Early Retirees Must Fill a Health Insurance Gap

Even though you’re eligible for Social Security at age 62, very few 62-year-olds qualify for Medicare.

If you’re planning to retire at 62, you’re probably thinking more about bucket-list vacations or a loved one’s caregiving needs than your own health care.

When you retire, you not only say goodbye to a regular paycheck; many people also lose medical insurance that their employer helped pay for. And if you file for Social Security, your benefits will be stuck at 70 percent of your full entitlement for the rest of your life.

You won’t have Medicare until age 65

Medicare, which provides coverage for about 70 million Americans, doesn’t start for most people until age 65 unless they have a disabling condition.

If your spouse is younger than you and relies on your insurance, your spouse won’t be able to sign up for Medicare either. Every person qualifies for Medicare individually by age or medical condition.

That means you’ll have a three-year gap to fill — and some sort of gap if you leave work any time before age 65. If you’re like most people, you’ll leave your employer’s group health coverage behind, and that raises the question: What are your options?

You could get coverage through COBRA

Provisions in COBRA, the acronym for the Consolidated Omnibus Budget Reconciliation Act, let you keep your workplace plan.

The federal law requires companies with 20 or more employees to continue offering health care coverage after employees leave their job. Some states have similar requirements for smaller employers.

After your employer-sponsored insurance ends, you’ll have 60 days to sign up for COBRA. But the coverage will last only 18 months after you leave your job.

The good news is the benefits and insurer you had will continue. If you go on Medicare but your spouse is still too young, your spouse can sometimes continue on your COBRA plan for 36 months.

The bad news is COBRA can be costly.

Expect to pay the total premium for coverage, what you were paying and what your employer was paying, plus a 2 percent administrative fee. Some companies pay as much as 80 percent of their workers’ insurance tab.

You could buy an Affordable Care Act plan

Affordable Care Act (ACA) coverage is available through the federal insurance marketplace or, in some states, a state’s own exchange. Your starting point for finding the right plan at the right price is HealthCare.gov.

ACA insurers are required to cover preexisting conditions and provide several types of preventive care, including many vaccines, at no out-of-pocket cost. One detail to keep in mind: ACA open enrollment generally runs Nov. 1 to Jan. 15, but you can qualify for a special enrollment period (SEP) if you lose your medical coverage because you retired.

You might qualify for a subsidy to help pay premiums based on your household income for the year, but your Social Security benefits will count as income.