Health insurance before Medicare: your options when you retire early

For many people planning to retire early, health insurance is the hardest line in the budget. Medicare generally starts at 65. If you stop working at 45, 55 or even 62, you need a way to cover yourself, and often a family, for the years in between.

The good news: there are several options. The less good news: costs vary a lot, and some rules changed for 2026.

This is general education, not advice. uFIRE does not sell insurance. Rules, prices and subsidies change every year and depend on where you live. Please check current details with HealthCare.gov, your state marketplace, your employer or a licensed professional.

Option 1: COBRA

What it is. COBRA is a federal law that lets many people keep the health plan they had at work after leaving the job. When the reason is leaving your job (other than for gross misconduct) or a cut in hours, coverage generally lasts up to 18 months (DOL).

The cost. You usually pay the whole premium yourself, the part your employer used to pay plus your part, and the plan may add a 2% administrative charge (DOL FAQ). Many people are surprised by how much that is.

Why people choose it.

• Same doctors, same network, same deductible you've already partly met this year.
• A simple bridge for a short gap, such as a few months before a marketplace plan starts.

Watch for. COBRA ends. If you retire at 55, 18 months gets you to about 56½. You'll need the next step lined up.

Option 2: An ACA marketplace plan

What it is. Individual health plans sold through HealthCare.gov or your state's marketplace. Plans can't refuse you or charge you more because of a pre-existing condition.

When you can sign up. During the yearly open enrollment period in the fall, or in a Special Enrollment Period from 60 days before to 60 days after you lose job-based coverage, so you can line up a plan before your last day. You qualify for that Special Enrollment Period even if you quit (HealthCare.gov; HealthCare.gov: retirees). Check HealthCare.gov or your state marketplace for this year's exact open enrollment dates.

The cost depends heavily on your income. Premium tax credits can lower your monthly premium, based on your estimated household income for the year.

What changed for 2026

From 2021 through 2025, temporary "enhanced" premium tax credits made marketplace plans cheaper and removed the upper income limit for help. Those enhanced credits ended on December 31, 2025, and starting January 1, 2026 the income cap returned at 400% of the federal poverty level (Oregon Health Insurance Marketplace).

For 2026 coverage, the marketplace uses the 2025 poverty guidelines. In the 48 contiguous states, the guideline for one person is $15,650 (HHS ASPE), so 400% is $62,600 for a single person. Alaska and Hawaii have higher guidelines.

What that means in practice:

• From 100% up to and including 400%: you may qualify for a premium tax credit, though generally a smaller one than in 2021 to 2025. Other rules apply too, such as not being eligible for affordable job-based coverage or Medicaid (IRS).
• Above 400%: you generally get no premium tax credit for 2026, however high the premium. This is often called the "subsidy cliff."
• Guess low, pay it back. The credit is usually paid in advance, based on your income estimate, and settled on your tax return (Form 8962). Starting with 2026, there's no cap on paying back an advance credit that turns out too big: if your income comes in higher than you estimated, you repay the full difference (IRS). Going even slightly over 400% can mean repaying the whole year's credit.

Congress debated restoring the enhanced credits during 2026. As of early October 2026, they had not been renewed. Check HealthCare.gov for the rules that apply to 2027 coverage before you plan around them.

Why early retirees pay close attention to income

When you're no longer earning a salary, your "income" for marketplace purposes depends partly on how you pay for your life: withdrawals from pre-tax accounts, investment income, side work and so on. That's why many early retirees plan which accounts they draw from in which years with health coverage in mind. It's a technical area; a tax professional can help you understand how it applies to you.

Medicaid

In some states, people with low incomes can qualify for Medicaid, including in early retirement years with little income. Eligibility rules differ by state. HealthCare.gov explains how to check.

Option 3: A spouse's or partner's plan

If your spouse or partner is still working and their employer offers family coverage, joining their plan is often the simplest bridge. Losing your own coverage usually lets you enroll outside the plan's normal sign-up period, but deadlines can be short. Check with their employer before your last day.

Some couples plan their exits on purpose: one person stops working first, while the other stays on a few more years partly for the benefits.

Option 4: Part-time work with benefits

Some employers offer health coverage to part-time workers. This is a big part of the idea behind Barista FIRE: leave your main career, take part-time work you enjoy, and let it cover health insurance and some spending while savings keep growing. See FIRE basics and try the Barista FIRE calculator.

Rules for part-time eligibility differ by employer, and can change. Read the benefit details before you count on them.

Option 5: Retiree coverage from your employer

Some employers, especially public employers and unions, offer retiree health coverage until Medicare. Eligibility often depends on age, years of service and retiring directly from the job. Ask early and get it in writing. Public servants can find more in FIRE on a public servant's salary.

The HSA: a quiet helper

A Health Savings Account is available to people covered by a qualifying high-deductible health plan. For 2026, the full-year limit is $4,400 for self-only coverage or $8,750 for family coverage, counting any employer contributions (IRS Rev. Proc. 2025-19). If you're 55 or older by the end of the year, you can add $1,000 more (IRS Publication 969). You have to be eligible to contribute; months without qualifying coverage can lower your limit (Publication 969).

HSAs have three tax advantages: contributions are tax-deductible (or pre-tax through payroll), the money can grow tax-free, and withdrawals for qualified medical expenses aren't taxed (IRS Publication 969).

For early retirees, a few details matter:

• Saved receipts. Many people pay medical bills out of pocket while working, keep the receipts, and let the HSA keep growing, then reimburse themselves later. This works only for expenses incurred after the HSA was set up, that weren't reimbursed some other way and weren't taken as an itemized deduction (Publication 969).
• Premiums usually don't count, with some exceptions, including COBRA premiums and premiums paid while receiving unemployment benefits (Publication 969).
• New for 2026: bronze and catastrophic plans are treated as HSA-compatible, even if they don't meet the usual high-deductible plan definition (IRS).
• Medicare ends contributions. Once you're enrolled in Medicare, you can no longer contribute to an HSA (Publication 969).

Option 6: Other ways people bridge the gap

You'll hear about other options, such as short-term health plans and health care sharing ministries. These are generally not ACA-compliant insurance and may not cover pre-existing conditions or guarantee payment. Read the fine print very carefully, and know what isn't covered.

Turning 65: don't miss Medicare

The bridge ends at Medicare. Your Initial Enrollment Period lasts 7 months: it starts 3 months before the month you turn 65 and ends 3 months after (Medicare.gov).

Two traps for early retirees:

• COBRA and retiree plans don't delay Medicare. Medicare.gov explains that COBRA and retiree coverage aren't coverage based on current employment (Medicare.gov).
• Late penalties last. If you sign up for Part B late without a Special Enrollment Period, you can pay a penalty for as long as you have Part B (Medicare.gov).

Build it into your number

Health insurance before 65 can be one of the largest costs in an early retirement plan. When you work out your FIRE number, add a realistic yearly amount for premiums and out-of-pocket costs for each year until Medicare. Get real quotes for your age, ZIP code and household on HealthCare.gov or your state marketplace rather than guessing.

Next step

Add your expected health costs to your yearly spending and see how they change your number and your date.

Find your FIRE number →

Related: The 4% rule, and where it falls short and The road to FIRE, on one page.