Health Insurance Options Before Age 65


Searching for health insurance options before age 65 is challenging. One way to keep from being overwhelmed with all of your options is to start your search by thinking of the different providers of health insurance. A provider could be the government, your old employer, a private insurance company, or a non-profit insurance organization.

There are 4 different ways to obtain quality health insurance for individuals and families who retire before age 65 (when most people can join Medicare):

  1. Work part-time

    Many employers, offer health insurance as a benefit to part-time workers! You may be able to gain access to quality health insurance at a subsidized price by working part-time. This can also act as a natural transition, helping maintain structure in your early retirement years.

  2. COBRA

    Under federal law, most employers (some small businesses are exempt), are required to offer you access to the employer health insurance plan for up to 18 months after you leave your employment. Even if you voluntarily resign, you may still be able to access this benefit.

  3. Private Organizations / Groups

    There are still some organizations that are relatively easy to join that offer health insurance as a benefit. This can be a great way to access quality health insurance at an affordable price. However, you still must locate a private organization that you may be able to join, carefully review the health insurance coverage to ensure there are no coverage gaps, and it is guaranteed renewable. A guaranteed renewable plan means that even if you become severely sick, you will still be offered coverage. You will want to inquire how much they will raise your premiums if you develop severe sickness or a chronic medical condition. Most plans offered through private organizations due require medical underwriting, which generally limits inclusion to these plans only to healthy individuals.

  4. ACA Plans

    ACA Plans are known as “Obamacare,” marketplace plans, and many other names. ACA Plans are available to all US citizens, and can be signed up for each year under the open enrollment period. In order to sign up for these plans outside of open enrollment, you need to have a qualifying event. Losing employer provided health insurance is one example of a qualified event. ACA plans are differentiated mainly by monthly premiums and out of pocket costs. For example, a bronze plan may have lower premiums, but if you have medical procedures during the year, you will have high out of pocket costs. A gold plan will have higher premiums than the bronze plan, but generally will have lower out of pocket costs for medical care. All ACA plans must cover the same 10 essential services, but some plans will offer expanded coverage.

Most of the time, one of the above methods will get you access to quality medical care. However, you must do your own due diligence before choosing any insurance policy, as all policies are different.

There are also two alternative methods of obtaining health insurance, but the quality will vary substantially from the sources above. The two alternative methods are:

  1. Short-Term Health Insurance

    Short-term health insurance is generally cost effective, but only offers coverage for up to 1 year. Medical underwriting is necessary to obtain it. Therefore, it is only an option for healthy retirees. Two major issues with this type of health insurance are it generally has a limit on how much it will pay out, and the insurance company can deny you coverage if you reapply. It’s possible to have significant medical expenses that exceed the coverage limits, meaning you will have to use other assets to pay for your medical bills. Additionally, if you develop a serious medical condition while you have the insurance, you will likely be denied coverage if you try to renew your coverage for the next year. For these reasons I typically don’t recommend this type of insurance to clients.

  2. Health-Sharing Plans

    Health-sharing plans are not technically health insurance but function in a similar manner. Individuals pay premiums (often times significantly lower than ACA plan premiums) and are reimbursed by the organization for their medical expenses. The key differences are that these health sharing plans are not technically health insurance, and they are not regulated as traditional insurance companies are. Therefore, there is a significant risk that the health-sharing plan can go bankrupt and will not reimburse you for your medical expenses. Additionally, all medical expenses must be paid out of pocket, and the plan reimburses individuals. Individuals must be able to front the cash for their medical expenses, which can be problematic if large medical expenses arise. Finally, these plans often have limitations on what medical coverage they will provide based on the organization’s values.

Finding health insurance is stressful and confusing due to all the legal and health jargon you navigate during your search. To keep it simple, first narrow down your options by thinking about the providers. This can often help you hone in on one or two options to bridge the health insurance gap before you begin Medicare.