Health Insurance for Early Retirement (All You Need to Know!)

If you are retiring early and not yet at Medicare age, there are options available. But please don’t just go entirely without health insurance!

Those without health insurance are far more likely to hold off on basic medical care until it becomes something they can’t ignore. That means small problems can become big, scary, expensive problems that land you in the ER.

Across the US, the average cost of an ER visit hovers somewhere around $2200. However, it is estimated that over 25% of bills will be over 3K and if you need surgery, without insurance, it could be upwards of 20K!

So, obviously, as health insurance brokers, we frequently see people in the worst, most stressful situations. People who only then reach out for a health insurance solution. Our opinion is definitely that you should not go without health insurance. 

Marketplace Plans

Probably the most obvious choice is a marketplace plan and this is an especially great option for those who have retired early, perhaps with lowered incomes because of premium tax credits.

All plans must offer the 10 essential benefits. Taking advantage of these benefits is honestly one of the best ways to save money on medical expenses.

It’s much less expensive to take preventative or even early measures in disease management. Make sure to take advantage of all of the preventative and wellness visits covered by your plan.

Another way to save money on a marketplace plan is to understand your needs and pick the right plan.

Do you have a good relationship with your PCP. If you need a referral to see a specialist is their office easy to deal with? Can you sacrifice a little flexibility for a lower monthly premium? Maybe choose an HMO.

If you need a little more flexibility and are willing to pay a little more for your premium, then perhaps an EPO.

Know which plans your doctors and hospitals accept so you don’t wind up with large out of network bills.

Have a list of medications you take so you can compare costs on each plan.

Are you pretty healthy overall and just need the plan in place to take care of your basic care and protect you in case you need it? Perhaps a lower premium/higher deductible plan or a lower tier plan like Bronze or Silver.

Are you already undergoing medical care? Do you need to visit the doctor more frequently or have procedures planned? Perhaps a higher premium/lower deductible plan or a higher tier plan like Gold or Platinum.

If you work with a broker, they’ll ask you all the necessary questions to make sure you save money by choosing the right plan.

But one of the most important ways to save money is with the premium tax credits. And this really starts with an accountant.

As someone who has retired early, you will likely have a much lower income. If you are relying largely on your savings with limited income, you may qualify for extremely large premium tax credits- saving you thousands of dollars per year. That’s because the marketplace only looks at your estimated MAGO, not your assets and savings. That being said, we highly recommend working with your accountant to maximize your deductions to ensure you are eligible for the largest premium tax credit possible. 

HSA/HDHP

Another benefit that may be available to you through the marketplace is HSAs which are available with some HDHPs.

An HSA is a Health Savings Account. This is a separate account with your money which can be used for qualified medical expenses or as a wealth-building tool. As long as it is for a qualified medical expense there is no taxation or penalty. You contribute however much you want (up to the yearly limit as determined by the IRS) and that money is pre-tax- therefore lowering your taxable income. These accounts are interest bearing and that interest is also not taxed. You can invest a certain portion of your HSA and any earnings on those investments are not taxed. This is what’s known as the triple tax advantage.

Hold onto that HSA and the money can roll over from year to year. If you hold onto it until you turn 65, you can convert it to a basic retirement account. 

This is not necessarily a money saving tip, but rather a money earning tip.

HSAs are only available with HDHPs or high deductible health plans. Usually, these types of plans will have lower monthly premiums because of the high deductible.

HDHPs are good if you have either more basic medical needs or perhaps extremely extensive medical needs that would allow you to meet your deductible very, very quickly. You have to run the numbers to make sure it will work for you.

Catastrophic Coverage and Short Term Medical Plans

In the past, a Short Term Medical Plan could have also been a really viable option. However, short term medical plans will now be restricted to a period of up to 3-4 months as of Sept, 2024.

So, they are still a good option if you need nationwide PPO coverage and are ineligible for a premium tax credit, but will really be best as a stopgap.

STM plans were once referred to as Catastrophic Coverage Plans. And while that is not technically accurate- they are completely different things, you may want to look into an actual Catastrophic Coverage Plan.

Catastrophic Coverage Plans are a form of high deductible health plan. They often offer low premiums with high deductibles and out of pocket maximums. So they are really for someone who just wants some type of protection in place should they need major medical care. Although they can be combined with other types of plans for more comprehensive coverage- more on that at the moment. 

Now Catastrophic Coverage Plans are available on and off the marketplace. There are pros and cons of each.

For example, marketplace catastrophic coverage plans are restricted to those under 30, however, you will have 3 primary care doctor visits per year covered even if you haven’t met your deductible yet.

Other than that, your insurance will mostly be there for large medical expenses. You likely will not have any coverage until you’ve met not only your deductible but your out of pocket maximum.

Direct Primary Care

Catastrophic Coverage Plans can be combined to form more cohesive coverage. For example with a DPC agreement or Direct Primary Care.

This isn’t actually insurance, it’s an agreement between you and your doctor. So, although it’s not something that we would be able to assist you with as it is not insurance, it’s still important you understand it as a potential option.

So DPC is similar to a medical version of a dental savings plan. Basically, if your doctor offers DPC agreements, and not many do, but if they do, you’ll have greater access to your doctor for more regular care. 

Now this would only cover services through your PCP. This is why having a catastrophic coverage plan is important in case you need to be hospitalized or need more critical care. 

Lump Sum Payout Plans

Then there are other supplement insurance plans that are lump sum payout plans. There are critical illness plans and hospital indemnity plans. They work very similarly although the payout criteria are different. 

For both types of plans, there can be disqualifying factors. Usually, you can’t be expecting a hospital stay or have been already diagnosed witha certain illness to enroll. 

For a hospital indemnity plan, you pay a monthly premium and then if you need to be hospitalized (based on the terms of your plan) you will receive a lump sum payment. 

Similarly, with a critical illness plan, you pay a monthly premium and if you are diagnosed with any of a very long list of critical illnesses, you will receive a lump payout.

These funds are yours to be used however you see fit. You can use it for medical bills or mortgage payments. It’s your money to use however you need.