If you’re retiring before age 65 and your employer doesn’t offer retiree health benefits, you’ll need a plan for your health coverage until you become eligible for Medicare at 65. Let’s take a look at your early retirement health insurance options and what you need to know about each one.
Can early retirees get health insurance through the ACA Marketplace?
Yes. The ACA Marketplace / exchange can be a great option for early retirees to find coverage. ACA-compliant coverage is guaranteed-issue regardless of medical history, and if you lose access to your employer’s health plan when you retire, the loss of coverage will trigger a special enrollment period for individual-market coverage.
Depending on your household income, you might be eligible for premium tax credits (subsidies) that cover some or all of the premiums for a Marketplace plan.
Here’s what you need to know about Marketplace health coverage for early retirees:
Premiums do not vary based on gender or medical history, but they do vary based on age. In most states, a 52-year-old will have a premium that’s roughly double the premium for a 21-year-old, and a 64-year-old’s premium will be three times as high as a 21-year-old’s.
If you qualify for a premium subsidy, the subsidy is based on your premium for the second-lowest-cost Silver plan (benchmark plan). So the premium subsidy is also larger for older enrollees, as it’s based on a larger benchmark plan premium.
To qualify for a premium subsidy, you must have a household income in the subsidy-eligible range, as described below. Here’s how household income is calculated under the ACA.
Marketplace subsidy eligibility is based on your total household income for the full year, even if that income isn’t evenly spread across the year.
How can early retirees find out if they’re eligible for Marketplace subsidies?
Let’s take a closer look at how Marketplace subsidy eligibility works for early retirees, since the subsidies can make a big difference in terms of how affordable a Marketplace plan will be.
The subsidy-eligible income range depends on where you live and how many people are in your household. On the lower end of the income spectrum, your household income must be at least 100% of the federal poverty level (FPL) to qualify for subsidies, but in most states, it actually needs to be above 138% of FPL because Medicaid is available below that level.
On the upper end of the income spectrum, you wouldn’t be eligible for federal premium subsidies if your household income exceeds 400% of FPL. (State-funded subsidies are available to enrollees with household incomes above 400% of FPL in Connecticut, New Jersey, and New Mexico.)
Here are the income ranges that make a single Marketplace enrollee eligible for federal premium subsidies in 2026 (using the 2025 federal poverty guidelines). (The income limits are higher if your household includes additional people.)
In Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming (states that have not expanded Medicaid under the ACA), your income must be between $15,650 and $62,600.
In Hawaii, your income must be between $24,827 and $71,960.
In Alaska, your income must be between $26,980 and $78,200.
In the rest of the country, your income must be between $21,598 and $62,600.
Your household income used to calculate subsidy eligibility includes total earnings from employment, capital gains, investment income, a pension, rental income, and Social Security. (Retirement benefits can begin as early as age 62.)
But if, for example, you’re planning to live off of savings and the income (dividends, interest, capital gains, etc.) from those savings isn’t enough to put you in the subsidy-eligible range, you would not be eligible for Marketplace subsidies.
On the other end of the spectrum, if your income will decline significantly when you retire, your pre-retirement income from earlier in the year could make you ineligible for subsidies for the remainder of that year, depending on how much you earned.
For example, consider a person who earns $100,000 per year (about $8,333 per month), who is planning to retire at the end of August. By that point in the year, they will have earned nearly $67,000. Unless they’re in Alaska or Hawaii, that means they will be ineligible for Marketplace subsidies for the whole year – even if they don’t earn anything at all for the final four months of the year.
You may want to have a discussion with a financial advisor before you retire, to ensure that you have a plan in place for managing your income in retirement if you’re hoping to qualify for Marketplace subsidies. And when determining the timing of your retirement, be sure you understand what your total household income will be during the year you retire – including money you earned before your retirement date and any severance pay you might receive – as well as future years.
Just for perspective in terms of how much difference a subsidy can make, here are 2026 Marketplace premiums for a single 60-year-old in Mobile, Alabama, which is fairly mid-range in terms of premium costs:
Household income of $60,000: Lowest-cost Bronze plan is $0/month (because the household receives a subsidy of $827 per month).
Household income of $63,000: Lowest-cost Bronze plan is $827/month (because the household is ineligible for subsidies, due to the “subsidy cliff”).
