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Deciphering Retirement Health Insurance Choices for Those 65 and Older

The transition from full-time work to retirement often brings with it a change in health insurance coverage. In many cases, this means a move from employer-sponsored coverage to Medicare or to private insurance. While the majority of retirees have Medicare as their primary source of health care, private insurers still make up a significant portion of the market. As such, if you’re retiring early, it’s important to understand your options for retiree health insurance and how they might affect your budget.

The first step in evaluating your early Retirement health insurance choices for those 65 and older options is to determine how much you can afford to spend on premiums and out-of-pocket costs. A good starting point is to create a spreadsheet that shows your projected medical needs in retirement, including current and expected expenses for things like medication, hospital stays and doctor visits. Next, compare that cost estimate against the amount of money you expect to have available in your retirement savings account and your annual Social Security benefits. Identify the gaps between your projections and your budget, as well as any options for filling those gaps.

One option is to continue your current health insurance plan through a special enrollment period under COBRA (Consolidated Omnibus Budget Reconciliation Act). This allows you to stay on the same coverage for up to 18 months after leaving your full-time job or becoming unemployed. However, premiums will be significantly higher under COBRA than they were with your employer’s plan.

Another option is to purchase private insurance through the healthcare marketplace, or “exchange,” where you can shop for individual and family plans from multiple insurers. Some states have their own marketplace, while others use the federal exchange. If you choose this route, it’s important to note that eligibility for premium subsidies based on your income is calculated throughout the year. This can be a particular challenge for early retirees, who may find that their pre-retirement income pushes them over the threshold for eligibility.

Most people age 65 and older are eligible for free Medicare Part A, which covers hospital stays. A separate monthly fee is required for Part B, which covers physician visits and other services. This is generally deducted from your Social Security or retirement check.

You can also sign up for a Medicare Advantage plan, which is similar to private health insurance, but offers extra features such as vision and hearing aids, gym memberships, dental and massage benefits, or transportation to and from medical appointments. Most Medicare Advantage plans also include prescription drug coverage, and most offer an indemnity or fee-for-service insurance plan.

Finally, if you’re struggling to afford private insurance or Medicare, you might be eligible for Medicaid, the government-run national health care program that provides coverage to low-income adults. Each state has a different program with its own rules and eligibility limits, so it’s important to visit your state’s Medicaid website to learn more about how to apply.