Retiring before age 65 can be an exciting milestone, but it also introduces an important challenge: securing reliable and affordable health care coverage before Medicare begins. Because Medicare eligibility typically starts at age 65, early retirees may face a coverage gap that lasts several years. Given the well‑documented rise in health care costs over the past decade, making informed decisions during this transition period is essential. Fortunately, there are several viable health insurance options available for retirees under 65 for us to consider.
Understanding how these options work—and how they fit into your overall retirement income strategy—can help protect both your health and your finances.
Health care costs continue to rise faster than general inflation, making pre‑Medicare planning increasingly important. According to the Kaiser Family Foundation, average employer‑sponsored family health insurance premiums increased by 26% over the past five years[1], and individual premiums have followed a similar path. Out‑of‑pocket costs such as deductibles and coinsurance have also increased, placing greater strain on retirees with fixed or semi‑fixed incomes. These trends underscore why careful plan selection, subsidy awareness, and long-term cash flow modeling are critical components of retirement planning before age 65.
The Affordable Care Act (ACA) Marketplace
For many retirees under age 65, the ACA Marketplace is the most flexible and cost‑effective option. Marketplace plans are available in every state and cannot deny coverage due to pre‑existing conditions. Coverage is organized into metal tiers—Bronze, Silver, Gold, and Platinum—which primarily differ in how costs are shared between the insurer and the policyholder.
One of the most attractive features of ACA coverage for retirees is the availability of premium tax credits. These subsidies are based on household income, not assets, which means retirees who are living off savings or carefully managed withdrawals may qualify for assistance. Strategic income planning—such as controlling taxable distributions from retirement accounts—can significantly reduce health insurance premiums.
Private Health Insurance Plans
Some retirees choose to purchase health insurance directly from insurance carriers outside of the ACA Marketplace. These plans may appeal to individuals who do not qualify for ACA subsidies or who prefer plan designs not available on the exchange.
However, private plans can be more expensive and often lack the pricing advantages of Marketplace subsidies. While coverage rules must still comply with ACA regulations, premiums can be significantly higher, particularly for older individuals. This option is generally best suited for higher-income retirees who value flexibility and are comfortable absorbing higher premium costs in exchange for specific provider networks or plan features.
COBRA Coverage
COBRA allows retirees to temporarily continue their employer-sponsored health insurance after leaving a job, typically for up to 18 months (and sometimes longer under special circumstances). The main advantage of COBRA is continuity: you keep the same coverage, doctors, and prescription benefits with no learning curve.
The primary drawback is cost. Under COBRA, retirees are responsible for the entire premium, including the portion previously paid by the employer, plus an administrative fee. Because employer-sponsored plans are often generous, this can result in very high monthly premiums.
COBRA can be a useful short-term bridge for retirees who want stability while evaluating long-term options or who are close to Medicare eligibility.
Retiree Benefits
This is an option for retirees only if offered by their employer, but worth mentioning. Some retirees are fortunate to have access to employer-sponsored retiree health benefits. One of the most notable examples is the Federal Employees Health Benefits (FEHB) program. Eligible federal retirees can continue FEHB coverage into retirement, often with the government continuing to subsidize a significant portion of premiums—both before and after age 65.
FEHB offers a wide range of high-quality plan options and is widely regarded as one of the most valuable retirement benefits available. Similar retiree health benefits may exist in certain state or local government roles or through large private employers, though these have become increasingly rare.
For those who qualify, employer-sponsored retiree benefits often provide the most stable and predictable coverage, and in many cases may actually replace the need for Medicare at all.
Navigating health care options between retirement and Medicare eligibility requires thoughtful evaluation of cost, coverage, and flexibility. However, it’s not a challenge you have to face alone. Your Apella advisor can help you reflect on your options and ensure that health care decisions align with broader retirement goals. They may also recommend connecting with a third-party licensed insurance agent specializing in health insurance to help select a policy. As health care costs continue to climb, proactively addressing this coverage gap can help retirees preserve savings, avoid unexpected expenses, and enter Medicare at age 65 on solid financial footing.
[1] https://www.kff.org/health-costs/2025-employer-health-benefits-survey/
Apella Capital, LLC (“Apella”), DBA Apella Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Apella Wealth provides this communication as a matter of general information. Any data or statistics quoted are from sources believed to be reliable but cannot be guaranteed or warranted.