in a common account by the program committee. When you have a medical need, you submit a request for payment. When the committee approves the request, your medical bills are paid by the program. With some programs, you pay the provider first and the program reimburses you.
There are some important caveats for these programs:
Since health sharing programs aren’t traditional health insurance, they aren’t bound by the same rules as insurance. So they may not cover the basic healthcare services that insurance plans are required to, like vaccinations or mental health and substance abuse services.
They can also deny membership or impose additional fees for preexisting conditions. Some programs require you to pay into the program for a year or even several years before you can submit a request for payment.
Unlike with health insurance, there are no annual or lifetime limits on medical cost reimbursements. But there may be limits on how much they will pay for certain diseases. So people with a chronic health issue may have large out-of-pocket expenses.
Health sharing programs aren’t regulated by the government. So if the program fails to reimburse you for whatever reason, or goes bankrupt, you have no recourse.
Many programs are based in the Christian faith, so you may be asked to sign a statement of faith before joining and agree to abide by some lifestyle choices. Some programs may drop coverage if you violate the lifestyle conditions such as by using illegal drugs. Some plans may end coverage when you reach age 65.
Before enrolling in a health sharing program, review the program’s rules and conditions. Some things to pay close attention to include:
- What services are covered and which are not?
- Are my doctor and hospital in network?
- What is the monthly fee and how much do I have to pay out of pocket?
- What are the lifestyle rules?
- How often does the program suspend or terminate coverage?
For more information about health sharing programs and to get free help with choosing a program, visit https://hsaforamerica.com/
Get a Part-Time Position With Health Benefits
A significant number of retirees are choosing to work part-time. About 20% of Americans age 65 or older are working or looking for work, according to a 2021 report by the Administration for Community Living. Older workers also enjoy working more than their younger colleagues, according to a Pew Research survey: two-thirds of workers age 65 or over said they were extremely or very satisfied with their jobs. Working enables retirees to stay productive, maintain social interactions, and supplement their retirement income. Likewise, many companies want to hire older workers for their experience and work ethic.
Although it’s not a legal requirement, many of these companies offer health benefits to part-time workers. If you’re considering part-time work for the health insurance, be sure to check the policies of the employers you’re considering. Find out how long you must work for the company and how many hours you need to work per week to be eligible for health benefits. Also look at the health plans offered and make sure they cover your needs.
You’ll also want to consider the job itself. Working a job you really dislike can be burdensome and, long-term, harmful to your health. Also remember that you’ll have less free time and higher costs for commuting and other expenses associated with your job.
You’ll also want to consider carefully the financial implications. Your employment income may impact your taxes and Social Security benefits. You may want to consult a financial and tax advisor.
For help searching for employment as a retiree, visit https://retirementjobs.com/
Self Employment
Many retirees start businesses as a way to stay productive and engaged and supplement their income. Freelance work and consulting are popular options. If you’re self-employed, you can search the federal government health insurance marketplace and the state marketplace if your state has one, for health coverage for self-employed individuals. You can compare the policies you find with private exchanges, membership organizations, and the other individual health insurance options listed above to decide which better fits your needs. If your business has one or more employees besides yourself, you can also search for small business health insurance.
Association health plans are an option that has recently become available. Association health plans are where multiple employers, including self-employed individuals, group together to get health benefits. By joining together, employers can negotiate lower rates from insurers and healthcare providers.
For more information about the federal marketplace for self-employed individuals, visit the self-employed page on healthcare.gov.
For more information about association health plans, visit https://www.associationhealthplans.com/
Enroll in Medicaid
Medicaid provides comprehensive health care and long-term services to low-income Americans. Over 90 million people receive Medicaid benefits. Medicaid provides free health insurance to people with incomes below 138% of the federal poverty level. Medicaid is jointly administered and financed by the federal government and individual states. Each state manages its Medicaid program within broad federal guidelines. For example, eligibility varies between states and may depend on household income, size, disability, age, and other factors. The services Medicaid offers also varies between states. All states’ Medicaid programs must include inpatient and outpatient hospital services, physician services, lab and x-ray services, home health services, nursing facility services, and transportation to medical care, among others. States are allowed the option to also offer prescription drugs, physical therapy, optometry services, and chiropractic services, among others. Visit this page for a list of mandatory and optional Medicaid services. You apply for Medicaid through your state Medicaid agency, which makes eligibility determinations based on your state’s policies.
For more information about Medicaid and to apply, visit https://www.medicaid.gov/about-us/beneficiary-resources/index.html
You can learn more about your state’s Medicaid programs at https://www.medicaid.gov/state-overviews/index.html
Enroll at a College or University
We mention this as an additional possibility. Over 200,000 people aged 50-64 are enrolled in colleges and universities across the country. Some are furthering their education for personal enrichment, some seek to bolster their credentials for second careers or part-time jobs, and some want to get that degree they didn’t finish earlier in life.
Many private and state colleges allow older adults to enroll in courses with no or minimal tuition. As a student, you may be eligible for student health services. Going back to school is a big decision, and naturally we wouldn’t suggest doing it just for the healthcare. But if it’s something you’re planning to do already, you could inquire about the possibility of using student health insurance, even as a supplement to other healthcare coverage you have.