Retire before 65 and you need health insurance until Medicare starts. For most early retirees, health insurance for retirees under 65 comes down to COBRA from their old employer or a plan from the ACA marketplace, where what you pay depends on your income. In 2026 that income test got much sharper: the subsidy cliff is back.
Health insurance options for early retirees under 65
| Option | How long | What you pay |
|---|---|---|
| COBRA | 18 months, longer in some cases | Up to 102% of the plan’s full cost |
| ACA marketplace plan | Until Medicare, renewed each year | Full price, less a tax credit if income is 100% to 400% of the poverty line |
| Spouse’s employer plan | While the spouse works there | The employee share of the family premium |
| Retiree health plan | Set by the employer | Set by the employer |
| Medicaid | While income stays low enough | Little or nothing |
COBRA
COBRA lets you keep your employer’s plan after you leave, at up to 102% of its full cost, since the employer stops paying its share. It applies to employers with 20 or more employees and usually lasts 18 months. A spouse or dependents can keep it for 36 months after some events, such as a divorce or the employee’s death.
COBRA keeps your doctors and the deductible you have already met, which can make it worth it for a few months. But it has no income-based discount. Timing matters: when COBRA runs out you can move to a marketplace plan right away, but if you drop it early on your own, you have to wait for open enrollment.
ACA marketplace plans
Marketplace plans must cover pre-existing conditions, and insurers can charge older adults no more than three times what they charge a 21-year-old. The premium tax credit brings the cost of the benchmark silver plan down to a share of your income, between 2.10% and 9.96% in 2026, for households between 100% and 400% of the federal poverty line.
Above 400% there is no credit at all. For 2026 coverage that line is $62,600 for one person and $84,600 for a couple in the 48 contiguous states. The enhanced credits that removed the cliff from 2021 to 2025 have expired and have not been extended. Open enrollment for 2027 runs from November 1 to January 15 on HealthCare.gov, and losing other coverage opens a 60-day special enrollment period.
What it costs: a worked example
A couple, both 60, with the 2026 national average benchmark premium of about $31,828 a year for the two of them:
- With $70,000 of modified AGI, they pay $6,972 a year for the benchmark plan and the credit covers $24,856.
- With $85,000, just over the cliff, they get $0 of credit and pay the full $31,828.
Fifteen thousand dollars more income costs them about $24,856 of credit. The ACA subsidy cliff calculator runs this for your household, state and coverage year.
Managing income for the subsidy
The credit is based on modified AGI: adjusted gross income plus tax-exempt interest and the untaxed part of Social Security. In early retirement much of that is in your control.
- Spending cash, Roth IRA contributions and the cost basis of taxable investments adds nothing to modified AGI.
- IRA withdrawals, Roth conversions and capital gains all add to it, so size them to the room below the cliff.
- Leave a margin: from 2026, if your income comes in higher than you estimated, you repay all of the excess credit, with no cap.
A spouse’s or retiree plan
If your spouse is still working, their employer plan is often the simplest bridge. You lose the marketplace credit only if that plan is affordable for the family (in 2026, the family premium is no more than 9.96% of household income) and meets minimum value.
Some employers still offer retiree coverage: KFF’s 2025 survey found 27% of large firms with health benefits offer it, and most of those cover retirees under 65. Being eligible for a retiree plan does not cost you the marketplace credit; enrolling in it does.
Medicaid
In the 41 states, counting DC, that have expanded Medicaid, adults with income up to 138% of the poverty line qualify, with no asset test. That includes early retirees living on savings with little taxable income. From 2027, most expansion adults aged 19 to 64 must show 80 hours a month of work or another qualifying activity unless they are exempt. Medicaid can also recover some costs from the estate of someone who received benefits after 55.
Short-term plans
Short-term plans cost less but do not have to follow ACA rules: they can exclude pre-existing conditions and cap benefits. A 2024 federal rule limited them to four months in total, but federal agencies said in August 2025 that they would not prioritize enforcing it, so state law now decides how long they can last. They are a stopgap, not a bridge to 65.
Using an HSA
Health savings account money can pay COBRA premiums and health coverage premiums while you receive unemployment benefits, but not ordinary marketplace premiums. From 2026, bronze and catastrophic marketplace plans count as HSA-eligible, so you can keep contributing (up to $4,400 single or $8,750 family in 2026, plus $1,000 from age 55) until Medicare starts.
Getting to Medicare without a penalty
Your initial enrollment period runs for seven months around your 65th birthday. Sign up for Part B then: COBRA and retiree coverage do not count as coverage from current employment, so they do not protect you from the late-enrollment penalty of 10% of the Part B premium for each full year you went without it, usually for life. Your income two years earlier then sets Medicare IRMAA; the IRMAA calculator shows the brackets.
Figures checked on against US Department of Labor, COBRA continuation coverage, HealthCare.gov, special enrollment periods, IRS Rev. Proc. 2025-25, 2026 premium tax credit percentages (PDF), KFF, how the loss of enhanced premium tax credits affects older adults, KFF, status of state Medicaid expansion decisions, IRS Publication 969, Health Savings Accounts, Medicare.gov, COBRA coverage and Medicare and Medicare.gov, avoid late enrollment penalties. Not insurance or tax advice: plans and premiums vary by county, age and state.