Health Insurance for Early Retirement

Health insurance is a big, incremental expense for people hoping to retire early from corporate life.  Understanding our options and the costs has been an important focus for us as we’ve plotted our upcoming FIRE escape on 4/1/16.  

(Please note that the following is our understanding of healthcare insurance options, and that we are not experts in this topic.  Please consult an insurance agent to explore your own circumstances)

Our current MegaCorp values our health & dental benefits at $18K a year.  We are fortunate enough to have quite a few choices to replace that coverage:

  • COBRA – We could continue MegaCorp coverage for eighteen months with COBRA, although this was not recommended due to its relatively high cost and the need to replace it next year.  You have 60 days from when you leave your job to get enrolled in COBRA coverage.
  • OBAMACARE (ACA) – Everyone qualifies for coverage under our State Exchange, regardless of pre-existing conditions.  This makes it a great option for people who might otherwise be tied to corporate coverage. Regardless of your politics, the ACA is clearly a boon to anyone who wants to retire early.  
  • FORMER MEGACORP – Because I worked at my former company for 24 years and reached “Rule of 70” early retirement status, I could get healthcare coverage from that company until age 55 when I am considered a full retiree.  This coverage is still on the pricier side (like COBRA) as the company does not subsidize the premiums between ages 50-55.  
  • INDIVIDUAL- Many Americans are self-employed and get coverage directly with an insurance company.  This seemed a bit foreign and expensive to me before we looked into it, but turned out to be the best option for us of all of these.  

Our new plan is almost an exact mirror of what we have had at MegaCorp.  We went with a high deductible ($5.6K family/$2.8K individual) HSA plan with a $10K out of pocket maximum. The plan has the broadest network of doctors and allows you to self-refer to specialists.  For our family of 3, the monthly premium is $928 in 2016.  A solid dental plan adds in another $122. 

On an annual basis, this will cost us $12.6K. This is quite a bit less then MegaCorp tells employees their healthcare coverage is worth (-$5.4K).  That figures. 

It only took a simple stop at an insurance agents office to get signed up (in less than 60 minutes). It felt a lot like signing up for auto insurance.  You could also do it online yourself without too much trouble.  

As it turns out getting healthcare coverage was a relatively simple task. Like many people, I had a lot about the options that would be available, only to find that it was all very straightforward.  We are a healthy family – obviously if you had pre-existing medical conditions could be much more complicated.

What are your plans for health insurance in early retirement?

Image Credit: Pixabay

20 thoughts on “Health Insurance for Early Retirement

  1. I wish there was a way to completely remove the insurance coverage from the equation. Almost 60% of what we pay go to company liabilities and profits. If we all paid into a State plan and money was invested wisely it could reduce the cost significantly. I know this is socialized medicine and as a capitalist maybe I shouldn’t be thinking this way, but sometimes I get angry knowing that my hard earned money is supporting someone else’s lush life. Insurance is a wonderful tool many things, but I really believe that it is destroying health care.

    Liked by 1 person

    1. We can have a long debate on the relative merits of different healthcare funding approaches. For the specific case, I was happy as a consumer that I could go in and buy a simple plan that work for my family and have responsibility for our own health due to the high deductible. I don’t know the relative profitability of insurance companies versus other kinds of companies.

      Liked by 1 person

  2. We are covered under my husband’s retirement plan. Although we don’t use the ACA, I am grateful for that option as I have a pre-existing condition (cancer many years ago). I think our healthcare system in the US is horrible and would love to see it replaced by a socialized system.

    Liked by 1 person

    1. I will be happy to be on a retiree plan in five years, and then Medicare sometime after that (socialized support).


  3. This is pretty enlightening… healthcare is one portion of FIRE that I have been just ball-parking for the time being since it will likely change over the next few years before I retire. However, I really need to get a little more specific with it for the time being and just adjust the plan as I get closer to the retirement date.

    I am going to bet that we’ll do almost exactly the same thing as you when that day comes.

    — Jim

    Liked by 1 person

    1. I would suggest just sitting down with an insurance agent – even now – to get a basic picture of the insurance landscape. I looked at a lot of things online, but it became really simple when I sat down with someone.


  4. I’m glad to hear this wasn’t a big headache to figure out. Health insurance for a family of five isn’t something I look forward to figuring out or paying for. But things could change drastically in the next 6 years, so we’ll see how things stand then.


    1. Yes it is a very dynamic marketplace – I would guess things might look very different in six years. This year’s presidential election may have a big impact already.


  5. Hey, Mr. FS. Great advice. Is there a difference between Obamacare and individual health insurance? I thought Obamacare was just subsidies for those of modest means. You make a certain percentage above the poverty level and the feds pick up a portion of your premiums. The more above the poverty level you are, the smaller the subsidy. But are individual policies actually different from Obamacare policies? I thought I had this all figured out. A guess Mrs. G and have some research to do. Thanks for the heads up.


    1. Good question. They seem to be essentially the same, although the prices aren’t. We won’t qualify for a subsidy – and found the Obama care prices a little higher. I think the insurance companies have to bid at the beginning of the year with the exchange to set a price. Someone that knows more about the insurance industry than I do you could probably tell you why they end up a little higher. If you did qualify for a subsidy, that would definitely be cheaper. Some folks online talk about managing their income down during early retirement so they qualify for a subsidy. There are different ethical considerations in doing that I would say.


  6. Glad you found a good option! We’re not going to get too attached to any option until after the presidential election, when we have some sense of whether Obamacare is going away or sticking around. But as of right now, we’re eyeing some “super silver” plans available to those with low annual income on the exchange which have some great benefits. But again, not getting too attached. 🙂

    Liked by 1 person

  7. I bought individual health insurance (not Obamacare) because we made a little too much last year and it runs $1,275 for the platinum plan(highest) for medical and dental for a family of 4. Think we should qualify for Obamacare later this year., We had some pre-existing conditions to worry about otherwise Gold or Silver would have worked just fine.

    Liked by 1 person

    1. We might try Obamacare next year depending on how income ends up in 2016. Nice to have the option.


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