How early retirees insure their health

There are other approaches for getting coverage if your health isn't so great:

Through a spouse or domestic partner. This can work if one-half of the couple is content to keep working at an employer with benefits or has one of the rare plans that cover retirees.

The Scardas of New Jersey are covered thanks to Gina Scarda's 20-year tenure at the New York Police Department. Tom Scarda could have had similar benefits through his previous job at the Metropolitan Transit Authority but would have had to work 30 years to get them. Instead, he quit the job after 14 years to operate a franchise and consult.

"Part of the decision-making process was that Gina would have to stay with the NYPD (for 20 years, the minimum to get retiree benefits) and that would give us health benefits for life," said Tom Scarda.

Through an association or small-group plan. Some trade and professional associations offer group plans to their members, although the number has dwindled as health-care costs have spiraled. If you run a small business, you may be able to get a group plan without exclusions. A few states, including Connecticut, require insurers to offer small-group plans to the self-employed.

Through high-risk pools or "HIPAA eligibility." Some states have government-run coverage of last resort for people who can't find private insurance. And in all states, so-called "HIPAA eligible" individuals must be offered coverage, said physician and financial planner Carolyn McClanahan, but the path to get there is long and expensive -- and so, too, may be the premiums should you eventually get coverage.

HIPAA refers to the Health Insurance Portability and Accountability Act of 1996. To be HIPAA-eligible, you must have had at least 18 months of continuous insurance coverage, with at least the last day of coverage being under a group health plan.

Then you typically must exhaust your benefits under federal COBRA rules, which give you another 18 months of coverage for which you must pay the full premium, plus a 2% administration fee. This is no small expense. Although workers with employer health benefits typically pay an average $58 a month for individual coverage and $273 for a family, according to the most recent Kaiser Family Foundation survey, the full cost is $373 for individuals and $1,009 for families.

• Video: How to get claims paid

Or you can move. One state, Vermont, not only requires insurers to cover individuals who don't have group-health plans, said McClanahan, but also requires insurers to charge everyone the same premiums.

If you're considering early retirement, spend some time researching your options and your state's health-insurance coverage laws. The Kaiser Family Foundation's state health data Web site summarizes the relevant rules by state. (Look under the "Managed Care and Health Insurance" tab for your state.) Also, consider consulting an experienced insurance broker who can help you evaluate your alternatives and get you through the application process.

Liz Pulliam Weston's latest book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published Oct. 8, 2007

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