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February 2022   Volume 20, Number 2        

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Early Retirees Need Health Coverage Options

It’s a dream come true for many Americans when they realize they can retire early.

Normally, retirees can take advantage of Medicare, which is the federal health insurance program for people 65 or older (though it may also cover younger people with disabilities or people with End-Stage Renal Disease).

But when people retire early, they are too young for Medicare. What are their options?


COBRA (Consolidated Omnibus Budget Reconciliation Act), in general, requires employers with 20 or more employees offering health plans to provide employees and certain family members the option to extend their plan for up to 18 months when coverage would have lapsed, such as upon retirement. The downside with COBRA is that employers are not required to subsidize the costs of the plan as they normally would. Consequently, the coverage may be unaffordable. In addition, employees might have to pay an additional 2 percent administrative fee.

Phased Retirement

Many large firms used to offer formal phased-retirement plans that included health insurance, but now only one in 10 employers does, according to NerdWallet. Alternatively, companies offering early retirement health insurance usually provide an alternate program with fewer benefits or the company health insurance at a higher premium than they offer to current employees.


Early retiring employees with an employed spouse or partner who has employer-sponsored health coverage may be able to obtain coverage through their spouse or partner’s plan.


Early retirees may wish to apply for private insurance, though prices are likely to be a lot more than they’ve been paying.


Short-term health insurance is intended as temporary for people who have a health insurance coverage gap. Coverage varies from one month to one year and, depending on the state, there is an option to renew for up to three years.

Short-term plans are cheaper than standard health insurance, but they aren’t the same as major medical insurance. The plans have limited benefits and can lead to substantial out-of-pocket costs. They also are not Affordable Care Act (ACA) compliant. They don't cover the 10 essential minimum benefits and anyone with a pre-existing condition, such as diabetes or cancer, will not be accepted for coverage. There are also limits on the number of covered doctor visits and prescription drug coverage. There’s no coverage for maternity.

On the positive side, someone can enroll anytime and there is no waiting period. Coverage may be effective as early as the day after the application is made. Most short-term plans have open networks, which means policyholders can select the doctor or hospital of their choice.


The ACA Health Insurance Marketplace offers major medical coverage including the 10 essential health benefits required by the ACA. These benefits range from emergency to laboratory services. No one who applies can be denied coverage for having a pre-existing health condition.

Costs for marketplace plans vary, depending on the applicant’s location and the level of coverage. The downside is that ACA plans can be very expensive if the applicant does not qualify for a subsidy. However, anyone whose income is between 100 percent and 400 percent of the federal poverty levels may be eligible for a Premium Tax Credit (PTC). You may also be eligible for some PTC if your income exceeds 400%.

One important limitation with an ACA Marketplace plan is that the networks are more narrow, so applicants may not be able to get their preferred providers.

Direct Primary Care

Direct primary care, often referred to as concierge care, is a way for early retirees to get coverage for basic doctor services. This type of coverage is growing in popularity because patients get same-day visits, 24-hour availability, low waiting room times, and house calls.

Patients pay a monthly membership fee that covers basic primary care services. There are no monthly health insurance premiums or copays. Direct primary care does not extend beyond primary services, however. People who get this type of coverage should also enroll in a high deductible health plan (HDHP), to cover catastrophic care, such when a patient requires emergency, serious, or extensive care.

Regardless of which coverage type your employee favors, it will be to their advantage to talk to an insurance agent or broker to make an informed choice.

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In this issue:

This Just In

No Surprises Act Fails to Remove All Surprises

Early Retirees Need Health Coverage Options

New Saving Incentive for Grandparent-Owned 529 Plans

DCAP — Use it or Lose It



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