If you’re in your early 60s — so not yet old enough to qualify for Medicare at 65 — you may be wondering what your choices are for health coverage.
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The good news is that you have a number of options. That said, there are also some challenges, since individual health insurance expenses go up as we get older. In recent years, many older Americans have struggled with these rising costs; one 2019 report found that seniors withdrew an estimated $22 billion from their long-term savings in the previous 12 months to pay for healthcare.1
But it is possible to get adequate coverage without spending a lot on monthly premiums and other costs. Your options include:
- Private insurance (through your employer or purchased on your own)
- Affordable Care Act (Obamacare) plans
- Short-term health insurance
- Association health plans
By weighing the pros and cons of each option as you consider your own health and financial situation, you can find a plan that’s right for you until you’re able to enroll in Medicare.
What You Need to Know
Some older adults will qualify for subsidies based on their income, making ACA-compliant health insurance coverage more affordable.
COBRA is expensive, but may make sense if you’re in the middle of treatment or otherwise don’t want to change networks or providers.
Consider enrolling in short-term health insurance or an association health plan if other options aren’t right for you and you need to bridge the gap until you’re eligible for Medicare.
How Has the ACA Affected Health Insurance for Older Adults?
Under the Affordable Care Act (ACA), health insurance companies cannot refuse to cover a person or charge them more because they have a preexisting condition, meaning a health issue that existed before the start date of new healthcare coverage.2
The ACA also says that older people who enroll in individual and small group health insurance plans can’t be charged more than three times the rate that applies to a 21-year-old.3 Before the ACA was enacted, this wasn’t regulated at all in many states and the rate was often nearly five times what a younger person would pay.
The flip side of this is that the passage of the ACA has contributed to rising health insurance rates for older Americans. No longer able to reject applicants with preexisting conditions or charge them higher premiums, insurance companies have raised their rates.
How Do Premium Subsidies Affect Health Insurance for Older Adults?
If you qualify based on your income, you could get help paying for your monthly premium for an ACA plan you buy through the federal or state Health Insurance Marketplace. These are called premium subsidies and can make an otherwise expensive plan one you can afford.
Older Americans with an income that’s not over 400 percent of the federal poverty level are eligible for subsidies. In 2020, that means an annual income of no more than $49,960 for a single individual and $67,640 per year for a couple.
Nationwide, the average premium for an Obamacare plan bought in 2020 on the Health Insurance Marketplace (also called an exchange) is just under $522 per month. (This is without any subsidies.)
However, in many states, the cost can be a lot higher.4 For example, a 62-year-old woman living in Charlottesville, Virginia, and earning $50,000 a year (slightly over 400% of the federal poverty level) would have to pay, at a minimum, a premium of $797 per month, or nearly 20% of her income, for a bronze plan purchased through Virginia’s health insurance exchange.
However, if she earned $48,000 instead, she would qualify for $689 per month in premium subsidies. That would allow her to buy the least expensive bronze plan for $108 per month. She could also get a silver plan for $345 per month.
You can get quotes for ACA plans, with and without premium subsidies, at healthcare.gov.
How Does Self-Employment Affect Health Insurance for Older Adults?
Self-employment rates are highest among people age 55 and older5, so a good number of older adults find themselves without health insurance through a job and needing to buy other coverage.
When Does COBRA Make Sense?
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, lets employees who’ve left their job for any reason except gross misconduct, or those who’ve had a reduction in their work hours, continue with the group healthcare coverage they had through their employer, as long as that plan is covered by COBRA.
An employee and the employee’s spouse and dependents can continue with their current healthcare coverage for a limited time, usually 18 months, but 36 months in some cases.6
COBRA premiums are usually high because you will probably have to pay the entire cost of coverage yourself. For that reason alone, many people don’t choose COBRA coverage because it’s simply too expensive.
That said, there are some situations when it may make sense for you to pay for COBRA. For example, if you or one of your dependents is undergoing treatment for a medical problem and you don’t want to switch to a new provider network and new physicians, you may want to stick with your current coverage and pay the COBRA premiums. Also, COBRA could be an option for those within 18 months of turning age 65 as you’re waiting to be eligible for Medicare.
When Does an Obamacare (Affordable Care Act) Plan Make Sense?
While Obamacare can be costly for seniors who have to pay full price, for those who qualify for premium subsidies, it can be a very good choice.
All ACA plans cover people with preexisting conditions and include 10 “essential health benefits,” including preventive care, emergency services, hospitalization, lab services and more. So if you need more care, you’re likely to save money in the end by choosing a plan that covers all the types of care and medication you need to get or stay well.
When Does Short-Term Health Insurance Make Sense?
If you don’t qualify for premium subsidies and you can’t afford an ACA plan, short-term health insurance can be a good alternative. These temporary plans are by definition of limited duration, usually lasting a few months up to a year. Depending on where you live, you may be able to renew your policy to get longer coverage.
There are pros and cons to short-term health insurance: These plans don’t cover preexisting conditions or all of the essential health benefits that ACA plans do. Your medical history can affect coverage, and these policies limit how much they pay in benefits.7
However, short-term plans are less expensive than ACA plans and you can purchase one at any time (no need to wait for the Open Enrollment Period), with coverage effective as early as the day after you apply.
Short-term health insurance can be a good choice if you don’t have any significant preexisting conditions or chronic conditions that require regular visits to your provider(s) and/or prescription medication.
When Does an Association Health Plan Make Sense?
Older adults who are self-employed and can’t afford an individual ACA marketplace plan may want to consider an association health plan (AHP). An AHP gives self-employed people access to the health insurance savings that come with large group medical coverage.
A major benefit of AHP plans is that, unlike short-term insurance plans, they can’t reject applicants based on their medical history. So they may be a better choice for those with a preexisting condition.8
That said, keep in mind that AHPs are likely to offer somewhat skimpier coverage than plans sold on the exchange. That’s part of the reason they tend to be less expensive.
AHP health plans also don’t have to offer all of the ACA’s essential health benefits. These plans can adjust premiums based on age, gender and the industry in which you work — none of which is permitted for policies sold on the Health Insurance Marketplace.
As you approach your 65th birthday and the chance to enroll in Medicare, you may still need reliable coverage for all your healthcare needs. Because ACA plans can be costly if you don’t qualify for premiums, some older Americans opt for an alternative like short-term health insurance or an association health plan.
When you’re ready to move ahead, take the time to carefully consider the pros and cons of each option in light of your particular situation, meaning your health and that of anyone else the policy will cover and what your budget can afford.
When you’ve narrowed down your choices, be sure to read all of the exclusions (what’s not covered), get a clear understanding of your benefits and all costs aside from premiums, and, if you need more help, talk to an insurance expert for guidance.
While no option is perfect, having some health coverage is better than having none at all as you bridge the gap until you turn 65.