Eyeing early retirement? 8 ways to keep your health insurance until Medicare kicks in

Retiring early has many perks: more time to travel, explore new business opportunities and spend time with family and friends. Yet if you quit work before you turn 65, you’ll likely lose access to your employer’s health insurance plan. It’s still possible to get coverage — through a spouse, new employer or the health insurance marketplace, for example. But it may not be cheap.

Still, remaining covered is worth it — medical debt rates increase with age, falling only when Medicare kicks in.

If you’re considering early retirement, explore these health coverage options to bridge the dangerous coverage gap.

Option 1: Extend your current employer coverage

If you’re preparing to retire, ask your employer if it offers health insurance coverage for early retirees. While less common over the past decade, thanks in part to rising health insurance costs, it’s possible you’ll have some level of coverage through your former job. The federal government offers retirement benefits to eligible retirees through the Federal Employees Health Benefits Program, for example. Academic institutions like Johns Hopkins and the University of Michigan also offer this type of coverage.

This would be the simplest option for early retirees, requiring minimum work on your part. It’s worth making sure you’re not eligible before considering other alternatives.

Read more: Your Social Security reality check: 5 steps to estimate what’s coming your way

Option 2: Join your spouse’s health plan

If you’re married to a person who has health insurance through their employer, you may be able to get coverage through their job. (That’s what I did when I quit my full-time job to pursue freelance writing.)

You may not even have to be married to qualify: Some companies and states like New York offer coverage to domestic partners or civil unions. Not all companies provide this, but if you live with a partner, it’s smart to ask if you can be included in their coverage.

This, along with staying on your employer’s health coverage after retirement, is among the least expensive options available to you before 65.

Option 3: Buy time with COBRA

Most businesses of 20 or more employees are required to offer an extension of your insurance when you leave a full-time job, thanks to the Consolidated Omnibus Budget Reconciliation Act. More commonly called COBRA, it allows you to retain the same coverage you had while working, including benefits for your spouse or dependents. A downside? You’re responsible for footing the full premium yourself — and it’s not cheap.

Average costs range from $400 to more than $2,000 each month. How much you pay depends on your insurance company, where you live, how many people your insurance covers and whether you want add-ons like basic and dental. In some cases, you might pay a little extra if you’re a smoker.

When I left my previous job, COBRA would have cost me about $800 a month as a single adult. Compare that to the $250 I’d been paying. Instead, I switched to my husband’s employer plan, which was about $400 a month for the both of us.

COBRA is designed as a short-term solution, though it might last up to three years in some cases, making it a good option if you don’t have a partner or a job that offers early retirement insurance. These employer group plans typically offer better coverage for less money than buying health coverage on your own.

Read more: ‘Will Social Security run out of money?’ 5 common fears vs. facts

Option 4: Shop the government’s ACA marketplace

If COBRA costs too much, check out the Affordable Care Act’s health insurance marketplace for more affordable plans on your own. These plans come with built-in protections — for example, a requirement to cover pre-existing conditions and no lifetime limits on medical spending.

Plans can run from $300 to $800 per month. Some plans can top $1,000, though costs that high are rare for early retirees. Each state runs its own marketplace, so plans and costs vary depending on where you live — in addition to other variables like your deductible, the type of plan you choose and the number of dependents on your plan.

You may be eligible for a tax credit for premium payments if your income is below 400% of the federal poverty level, which lowers your monthly premium. Depending on your state, income and family size, you may also qualify for additional savings. Enter your state, household size and income into HealthCare.gov’s money-saving calculator to see if you qualify.

How to get insurance through the ACA marketplace

Normally you can sign up for a new plan only during open enrollment at the end of the year. But new retirees qualify for a special window: You can enroll for new coverage within 30 days of leaving work.

You have three ways to enroll in ACA marketplace coverage:

1. Enroll online. Create a HealthCare.gov account, compare plans you’re eligible for and apply through the marketplace.

2. Enroll by phone. Call the marketplace toll-free at 800-318-2596. The number is available 24 hours a day, 7 days a week (except holidays).

3. Enroll by mail. Complete, print and mail the Health Insurance Marketplace application to Health Insurance Marketplace, Dept. of Health and Human Services, 465 Industrial Blvd., London, KY 40750-0001.

