What Are My Health Insurance Options Before Medicare Starts?

Health Insurance Options Before Medicare FAQ

If you retire before age 65, you’ll need a health plan to bridge the gap until Medicare kicks in. You generally have three main options:

• Option 1: COBRA Coverage

  • Lets you keep your employer health insurance for up to 18 months

  • Same doctors, same network

  • You pay the full premium + 2% admin fee

  • Not renewable — if it ends mid-year, you may face deductibles on two plans in one year

• Option 2: ACA Marketplace (Obamacare)

  • Offers income-based subsidies if under 400% of the Federal Poverty Level (FPL)

  • Can be cheaper than COBRA if income is low

  • Higher income = no subsidy, which can make it expensive

  • May have narrower networks than employer plans

• Option 3: Spouse’s Employer Plan

  • If your spouse is still working, this is often the simplest and most affordable option

  • It’s still smart to compare it to ACA and COBRA for the best balance of cost and coverage

How Does Early Retirement Affect Medicare Premiums?

• Do Medicare premiums go down once I stop working?

  Not automatically.

  Medicare Part B and Part D premiums are based on your taxable income from two years prior, not your current employment status.

• What is IRMAA and how is it triggered?

  IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge added to your Part B and D premiums if your income is high.

  • Example: If you retire at age 63 with high taxable income from stocks, real estate, or severance, it will show up on your age 65 Medicare premiums

• Can I use SSA-44 to lower my premiums?

  Only if your income has dropped due to a qualifying life event like:

  • Retirement

  • Divorce

  • Loss of income-producing property

  If you did not experience one of these events (e.g., you’re still drawing high investment income), SSA will not approve an IRMAA reduction until your next tax return shows lower income — and that might take a full year or more.

• What’s the bottom line?

  Early retirement can lead to unexpectedly high Medicare premiums for your first year or two unless you plan income distributions carefully. This is why we recommend:

  • Meeting with your CPA or financial advisor before age 63

  • Strategizing income timing to minimize IRMAA impact