health care

The toughest conundrum facing those “still working” when they reach age 65 is whether to choose Medicare or stay with their employer’s health insurance.  For most people, it does not have to be – and likely should NOT be – an either/or decision.   A better understanding of Medicare Parts A & B will make this more clear.

Medicare Part A

Part A of Medicare is FREE.  You can and likely should apply for Part A while also keeping your employer coverage.  One material drawback to Part A enrollment is that you can no longer contribute to a Health Savings Account. If this is important to you, further analysis should be done by your financial planner.  If your company health plan enrolls fewer than 20 employees, Medicare Part A will become your primary coverage.  If your company health plan enrolls 20 or more employees, your employer health plan will be your primary coverage.

Medicare Part B

Part B enrollment is a more complicated decision. If your company health plan covers fewer than 20 employees, you will likely be required by your employer to sign up for Part B – and, even if it is not required by your employer, it is required by Medicare.  In this situation, failing to enroll at age 65 can result in substantial penalties later.  It could also mean that you would be responsible for at least 80% of any medical bills after age 65 since your company will only be providing Medicare “supplement” coverage at this point.

For those whose employer health plans cover 20 or more employees, Part B enrollment is not required and enrollment later will not result in penalties as long there is no “break” in coverage when you do retire and/or switch to Medicare Part B.  The employer health plan versus Part B decision is therefore up to you.  If you drop your employer plan, you can estimate that Part B will cost you about $300.00 per month:  a $104.90 monthly Part B premium plus the cost of a good Medicare Supplement contract plus Medicare Part D (drug) coverage.  There are also things that Part B does not cover, such as dental and vision expenses.  You should compare this to the premium and out-of-pocket costs of your employer health plan.

If you are providing health care insurance for a spouse or dependents, be very careful about dropping your employer coverage.  If two spouses are switching to Medicare, you can estimate $600.00 per month for premiums (Part B, D & Supplement) plus uncovered expenses – and, since Medicare does not cover a non-spouse, you will have to find private or state coverage for any dependents.

Social Security

If you are working and receiving Social Security benefits, you will be automatically enrolled in Part A and Part B at age 65. If you decide that you do not want or need the Part B coverage yet, you will have to talk with someone at Medicare: 1-800-MEDICARE (1-800-633-4227).

Summary

This is a complicated topic.  If you will be working past age 65 for a company that enrolls more than 20 employees in its health plan, make sure to consult with a professional before adding – or dropping – anything.