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Early Retirees Need Health Coverage Options

It’s a dream come true for many Americans when they realize they can retire early.

Normally, retirees can take ad­vantage of Medicare, which is the federal health insurance program for people 65 or old­er (though it may also cover younger people with disabilities or people with End-Stage Renal Disease).

But when people retire early, they are too young for Medicare. What are their options?


COBRA (Consolidated Omnibus Bud­get Reconciliation Act), in general, requires employers with 20 or more employees offer­ing health plans to provide employees and certain family members the option to extend their plan for up to 18 months when cover­age would have lapsed, such as upon retire­ment. The downside with COBRA is that employers are not required to subsidize the costs of the plan as they normally would. Consequently, the coverage may be unaf­fordable. In addition, employees might have to pay an additional 2% administra­tive fee.

Phased Retirement

Many large firms used to offer for­mal phased-retirement plans that included health insurance, but now only one in 10 employers does, according to NerdWallet. Alternatively, companies offering early re­tirement health insurance usually provide an alternate program with fewer benefits or the company health insurance at a higher pre­mium than they offer to current employees.


Early retiring employees with an em­ployed spouse or partner who has employ­er-sponsored health coverage may be able to obtain coverage through their spouse or partner’s plan.


Early retirees may wish to apply for pri­vate insurance, though prices are likely to be a lot more than they’ve been paying.


Short-term health insurance is intended as temporary for people who have a health insurance coverage gap. Coverage varies from one month to one year and, depending on the state, there is an option to renew for up to three years.

Short-term plans are cheaper than stan­dard health insurance, but they aren’t the same as major medical insurance. The plans have limited benefits and can lead to sub­stantial out-of-pocket costs. They also are not Affordable Care Act (ACA) compliant. They don’t cover the 10 essential minimum benefits and anyone with a pre-existing con­dition, such as diabetes or cancer, will not be accepted for coverage. There are also limits on the number of covered doctor visits and prescription drug coverage. There’s no cover­age for maternity.

On the positive side, someone can en­roll anytime and there is no waiting peri­od. Coverage may be effective as early as the day after the application is made. Most short-term plans have open networks, which means policyholders can select the doctor or hospital of their choice.


The ACA Health Insurance Marketplace offers major medical coverage including the 10 essential health benefits required by the ACA. These benefits range from emergency to laboratory services. No one who applies can be denied coverage for having a pre-ex­isting health condition.

Costs for marketplace plans vary, de­pending on the applicant’s location and the level of coverage. The downside is that ACA plans can be very expensive if the applicant does not qualify for a subsidy. However, any­one whose income is between 100%and 400% of the federal poverty lev­els may be eligible for a Premium Tax Cred­it (PTC). You may also be eligible for some PTC if your income exceeds 400%.

One important limitation with an ACA Marketplace plan is that the networks are narrower, so applicants may not be able to get their preferred providers.

Direct Primary Care

Direct primary care, often referred to as concierge care, is a way for early retirees to get coverage for basic doctor services. This type of coverage is growing in popularity be­cause patients get same-day visits, 24-hour availability, low waiting room times, and house calls.

Patients pay a monthly membership fee that covers basic primary care services. There are no monthly health insurance pre­miums or copays. Direct primary care does not extend beyond primary services, how­ever. People who get this type of cover­age should also enroll in a high deductible health plan (HDHP), to cover catastrophic care, such when a patient requires emergen­cy, serious, or extensive care.

Regardless of which coverage type your employee favors, it will be to their advantage to talk to an insurance agent or broker to make an informed choice.

Copyright © 2022 Smarts Publishing

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