If you’re approaching 65 and considering working past retirement age, you are not alone – late retirements are a growing trend. Deft Research’s 2020 Age-In Study reveals that this is especially prevalent amidst the Coronavirus pandemic. The financial sting of the virus has been felt in St. Petersburg, FL and across the country, and older Americans are delaying retirement for a litany of reasons, including to maximize their eventual Social Security income or earn back the part of their nest egg they may have been forced to spend in recent moths. Whatever your reason may be to delay your retirement, it is important that you understand the difference between your employer sponsored insurance and the Medicare options for which you are now eligible. I’ll try to cut through some of the confusion below.
If you (or your spouse) work past 65, your options will vary depending on the size of your employer. The rules for Medicare enrollment are different if you work for an employer with less than 20 employees (small employer plans) versus an employer with 20 or more employees (large employer plans).
If you belong to a large employer plan, you are not obligated to enroll in Medicare coverage, though you should consider your options. Rising health care costs have led employers to reduce the contribution that they pay toward their employee’s health plan. Additionally, many companies have resorted to offering high-deductible plans to make coverage more affordable. Thus, it may be a smart financial move to get Medicare in place of your employer plan.
By contrast, if you have a small employer plan (less than 20 employees) you’ll be required to get Medicare when you turn 65 – do not delay your enrollment.
HSA contributions
It is not recommended to actively contribute towards an HSA when enrolled in Medicare. Contributing to an HSA while under large employer coverage will lead to future tax penalties. To be safe, end your HSA contributions six months before you plan to enroll in Medicare.
Enrollment Process
Your Medicare enrollment process will look different if you choose to remain on your employer plan past 65.
If you maintain large employer coverage, you may elect premium-free Medicare Part A (hospital coverage) while keeping your large employer plan because you paid for this coverage through your payroll taxes while working. Part A will be a secondary payor on hospital claims. You can delay Medicare Part B (medical services coverage) until you wish to leave large employer coverage or retire without penalty.
When you leave large employer coverage, you will have an 8 month Special Election Period (SEP) to enroll in Medicare that begins on the day you lose employer coverage or employment (whichever is first). Your enrollment process is different because you delayed Part B. In this case, you will need to apply with a paper application (Form 40B) and submit a Request for Employment Information (Form L564) that your employer completes, attesting to your credible coverage. These forms are submitted, at the time of application, by mail or in-person at your local Social Security Office.
At Bayside Medicare, we will compare your employer coverage vs Medigap and Medicare Advantage options and help you explore Medicare Part D (prescription drug coverage). Those options are explained below.
Medigap Option
Original Medicare doesn’t cover everything. Medicare Parts A and B cover only 80% of your medical expenses and set no cap on how much the remaining 20% can cost a patient. A Medigap plan picks up where Original Medicare coverage leaves off. Whether or not you delayed Medicare Part B to stay on your employer sponsored plan, you have a 6 month window to enroll in a Medigap plan that begins the first day of the month you become eligible. During this window, you will have guaranteed issue rights. You must have Medicare Parts A and B to enroll in a Medigap plan that is purchased through a private insurance company.
Medicare Advantage Plans
Medicare Advantage is also known as Part C and looks similar to your employer coverage’s HMO and PPO plans. Your Initial Election Period at 65 will allow you a 7 month window to enroll in a Medicare Advantage Plan. But, if you delayed Part B to keep your employer coverage, you will only have a 2-month window from the time you cancel or lose employer coverage to enroll. You must also have Parts A and B to enroll in a plan that is offered by private insurance companies. Insurers must meet the minimum benefits offered in Parts A and B and often exceed that by including extra benefits to hearing, vision, and dental through Medicare Part C.
Part D
The timeline for enrolling in prescription drug benefits (Medicare Part D) is different than for Parts A and B. You will have a 2-month window to obtain prescription drug coverage after cancelling or losing employer coverage. To avoid penalties, you will want to enroll in a stand-alone prescription plan if you enroll in a Medigap plan like those discussed above. Many Medicare Advantage Plans incorporate Part D in their plans resolving the Part D issue.
Be sure to do a comparison to see if it is financially worthwhile to keep or drop your group coverage. You may be pleasantly surprised at the strong benefits Medicare has to offer.
Stay safe and be well.
About Dayna Schafer
Dayna is a Certified Medicare Insurance Planner®, a member of the Rise Community, and Medicare broker. Her agency is located in Saint Petersburg, FL where she has helped thousands of individuals and Medicare beneficiaries understand their benefits by ‘Making it Make Sense’. Since 2002, Dayna has certified with triple the average amount of insurers in an effort to relentlessly seek out the right fit for her client’s healthcare needs. If you’d like to contact her, she can be reached at (727) 375-2700