You can also find local assistance if you need guidance, or use a third party to handle the application for you. If you decide to go into consulting after retirement, you can also sign up for ACA health insurance through the Small Business Health Options Program marketplace (SHOP).

🔍 Can I cancel my coverage through the ACA marketplace when I’m eligible for Medicare?

Yes. Use your marketplace plan to cover the gap, and cancel as soon as you’re eligible. You can enroll in Medicare starting three months before you turn 65 and ending three months after.

Learn more: Original Medicare vs. Medicare Advantage: Which should you choose for health coverage?

Option 5: Work part-time for the perks

Large corporations that rely heavily on hourly workers — like big-box stores and coffee chains — might offer health insurance even to part-time workers.

You’ll need to meet a certain number of hours every few months to qualify, usually the equivalent of 20 hours a week. With this kind of shift work, you’re often not guaranteed to be assigned that many hours per week, so there’s a chance you could lose eligibility for insurance at any time. Unionized jobs may offer better coverage and more protection.

Companies that offer health insurance to part-time employees

Large companies that offer healthcare coverage to part-time workers include:

• American Red Cross offers health coverage through Cigna to all employees regularly scheduled for more than 20 hours per week.

• Costco offers health coverage to part-time employees working at least 24 hours a week, with eligibility after 60 days of service.

• JP Morgan Chase offers a full suite of benefits to employees working at least 20 hours a week. For part-time employees, you must work for the company at least 60 days to qualify for coverage.

• REI Co-Op employees who average 20 hours weekly over 12 months can choose from three health plans. Those who work fewer hours are eligible for higher-deductible REI Access Plan.

• Staples offers a pared-down version of medical and dental benefits to part-time employees in addition to other benefits like pet insurance.

• Starbucks offers health insurance and a host of other benefits to part-time employees after you’ve worked at least 240 hours over three consecutive months. To remain eligible, you must put in at least 520 hours every six months.

• UPS extends full-time benefits to part-time employees, including healthcare coverage, retirement pensions and tuition assistance.

Your local government might also offer coverage to employees who work at least 20 hours a week. Search for your city or state’s careers site to learn what’s available.

Read more: Best jobs for retirees and mature workers: 10 second-act careers plus 13 side gigs

Option 6: Check your Medicaid eligibility

If your income has dropped over the past year, you may be eligible for Medicaid. Eligibility for this federal program actually depends on where you live: You apply for it through your state government, which has its own criteria. But in most cases, Medicaid is free and retroactively covers medical bills from 90 days before coverage officially begins.

Eligibility comes down to your modified adjusted gross income — or MAGI. If your income is too high but you have a health condition that requires care, you may qualify as “medically needy.” In that case, you have the option to spend down your income until you reach the MAGI cutoff for that type of Medicaid.

However, qualifying for Medicaid can be tricky if you rely on your retirement account withdrawals for income, as these distributions count toward your MAGI. It may be worth consulting an attorney in your state who specializes in elder law to walk you through the process.

Option 7: Use temporary insurance as a stopgap

Short-term health insurance is a type of health insurance available outside of the ACA marketplace. With monthly costs ranging from around $100 to $300, these plans might sound like a great deal. They’re also available outside of open or special enrollment periods.

However, they don’t offer the same coverage as your standard marketplace plan and may leave you with sky-high medical bills in the event of an emergency. That’s why it’s sometimes called junk insurance. Thanks to recent legislation, these plans can also only cover you for up to three months, with the option for a one-time month extension.

States that ban or restrict short-term health plans include California, Colorado, Connecticut, Massachusetts, New Jersey, New Mexico, New York, Vermont and the District of Columbia.

Option 8: Skip insurance entirely (and hope for the best)

While you can technically go without health insurance, experts don’t advise it. It’s true that you no longer have to pay a penalty associated with the ACA for remaining uninsured — but going it alone is a risky option. Aside from the fact that healthcare and prescriptions are priced with the assumption that patients are covered by insurance, a Wall Street Journal investigation found that many healthcare providers charge higher rates to uninsured patients than they do to insurance companies. That’s because large insurance companies have more leverage than individuals when it comes to negotiating how much they pay for care.

