What’s the best route for medical insurance without a work place option? I need two years of coverage before Medicare kicks in.
– Robert
Health insurance and its associated costs are an important consideration in retirement – even more so if you retire before qualifying for Medicare at age 65. I don’t think there’s any one “best route” for obtaining that coverage. Instead, it’s about assessing your needs and budget, and then comparing your available options. Here’s a closer look at how to approach this important component of your retirement plan.
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The pre-Medicare health insurance options for retirees typically include COBRA, the healthcare marketplace and private insurance. If you have a spouse who is still working for an employer that provides a workplace health plan, that is usually a good place to look as well, but that isn’t always an option. Since you said that you don’t have a workplace option, I’ll assume that applies to your spouse, as well (if you’re married).
People often refer to “COBRA insurance,” but it’s not really a form of insurance. Rather, COBRA refers to the Consolidated Omnibus Budget Reconciliation Act (COBRA) – a law that allows you to maintain the coverage you have through an employer’s group plan for a short period after your employment there ends.
If available to you, COBRA could possibly close a portion of the two-year coverage gap before you become eligible for Medicare. The standard length of time you qualify to maintain your coverage through COBRA is 18 months. It can be extended to 36 months in some cases if you have another qualifying event.
The rub with COBRA is its cost. While you are working, your employer often covers a significant portion of your premium. If you choose to continue coverage through COBRA, you’ll typically pay the entire cost yourself. As a result, many people find it to be cost prohibitive.
For now, the healthcare.gov marketplace may be your best option. This is where you can obtain an Affordable Care Act (ACA) or “Obamacare” plan. The benefit here is that your eligibility for premium tax credits is based in part on your modified adjusted gross income (MAGI). The lower your MAGI, the larger your premium subsidy will be. With prior planning, you may be able to reduce your MAGI to a level that allows you to obtain a very cost-effective policy.
