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COBRA for Early Retirees Coverage Gap

Seniors who choose early retirement have a decision to make about their health insurance until they reach Medicare eligibility at the age of 65. Consolidated Omnibus Budget Reconciliation Act (COBRA), which passed by Congress in 1986, provides healthcare coverage for retired employees, spouses, former spouses and dependent children for 18 months. The health insurance these former employees receive is less expensive than individual health insurance but more expensive than active employee insurance.

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Do You Qualify for COBRA?

Individuals who choose early retirement are eligible for COBRA benefits. The qualifying events for this coverage include employees who voluntarily or involuntarily discontinue their employment with the company. Individuals who must reduce their hours are also eligible for this coverage, since health insurance usually drops if an employee does not work a certain amount of hours.

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Health Insurance after COBRA and Before Medicare

Early retirees are entitled to COBRA for 18 months. When COBRA runs out, seniors will have to find alternative health insurance. The costs of health insurance pre-Medicare can be costly. Many seniors elect not to buy health insurance due to the high premiums and deductibles. However, this is risky because if a medical problem should occur you may not be able to pay for the large price of healthcare.

There are healthcare insurance options for you until you reach 65 years of age.

  • PPO plans have high premiums but have low co-pays, low deductibles, and prescription drug coverage.
  • HMOs have lower premiums but have slightly higher out-of-pocket expenses compared to PPO plans.
  • High-deductible Health Plans are for seniors who are healthy and can afford high deductibles.

These plans will require its members to meet a higher than normal deductible in exchange for a very low monthly premium. Whichever plan you choose, having health insurance until you reach Medicare eligibility is essential.

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