Shopping for Health Insurance Before Medicare Kicks In

(This article is excerpted from Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life by Steve Vernon, FSA.)

If you want to retire before age 65, which is the eligibility age for Medicare, then finding affordable medical and dental insurance must be a critical part of your retirement planning. By getting the right insurance, you help protect yourself against the threat of high, uninsured costs during the gap years between when you retire and age 65.

This can be a tough challenge — you may need to be creative and persistent to obtain the medical coverage you need. However, it’s a step you ignore at your own peril.

Below are four conventional possibilities for obtaining medical, dental and vision coverage between the time you retire and age 65. In each case, you’ll want to determine the amount of your monthly premium in order to factor it into your budget for living expenses. If you have a specific health condition, you may also want to see if your preferred health care specialists are in the insurer’s network.

Instead of retiring completely, consider semi-retirement or downshifting. In this instance, you’ll seek work from an employer that offers medical coverage for part-time employees. That may be hard to find, but some companies seek out older, experienced workers, and they offer medical insurance as part of a package to attract them.

Determine whether your employer or your spouse’s employer offers retiree medical insurance and whether you’re eligible for it. Not many employers offer this type of insurance, but it’s worth your time to find out. If your employer offers it, review the eligibility requirements to make sure you qualify and to see how much you’d pay for premiums. It’s entirely possible you still won’t be able to afford the monthly premiums, even considering any premium subsidies from your employer, but it doesn’t hurt to check.

Purchase COBRA insurance coverage from your employer when you retire. COBRA is a federal law that allows workers who are covered by their employer’s medical plan to continue their medical insurance for up to 18 months after they terminate employment. The premiums are usually high, however, and the typical coverage lasts just 18 months.

But COBRA coverage might enable you to close the coverage gap between age 63 ½ and age 65, when you’d be eligible for Medicare. One thing to keep in mind: If you’re married and your spouse is covered through your medical plan at work, you’ll need to wait to retire until your spouse also reaches age 63 ½ in order to have no gap in your spouse’s coverage.

Purchase medical coverage on your own through exchanges under the Affordable Care Act (ACA), aka Obamacare. You might even receive a subsidy for coverage if your income is low enough to qualify. Each state has different programs and options, so it’s important that you check out the options in your state.

Be sure to keep up with the efforts in Congress to repeal or change the ACA, especially whether Congress has weakened the prohibition on exclusions for pre-existing conditions.

Some people who are eligible for employer-sponsored retiree medical insurance or COBRA may be tempted to buy less-expensive coverage on their own. I prefer employer-sponsored coverage because your employer can act as an advocate on your behalf if you have disputes regarding medical claims. If you buy individual medical insurance and have a dispute, it’s just you versus a big insurance company.

If none of these options appeal or apply to you, I’d like to suggest three more creative possibilities. Whey they won’t work for everybody, they might be worth investigating if you need to bridge the gap until you’re eligible for Medicare.

1. Move to a state with high rankings for access to insurance, moderate insurance costs and favorable medical outcomes. The Wallethub site and the U.S. News and World Report site have good rankings.
2. Move to a country with cheaper medical or insurance costs, such as Panama, Costa Rica or Thailand.
3. Move to a country with universal health care (most European countries qualify). If you like this option, then before you cross the pond, you should determine whether you’ll qualify for coverage once you’re there. Note that if you stay overseas after you become eligible for Medicare, you’ll need to carefully consider whether you’ll enroll in Medicare at that time.

One last piece of advice: If you find your medical and dental insurance options are limited or too expensive, you might want to explore a downshifting strategy — work just enough to cover your living expenses. See if you can work part-time for your current employer and still receive medical coverage. This might be a win-win alternative that provides critical medical coverage yet allows you to enjoy life more.

The bottom line: Monthly premiums for medical and dental insurance before age 65 can easily amount to several hundred dollars to more than $1,000 for yourself, and they can top $2,000 for a married couple. If you want to secure the best coverage at the most affordable prices, you’ll want to explore all your options carefully. You’ll also want to get a good estimate of your monthly premium costs and factor these amounts into your retirement budget.

Even if you find you can’t afford to retire when you’d like, you’re better off finding out before you quit your career job. The time you spend investigating your options may just help you save a lot of money, and the insurance can help keep you alive and healthy.