Healthcare Options For Early Retirees

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Last Updated on October 21, 2024 by Carolyn

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Are Healthcare Concerns Holding You Back from Retiring?

What’s holding you back from retiring? For many people who have lived a life of FIRE and saved for an early retirement, it’s the uncertainty about healthcare options for early retirees. These 40, 50, or even 60-year-old want-to-be retirees know it’ll be a while before they’ll be eligible for Medicare.

They are afraid to leave their jobs knowing that saying goodbye to their employer also means saying goodbye to their employer’s health insurance plan. Shelling out 10s of thousands of dollars a year for private healthcare insurance takes a huge bite out of their future annual retirement income. 

For those of us who have been self-employed most of our careers, this issue isn’t quite as daunting as we’ve had to deal with it throughout our entrepreneurial life. We haven’t had the luxury of employer-subsidized health plans to take care of our health needs, and are used to the constant struggle to match healthcare needs with affordability and you know what? It hasn’t broken most of us!

Today, I’m going to discuss affordable healthcare options for early retirees that will bridge that healthcare gap in the years between early retirement and medicare eligibility at 65.

Healthcare Not What It’s Cracked Up to Be

US Healthcare is the most expensive in the world. It’s not a coincidence that global insurance plans that offer worldwide insurance coverage exclude the US or provide very limited coverage in the US. In the US the cost of healthcare treatment is exorbitant and not getting cheaper.

Healthcare costs per capita in the US are a whopping 33% more than the per capita costs in Switzerland ( the 2nd most expensive country for healthcare) and are about double the average cost of OECD nations. 

Many Americans would argue the higher costs are due to better quality healthcare but sadly that’s not the truth.

In several independent studies evaluating the quality of healthcare, ease of access to healthcare, and other factors, the US has actually ranked last when ranked against several other industrialized nations.

So the truth is we pay more for lesser care.

Do you have to be wealthy to be healthy? Let’s delve into the healthcare options for early retirees.

Employer-sponsored Retiree Benefits

Future retirees’ first stop should be with their own employer’s HR department. Some companies offer retired employees the option to stay on the company insurance plan, some with subsidized premiums.

COBRA

What is COBRA? COBRA is an abbreviation for “Consolidated Omnibus Budget Reconciliation Act”.  Great, that doesn’t tell you much, does it?

COBRA is the federal law that provides many employees with the right to continue in their employee health plan after their employment has terminated.

COBRA will provide you with the benefits you have become accustomed to while being covered by your employer’s health insurance.

It does come with a cost: Premiums may be up to 102% of the cost of the plan. If you’re wondering how much that is take a look at your W-2 Box 12, it should be listed there.

COBRA is available to you, your spouse, and your dependents for a term of up to 18-36 months depending on the circumstances surrounding your termination.

For more detailed information on COBRA visit https://www.dol.gov/general/topic/health-plans/

Spousal Coverage 

If your spouse is going to continue to work in the near ( or far) future, this is a good option for your healthcare needs. Sign up under their plan and you’ll be good to go.

Of course, spousal coverage varies from employer to employer on coverage and cost, so investigate this option before counting on it for your needs.

Marketplace Insurance

 Affordable Care Act Coverage ( more commonly known as Marketplace or Obama Care coverage ) is a good option for those who can keep their income low enough to qualify for subsidies.

As a retiree, it can be fairly easy to manipulate your income to stay within the subsidy limits. Consider taking non-taxable distributions from ROTH IRAs instead of taxable distributions from regular IRAs, don’t take early social security payments opt instead to draw down savings to supplement your income and if you need to access taxable IRA funds do so the year before you retire so that it doesn’t boost your income for Marketplace coverage.

The Marketplace has an annual open enrollment period from Nov 1st to Jan 15th but the loss of existing health insurance is a qualified life event that permits you to enroll outside of those dates.

Health Sharing Memberships

Health Sharing Memberships are healthcare cost sharing between a non-profit entity (often but not necessarily faith-based) where members agree to share medical expenses and pay a monthly membership fee as their contribution to the community fund.

These organizations do not provide health insurance but rather they use the monthly contributions to share in eligible medical expenses amongst the members.”

Since Health Sharing Organizations are not health insurance companies, they aren’t subject to the consumer protections provided by the Affordable Care Act. They can choose to not share in expenses incurred for pre-membership conditions or have waiting periods before those conditions will be shareable. Some also have limits to how much expenses they will share.

Due to these limitations, they can keep their rates very affordable. 