This may not be the case with public or nonprofit hospitals — many offer “charity care” at reduced prices or even free coverage to low-income patients. If you do end up in the hospital without insurance, always negotiate your medical bills before paying them.

And if you go this route, set aside money in a high-yield savings account to build an emergency fund that can help cover the unexpected.

Read more: What happens if you outlive your term life insurance policy?

What you can expect to pay for health care in early retirement

Retirees can expect to pay an average of $172,500 in health insurance and medical expenses throughout retirement, according to a 2025 report from Fidelity. That’s a 4% increase over 2025 — and that’s if you retire at 65.

Early retirees may expect to pay even more during retirement, especially if you dip into Social Security or other retirement funds to help cover the cost before you qualify for Medicare.

Fortunately, the Inflation Reduction Act set limits on how much you’ll pay through Medicare. Starting in 2025, there’s a $2,000 cap on out-of-pocket prescription costs — including a $35 monthly cap for insulin prescriptions.

Read more: 6 simple ways to save money on your prescriptions — without skipping your meds

Can you use an HSA if you retire early?

Yes, you can use a health savings account — or HSA — if you retire early. HSAs allow you to deposit pretax dollars into a savings account that can be used only for eligible medical and health expenses. After you turn 65, you can also use the funds for non-medical expenses.

In 2025, you can contribute up to $4,300 if you have an individual plan or $8,550 for a family plan. Folks over 55 can contribute an additional $1,000 per year to catch up. However, to qualify for an HSA, you must have a high-deductible plan. The IRS defines this as a plan with a deductible of at least $1,650 for individuals and $3,300 for families, with out-of-pocket expenses of no more than $8,300 for individuals or $16,600 for families.

What are HSA contribution limits for 2025?

The IRS released information on HSA inflation-adjusted amounts for 2026 in August that specify contribution limits of up to $4,400 if you have an individual plan or $8,750 for a family plan. For 2025, the IRS defines high-deductible plans as those that don’t exceed $8,500 for individuals or $17,000 for families.

Read more: Can you still retire in 2025? Here’s what the experts say amid market volatility

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FAQs: Health care coverage for early retirees

Learn more about how to bridge the gap between early retirement and Medicaid. And take a look at our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

I’m enrolled in COBRA. Can I cancel COBRA and sign up for marketplace coverage instead?

Generally, yes. But when you can switch from COBRA to a marketplace plan depends on whether you’re within the open enrollment period or about to lose COBRA:

• During open enrollment — November 1 through January 15, in most states — you can switch from COBRA to the marketplace without restrictions.

• Outside of open enrollment, you can switch from COBRA to the marketplace only if your COBRA is running out, your former employer stops contributing to COBRA or you lose a government subsidy that results in you needing to pay full cost. In these cases, you qualify for special enrollment.

Contact the healthcare marketplace in your state to learn more.

Are there organizations that provide health care to early retirees?

No. There’s a common misconception that senior-focused organizations offer medical insurance, but that’s not the case. However, while you can’t get medical coverage through these organizations, you may have access to health-related perks.

For example, AARP offers members dental coverage and prescription drug discounts. Joining the AARP also gives you access to reduced prices on physical therapy, hearing aids, gym membership and more.

What’s a health share plan — and is it too good to be true?

Also called healthcare sharing ministries, health share plans are an alternative to traditional insurance where members voluntarily contribute to cover the healthcare expenses of other members. These are most commonly available through religious organizations and do not come with the same consumer protections as your standard health insurance plan.

While the idea of sharing expenses with your neighbor can sound nice, these plans may not be as helpful as they appear. As reported by CBS News, a May 2023 report found that members were required to exhaust all other avenues of paying for healthcare expenses, such as applying for Medicaid and financing through charities, before accessing the funds. Only about a third of coverage requests were approved in 2021, according to the report, and some users who did receive coverage said it took years for it to come through.

About the writer

Anna Serio-Ali is a trusted lending expert who specializes in consumer and business financing. A former certified commercial loan officer, Anna’s written and edited more than a thousand articles to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in Business Insider, CNBC, Nasdaq and ValueWalk, among other publications, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.

Article edited by Kelly Suzan Waggoner

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