Early Retirees: Before Medicare Eligibility
For those who retire before age 65, and thus are not yet eligible for Medicare, health insurance costs can be substantial. These early retirees must find coverage through the Health Insurance Marketplace (established by the Affordable Care Act), COBRA, or other private plans. Premiums for ACA plans increase with age, and a 60-year-old can expect to pay significantly more than a younger individual. A Forbes Advisor analysis of 2025 ACA rates indicated that the average monthly premium for a 60-year-old was around $994 for single coverage.
Options for Early Retirees
- ACA Marketplace Plans: These plans offer different tiers (Bronze, Silver, Gold, Platinum) with varying premium and coverage levels. Subsidies may be available for lower-income individuals to reduce monthly premiums.
- COBRA: This option allows you to continue your health coverage from a former employer for a limited time, but you must pay the full premium plus an administrative fee. It is often the most expensive choice.
- Spouse's Plan: If your spouse is still working, you may be able to join their employer-sponsored health insurance plan.
Retirees on Medicare (Age 65+)
Once you turn 65, you become eligible for Medicare, which consists of several parts. While this significantly reduces costs compared to early retirement, it is not free. Most retirees have to budget for a variety of monthly premiums and out-of-pocket costs.
The Components of Medicare Costs
- Part A (Hospital Insurance): Typically premium-free for most retirees who paid Medicare taxes for at least 10 years.
- Part B (Medical Insurance): Covers doctor visits and outpatient care. The standard monthly premium is an essential cost for most Medicare beneficiaries. For 2025, this is $185.00. Higher-income retirees will pay an Income-Related Monthly Adjustment Amount (IRMAA), which adds a surcharge to their Part B premium.
- Part D (Prescription Drug Coverage): This is optional coverage, with premiums that vary by plan and income. The average Part D premium for 2025 is estimated to be around $46.50.
- Medicare Advantage (Part C): These plans are offered by private companies and include Part A, Part B, and often Part D coverage. Some plans have $0 premiums, though you still need to pay your Part B premium.
- Medigap (Supplemental) Plans: These are private insurance plans that help cover costs not covered by Original Medicare, like copayments and deductibles. Premiums for these plans vary widely.
Comparison: Pre-Medicare vs. Medicare-Eligible
| Feature | Early Retiree (Under 65) | Medicare-Eligible Retiree (65+) |
|---|---|---|
| Primary Plan | ACA Marketplace, COBRA, or Private | Original Medicare (Parts A, B, D) or Medicare Advantage (Part C) |
| Average Monthly Premium | Can exceed $1,000+ per individual without subsidies. | ~$230–$430 per month (includes Part B, D, and potential supplemental). |
| Income-Based Surcharges | Generally not applicable, but eligibility for tax credits is income-based. | Income-Related Monthly Adjustment Amount (IRMAA) on Part B and D for higher earners. |
| Key Expenses | Monthly premiums, high deductibles, and co-pays. | Monthly premiums (Part B, D, Medigap), deductibles, co-pays, and co-insurance. |
| Financial Aid | Premium tax credits based on income and household size. | Extra Help program for Part D costs, and Medicare Savings Programs for Part B. |
| Long-Term Care | Must be planned for separately. | Not covered by Medicare; requires separate planning. |
How to Budget and Reduce Your Retiree Health Insurance Costs
Health insurance can be one of the largest expenses in retirement, but proactive planning can help mitigate costs.
- Start Early: Planning for healthcare costs should begin long before retirement. This includes leveraging tax-advantaged accounts.
- Utilize Health Savings Accounts (HSAs): If you are still working and have an HSA-eligible health plan, contributing to an HSA is a powerful way to save for retirement healthcare costs. The money can grow tax-free and be withdrawn tax-free for qualified medical expenses.
- Compare Medicare Options: At age 65, carefully evaluate Original Medicare with a Medigap plan versus a Medicare Advantage plan. The right choice depends on your health needs and financial situation.
- Plan for Long-Term Care: Medicare does not cover long-term care, which can be extremely expensive. Explore options like long-term care insurance or hybrid policies well before you may need them.
- Research Financial Assistance Programs: Low-income retirees can receive significant help. The Extra Help program assists with Part D costs, while Medicare Savings Programs can help with Part B premiums.
Conclusion: A Multi-Faceted Cost
There is no single average cost for retiree health insurance, as the price tag is highly personalized. Early retirees face a hefty expense, often over $1,000 per month, before they are eligible for Medicare at age 65. For those on Medicare, costs include monthly premiums for Parts B and D, potential surcharges based on income, and premiums for supplemental coverage like Medigap or Advantage plans. A comprehensive understanding of these varied costs and proactive planning strategies are essential for managing healthcare expenses throughout retirement. By starting early and considering all available options, retirees can ensure they have adequate and affordable coverage. Financial planning insights from Fidelity provide further guidance on this topic.