As a healthy person in my 50s, not eligible for Marketplace subsidies, I have elected to join Zion HealthShare and my monthly contributions are $240 (monthly contributions are determined by age and membership options selected). Zion HealthShare is non-faith-based and does not have annual or lifetime sharing limits for eligible medical expenses.

Zion HealthShare also has a health share membership designed to be coupled with Direct Provider Care (DPC) discussed next.

Direct Primary Care 

Direct Primary Care (DPC) is a practice model where patients pay a fixed monthly subscription fee for access to a practice of physicians offering primary care services such as routine screenings, chronic condition care, and acute-care visits. Many DPC’s also include labwork and x-rays as well as prescription discounts in their subscription fee.

 There is no insurance involvement, and by cutting out the insurance company physicians are free to spend more time with their patients. Most DPCs provide more personal care than their conventional insurance-accepting counterparts.

It is recommended to couple your DPC subscription with a high deductible catastrophic insurance plan or healthcare-sharing membership so that you’ll have coverage for non-primary care services such as hospital stays and emergency room visits.

DPC rates are normally quite affordable and are a good healthcare solution for those people who need frequent visits to their physicians.

Private Health Insurance

Private health insurance is always an option but is costly.  

Anyone pursuing private healthcare coverage should evaluate options carefully. There are many variables with these plans: Some offer PPO plans where insured persons must use in-network providers to receive payment, some only pay up to a certain % of medical costs incurred, some include an annual doctor’s visit and some don’t.

If you plan on traveling out of state make sure to look for a plan that offers out-of-state coverage.

Be careful to compare apples to apples when evaluating private insurance plans and be sure to read all of the fine print.

Fixed Price Clinics

Combining fixed-price clinics with catastrophic health coverage can be a good coverage option.
Fixed-price clinics post their rates, are usually much more affordable than general medical facilities and they are transparent with their prices so you know what the bottom line will be. These facilities often offer extended hours, and simple emergency services like sutures, setting broken bones etc.

These clinics are a great resource for those who have high deductible plans that don’t cover Doctor’s visits. I highly recommend you search for such a facility in your neighborhood and add their contact information to your contacts. When you need their services you won’t have time to google!

Short-Term Insurance Plan

If your gap until reaching medicare age is less than 3 years or if you need to bridge a gap between coverage on other options, short-term health insurance can be an affordable way to stay covered.

I used short-term health insurance to bridge a short gap in marketplace coverage I incurred due to technical difficulties renewing while out of the country.

Short-term insurance plans aren’t usually nearly as comprehensive as traditional plans but are a good affordable option for some coverage.

Global Health Plans

If traveling the world is what you plan on doing once you retire, a global health insurance plan may fit the bill. These plans provide health insurance coverage in countries around the world, though many exclude the United States or have limited US coverage. Some plans have special riders that can be added for limited US coverage.

Premiums are surprisingly affordable with reports of high deductible plans starting at around $125 per month for a person in their 50’s and lower deductible plans running in the neighborhood of $500 monthly for a couple in their 50’s.

CIGNA, GEOBLUE, and IMG are the most popular providers.  You will need an address outside of the US for these plans.

Become an Expat

If you’ve ever dreamt of living in another country, now may be the time. There are many countries where healthcare is affordable and highly rated. Becoming a resident doesn’t mean you have to give up US citizenship and can open up the doors for affordable healthcare. Almost all the European countries have universal healthcare.

In my recent interview with Beth Haslam who lives in France, she shared that as a French resident visits to their physician cost approximately 25 €.

In Panama a popular expat destination doctors visits cost at most about $50, lab work runs 50% of most US prices and an inpatient stay will run around $100.

In Costa Rica, once you’ve become a resident you pay into the nation’s medical system CAJA based on the income declared on your residency application. Note that the income used for your residency application can be much lower than your US taxable income as it doesn’t include income from all sources. CAJA premiums start at about 5% of declared income for lower-income earners and go up from there.

Many people feel that expat life is just too much of a change, but consider that it doesn’t have to be permanent, you can treat it as a long vacation! I’ve had several expats share their stories of life abroad, including Moving to Costa Rica during Covid-19 and With Love from Morrocco.

Part-time Work

For some, total retirement is daunting. For people who aren’t sure they want to retire completely, part-time work is a great way to ease into retirement.

Perhaps you’ve always wanted to try a certain occupation but haven’t because it doesn’t pay well. This might be the time to pursue that desire.

Many Healthcare Options For Early Retirees

There are many options to bridge the healthcare gap. We all have unique situations so healthcare coverage is not “one size fits all”. Explore your options, be open-minded find your best fit, and pursue your retirement dreams. Tomorrow isn’t a guarantee!

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