If you’re contemplating early retirement before Medicare eligibility at age 65, you’re going to need a good health insurance plan. Such a plan can help prevent catastrophic medical costs for anyone, including people who are currently vital and healthy. Before you turn in your retirement notice, it’s critical that you explore your options—and their costs.
If you’ve been covered by a health plan at work, you may find that your situation can change significantly when you retire. For one thing, it’s very likely that your monthly premiums will increase significantly for any new policy you find, maybe $1,000 per month or more. You might also face higher deductibles or copayments, and you could be limited in the doctors and health care providers you can work with.
Here we’ll explore seven possible ways that an early retiree can obtain the health insurance they need, and then we discuss how to explore your options.
1. Work For An Employer That Provides Insurance For Part-Time Employees
One significant advantage of semi-retirement is that your employer might offer health insurance coverage for part-time employees. If you’re thinking of continuing to work for your current employer, see if they offer this coverage. If not, you may want to consider looking for a new employer.
The advantage to health coverage provided by your employer is that they’ve shopped around for health insurance coverage and have hopefully negotiated lower costs and better features than you might obtain on your own. They also typically offer wellness programs that have the potential to improve your health and longevity.
2. Obtain Coverage Through Your Working Spouse
If you’re married and your spouse is still working, a plan offered through their employer might cover you as well. These plans have the same advantages as described above, though they often charge a higher premium for spouses compared to employees.
3. Elect Retiree Health Insurance From Your Former Employer, If You’re Lucky
A few employers still offer retiree health coverage for employees who meet certain age and service thresholds when they retire. Examples include attaining age 55 or older when you retire and requiring 10 or more years of service. In this case, you might be able to continue the coverage you had as an employee, although your monthly premium might increase. If you’re eligible for such a plan, you’ll want to investigate both the coverage offered and the premiums required.
4. Continue Coverage Through COBRA
When you leave employment that includes health insurance, a federal law known as COBRA requires that your employer allow you to elect continued coverage for up to 18 months. Four states (California Connecticut, New York, and Texas) have laws that allow continued coverage for periods that range from 24 to 36 months under certain circumstances. With COBRA coverage, you’ll pay the full cost of the insurance, so it’s very likely that your monthly premium will increase significantly.
COBRA can be a viable option for people who retire within 18 months of attaining Medicare eligibility at age 65. But here’s one trap: If you were covering your spouse through your health plan at work and he or she is younger than you, their coverage will stop after 18 months, leaving them with a coverage gap until they’re eligible for Medicare.
5. Buy Insurance From The Affordable Care Act (ACA) Health Insurance Marketplace
The ACA Health Insurance Marketplace offers insurance plans to individuals, families, and small businesses. Each state sets up their own exchanges, or offers an exchange hosted by the federal government. There is typically a large variety of plans that have different costs and features.
Through 2025, the ACA offered subsidies for the premium costs for people with limited income. These subsidies are scheduled to expire at the end of 2025. They were not extended by the One Big Beautiful Bill Act to help pay for the tax cuts in that bill. As a result, in 2026, most people will be paying for the full cost of any health coverage they purchase through the ACA.
You can explore the full costs of ACA insurance on the website ehealthinsurance.com. Health insurance for early retirees can easily cost $1,000 per month or more per person, depending on the type of plan. While you’re investigating this option, be sure to do your homework regarding monthly premiums and build the cost into your budget to make sure you have enough retirement income to live on.
6. Purchase Short-Term Insurance
You may be able to purchase short-term health insurance coverage for a period of three or four months. These types of plans typically have lower costs and reduced benefits compared to plans on the ACA Marketplace. Many of these short-term plans have restrictions for pre-existing conditions and are best used to bridge an insurance gap between work and eligibility for other coverage, such as Medicare. They aren’t a long-term solution for most early retirees.
You can learn more about short-term health insurance on the website ehealthinsurance.com.
7. Apply For Medicaid
Medicaid offers health insurance for adults and children with limited income and resources. Medicaid funding has been shared by the states and federal government, although it’s likely that federal funding will decrease in the next few years due to the One Big Beautiful Bill Act. Each state administers the program for its residents; as a result, the eligibility requirements, benefits and costs vary by state.
Starting in 2027, the One Big Beautiful Bill Act will implement work requirements for able-bodied adults under age 65 to be eligible for Medicaid, so it remains to be seen if Medicaid will be a viable option for early retirees.
How To Move Forward
You’ll want to determine which of the options you’re eligible for and then explore their costs and features. For many early retirees who are already completely retired, the ACA Marketplace may be their only option.
For any plan you’re considering, here are the bare minimum questions you’ll want to ask and find answers for:
- What are the monthly premiums? How and when can they change?
- What type of plan is it? Is it a fee-for service that allows self-referrals or a managed care plan where you’re restricted to providers in their network? If it’s the latter, are your doctors and health providers in that network?
- What are the deductibles and copayments?
- Is there an annual or lifetime maximum amount paid by the plan?
As noted, these questions cover the bare minimum information you should gather. There are additional questions you can ask to do a more thorough job, and you’ll find one list here.
If you’re serious about early retirement, you need to explore your health insurance options before you retire. You don’t want to ride out into the sunset and then learn that you need to come back with your tail between your legs because you can’t afford to pay for health insurance.
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