1) COBRA
For workers who retire from a company with greater than 20 employees, COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage allows newly-separated employees (or employees who work so few hours that they’re not eligible for their employer’s health plan) to continue their existing insurance coverage at the same (full-premium) cost (plus an administrative fee that is usually capped at a maximum of 2% of the premium). However, COBRA coverage generally lasts only 18 months, and thus can only (except under certain conditions) be used to bridge short gaps before Medicare eligibility begins.
2) Covet A Group Plan to An Individual Plan
Another option for retirees looking to continue their coverage using the same health insurance provider is to “convert” the plan under the group to an individual plan… at least, as long as the plan allows for such a conversion. Again, though, this isn’t always an ideal alternative, as there’s no requirement that the terms (or cost) of such an individual policy are the same as their “old” group plan.
3) Affordable Care Act Plans
Meanwhile, retirees who (either due to eligibility or cost) decide that either COBRA coverage or a conversion policy isn't the right choice for them, may choose to simply purchase health insurance using their state-approved exchange created under the Affordable Care Act. However, while retirees can’t be denied coverage for a pre-existing medical condition, coverage can only be purchased during specific open enrollment periods, or within 60 days that the employer’s plan is terminated (which means time is of the essence after retiring to make a decision).
Ultimately, though, the key point is simply to realize that, while retirees may be understandably worried about their healthcare costs eating away at their life savings, the availability of Medicare ameliorates those concerns to a significant degree. However, for those who aren’t yet eligible for Medicare, the issue of securing health insurance to bridge the gap until they reach age 65 becomes less clear… particularly for those whose budgets aren’t exactly robust. Regardless, the good news is that there are options, with coverage that is guaranteed (at least if timely obtained). But the range of choices means it is necessary to conduct a thorough cost/benefit analysis when finding the best option between purchasing COBRA coverage, converting an existing group health plan to individual coverage, and/or purchasing insurance via a state-approved health insurance exchange.