Health insurance before you're eligible for Medicare
Retire before 65 and there's a real gap to plan for. Your employer coverage typically ends on your last day. Medicare doesn't start until you turn 65, or earlier only if you qualify through disability. Most early retirees bridge that gap with one of two options: COBRA or an ACA Marketplace plan. The two work very differently. This page walks through what each one actually costs. It also covers why your income matters more than it used to under 2026's rules. And it lets you compare your own numbers.
01 Bridging the gap before Medicare
Medicare eligibility starts at 65. There's a narrow exception for people who qualify earlier through disability or certain conditions like ESRD or ALS. If you retire before that age, your employer's group health plan generally ends on your last day of work. Sometimes it runs through the end of that month instead. Either way, nothing automatically replaces it.
That leaves three realistic paths. It's worth checking all three before assuming COBRA or the Marketplace is your only option.
- Retiree health benefits from your former employer are increasingly rare. But if your employer still offers this, it usually beats both options below. Ask HR before you leave.
- COBRA — with COBRA, you keep your exact same employer plan, doctors, and network. You just lose your employer's contribution toward the cost. Covered in Step 2.
- An ACA Marketplace plan is a new individual plan you choose from scratch. It may come with a government subsidy, depending on your income. Covered in Step 3.
A spouse's employer plan is a fourth option worth checking, if you're married and they're still working. It's often the simplest and cheapest bridge of all, when it's available.
COBRA lets you stay on your exact former employer plan: same doctors, same network, same coverage. You just get it for a limited time after you leave. Voluntary retirement counts as a qualifying event, the same as a layoff. The only requirement is that you were enrolled in the plan the day before you left. Federal COBRA applies to employers with 20 or more employees; smaller employers may offer a similar state-level "mini-COBRA" instead.
| Situation | How long COBRA lasts |
|---|---|
| Standard (retirement or job loss) | 18 months |
| You're determined disabled within the first 60 days | Up to 29 months |
| A second qualifying event happens during the 18 months (e.g. divorce, a covered spouse's death) | Up to 36 months for the affected family member |
Here's the part that surprises people: COBRA isn't a discounted continuation of what you paid as an employee. The law allows the plan to charge up to 102% of the full premium. That includes both your old share and the amount your employer used to quietly cover, plus a 2% administrative fee. In other words, retiring doesn't just end your coverage. It ends your employer's contribution too, and COBRA bills you for the difference.
That example uses KFF's 2025 average self-only group premium: $777/month total. The typical employee pays just $120 of that, and the employer covers the rest. A family plan follows the same math on larger numbers. KFF's average family premium is $2,249/month, of which employees typically pay $571. Once the 102% surcharge applies, a family's COBRA bill would run close to $2,294/month.
Instead of continuing your old employer plan, a Marketplace plan is a new individual policy. You choose it yourself at healthcare.gov, or your state's own exchange. Depending on your household income, the government may cover part of the premium through a Premium Tax Credit. That's money that reduces your monthly bill directly, not a tax refund you wait for.
How much help you get depends on your income relative to the Federal Poverty Level (FPL). The 2026 rules ask you to contribute a rising percentage of your income toward the "benchmark" plan. That's the second-cheapest Silver plan in your area. The percentage climbs as income rises: roughly 2% near the poverty line, up to about 10% by 300–400% of it. Above 400% of the poverty line, the credit disappears completely. That's often called the "subsidy cliff," and it genuinely is one. A single extra dollar of income can cost you thousands of dollars a year in lost subsidy.
To make this concrete, picture a single retiree with $45,000 in expected income. That's 287% of the poverty line, comfortably under the cliff. She's shopping for a plan with a $950/month benchmark premium, a reasonable estimate for someone in their early 60s. Actual premiums vary a lot by state and age:
Same benchmark plan, same person's age and location. The only thing that changed is income. Below the cliff, the subsidy cuts the bill to well under COBRA's cost. Above it, the same plan costs more than COBRA does, since there's no subsidy left to offset it. That's exactly why income planning matters so much in the years right around this gap. A large taxable withdrawal, a Roth conversion, or a big capital gain can push you over that line. Crossing it can erase thousands of dollars in subsidy for the whole year.
Estimate COBRA vs. a Marketplace plan
Enter your own numbers to see a rough side-by-side. This runs entirely in your browser. Nothing you type is sent anywhere. Your actual Marketplace premium and subsidy depend on your state, county, and age. Treat this as a starting estimate, not a quote, and confirm the real numbers at healthcare.gov.
Losing your job-based coverage opens a Special Enrollment Period, or SEP, for the Marketplace. That window runs 60 days before your coverage ends and 60 days after. You don't have to elect COBRA first. You're free to go straight to a Marketplace plan within that window instead. Often that's the financially better move, once a subsidy is factored in.
Where people get stuck is what happens next. If you elect COBRA and later decide you want to switch to a subsidized Marketplace plan, you generally can't. There are only three exceptions to that. COBRA runs its full course, your employer stops contributing to it, or the next annual Open Enrollment comes around. Open Enrollment runs November 1 to January 15. Voluntarily dropping COBRA early does not open a new SEP.
COBRA running out on its own, hitting the 18/29/36-month maximum, does open a fresh SEP. So does your employer ending its contribution to your COBRA premium mid-course. So the door isn't closed forever. It just isn't open again until one of those specific events happens.
A few things worth confirming before you decide:
- Get a real Marketplace quote, not just an estimate. Benchmark premiums vary widely by state, county, and age. The numbers above are illustrative, not a substitute for pricing an actual plan at healthcare.gov.
- Check your income against the cliff for your household size. It's $62,600 for one person and $84,600 for a couple, under 2026 rules. A large taxable withdrawal or Roth conversion could push you over that line. If so, consider timing it for a different year, or weigh the lost subsidy against the benefit of the conversion itself.
- Factor in your doctors and network, not just price. COBRA keeps your exact existing coverage; a Marketplace plan may use a different network entirely.
- If you'll use a high-deductible plan, HSA contributions are still available on either path. A qualifying HDHP through COBRA or the Marketplace both work for HSA purposes. That's true right up until you enroll in any part of Medicare, which ends HSA eligibility immediately.
This gap is exactly the kind of cost that's easy to underestimate when planning a retirement date. See the Nearing Retirement page for how it fits into the broader picture. See the Medicare page for what happens once you reach 65. Once you have real premium quotes in hand, model the full effect on your plan. This includes how a Marketplace subsidy or a Roth conversion interacts with your withdrawal strategy. Try the Retirement Planner & Modeler to see the full effect.