Note: You can reduce your ACA-specific household income by contributing to a health savings account (HSA) if you select an HSA-eligible health plan. And if you continue to have earned income during retirement (from a part-time job, self-employment, consulting, etc.), you can contribute to a pre-tax retirement account, which will also lower your household income under ACA rules.
Use a subsidy calculator to see if your retirement income makes you subsidy-eligible.
Can early retirees get Medicaid if they’re in an expansion state?
In 40 states and Washington, DC, Medicaid eligibility has been expanded under the ACA. This means that adults under age 65 are eligible for Medicaid if their household income doesn’t exceed 138% of FPL.
If you’re under 65, your eligibility for Medicaid in an expansion state is based solely on your income, so assets aren’t taken into consideration. (Individuals age 65 and older face both income limits and asset limits when applying for Medicaid.)
And unlike eligibility for Marketplace subsidies, your Medicaid eligibility can be determined based on annual income or current monthly income. This can make Medicaid coverage possible even if the person had a higher income earlier in the year.
But there are a couple of important points to understand about using expanded Medicaid as your early retiree health coverage:
Medicaid expansion states will soon have a work requirement
Starting in 2027, Medicaid expansion enrollees will face a work requirement, due to federal legislation enacted in 2025. Unless they qualify for an exemption, Medicaid expansion enrollees will be required to spend at least 80 hours per month participating in “community engagement” activities.
These “community engagement” activities can include employment, community service, education, or a combination these activities. Enrollees will be required to provide proof of these activities to their state Medicaid agency in order to keep coverage in force.
Some early retirees who plan to volunteer extensively or return to school or hold a part-time job (that doesn’t push their income out of the Medicaid-eligible range) will continue to be eligible for Medicaid expansion coverage in those states that expanded Medicaid. But those who do not plan to have at least 80 hours per month of community engagement are unlikely to be eligible for Medicaid in 2027 and future years.
Medicaid estate recovery
Under federal rules, states are required to use estate recovery (recouping funds after a Medicaid beneficiary has died) for Medicaid-funded long-term care that was provided after a person was 55 years old. But states also have the option to use estate recovery to recoup any Medicaid expenses that were incurred after a person was 55 years old, so states vary in their approach to this.
If you’re planning to use Medicaid as your early retiree coverage, make sure you understand how your state handles estate recovery, so that there are no eventual surprises for your heirs. (Here’s Medicaid contact information for each state.)
Is COBRA or state continuation a good option for early retirees?
When you retire, you may have access to COBRA or state continuation (“mini COBRA,” which is offered in many states to people whose employers weren’t large enough to be subject to COBRA). These federal and state provisions allow early retirees to continue their employer-sponsored coverage temporarily. Here’s what you need to know about this option:
If your employer’s health plan is subject to COBRA and you retire, COBRA allows you to continue your existing coverage for up to 18 months.
If your employer’s health plan is subject to state continuation, the length of time you can keep your plan will depend on the rules in your state.
You’ll be responsible for the full premium cost (including the portion your employer was paying), plus an administrative fee. For COBRA, the fee is 2% of the premiums. For mini-COBRA, the fee varies by state.
COBRA can be a good solution if you’ll be eligible for Medicare within 18 months of retirement, as it means you won’t have to switch to new coverage for the gap between your retirement date and the start of your Medicare coverage. But it’s a good idea to compare Marketplace plans to your COBRA offer to see which makes more sense for your circumstances, as each option has pros and cons.
You can use COBRA even if you still have several years before you’ll be eligible for Medicare. Just know that once you exhaust your COBRA benefit, you’ll need to pick a new plan at that point, to cover the rest of your early retirement years.
Early retirement health insurance through a spouse’s coverage
If you’re retiring early but your spouse is still working, you may both have access to your spouse’s employer-sponsored health plan. There is no federal law requiring group health plans to offer coverage to spouses, but almost all of them do.
If your spouse is enrolled in their employer’s plan and you’re enrolled in your own employer’s plan, your loss of coverage will trigger a special enrollment period that will allow you to be added to your spouse’s plan (assuming the plan is offered to employees’ spouses).
If you and your spouse are both covered under your plan, the loss of coverage when you retire will trigger a special enrollment period that will allow both of you to enroll in your spouse’s plan (assuming your spouse is an eligible employee and the plan allows employees’ spouses to enroll).
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written hundreds of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.
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