How to cover health insurance before Medicare

Why does retiring before 65 create an insurance gap?

Medicare eligibility begins at age 65. Retire earlier and you leave employer coverage before government coverage begins, so the years in between need a bridge. This is a common, manageable planning problem with three main answers, and it deserves a decision before you set your retirement date rather than after.

I bring this up early with anyone eyeing a retirement date before 65, because the bridge affects the budget and sometimes the date itself. The encouraging part: the options are known, the rules are stable, and the comparison usually comes down to your health needs, your timeline, and your income plan.

What are the three ways to bridge the gap?

Three bridges cover nearly every situation: COBRA, which continues your current employer plan for up to 18 months in most cases; a marketplace plan under the Affordable Care Act, priced partly by your income; and a spouse's employer plan, if your husband or wife is still working. Some retirements use two in sequence.

COBRA's price surprises people because the full premium was always this high; your employer was simply paying most of it where you couldn't see. KFF's 2025 Employer Health Benefits Survey put the average annual premium for employer family coverage at $26,993, of which the covered worker contributed $6,850. The other twenty thousand dollars came from the employer, invisibly, every year you worked there. On COBRA that whole number becomes yours, plus an administrative fee. That's not a reason to avoid it. Keeping your exact doctors and an already-met deductible can be worth every dollar for a short bridge, especially in a year with planned procedures.

How does your income change what the marketplace costs?

Marketplace premium tax credits are based on your household's income for the year, not your savings. Two retirees with identical portfolios can pay very different premiums depending on which accounts they draw from. Withdrawals from pre-tax accounts count as income; spending from cash or a taxable account's principal mostly doesn't.

This is where the bridge stops being an insurance question and becomes a planning question. The same years you're buying marketplace coverage are often the years you're weighing Roth conversions, and a large conversion raises the income the exchange sees. Sometimes the conversion still wins; sometimes trimming it preserves a credit worth more. The only way to know is to run both versions and compare.

Where does an HSA fit in the bridge years?

If you have a health savings account, the bridge years are one of its best uses and one of the last chances to keep filling it. The HSA is the rare account taxed favorably three times over: money goes in pre-tax, grows without tax, and comes out tax-free for qualified medical costs. That suits a stretch of life where medical spending tends to be front and center.

Two things are worth knowing. First, you can keep contributing to an HSA before Medicare, as long as your bridge coverage is a qualifying high-deductible health plan; a COBRA continuation of an HDHP can count, and so can some marketplace plans. That window closes once you enroll in Medicare, which ends HSA contributions, so the pre-65 years can be a final opportunity to add to the account. Second, on the spending side, HSA dollars can pay COBRA premiums and your out-of-pocket medical costs tax-free during the bridge, and later they can cover Medicare premiums as well. What they generally cannot pay is a marketplace premium. IRS Publication 969 spells out the exception list: HSA money can cover insurance premiums only for long-term care, continuation coverage like COBRA, coverage while you're receiving unemployment compensation, and, once you're 65 or older, Medicare, though not a Medigap supplement. An exchange plan bought before 65 isn't on that list, so match the account to the right bills. Kept invested and drawn on with intent, an HSA can carry meaningful value from these years into retirement.

When should you plan the bridge?

Before you set the date, not after. The cost of the bridge belongs in your retirement budget alongside housing and travel, and the income you plan to report shapes what the bridge costs. Working the two out together, coverage and withdrawals, tends to produce a calmer plan than deciding one at a time.

None of this argues for delaying retirement. It argues for sequencing: choose the bridge, price it into the budget, set the withdrawal plan around it, and then pick the date with confidence. Couples should check the spouse's-plan option first, since it's often the lowest-cost of the three while it's available.

One more date to circle. When you do reach 65, your Medicare initial enrollment window opens around your birthday, and COBRA or marketplace coverage generally doesn't let you delay Part B without penalty the way active employer coverage can. The bridge ends at Medicare's door either way, so build the handoff into the plan from the start.

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