Medicare When Working Past 65

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(upbeat playful music) - I'm Phil Moeller. Thanks for spending a few minutes with me today. As a journalist, I've written a lot about health care and retirement over the years. As an author, I've done consumer guidebooks to Social Security and Medicare, so not surprisingly, I get asked a lot of questions by readers about how these programs work. The question I get asked most frequently is, "I'm nearing my 65th birthday. "What the heck do I do about Medicare?" And the answer, of course, is it depends. So I wanna break that down for you today and describe the various situations that can affect somebody who's nearing their 65th birthday. So the first decision is for somebody who's nearing the age of 65 at work and they do plan to retire when they turn 65. So in that situation, the first thing I advise people to do is sit down with their employee benefits department and find out if they have any kind of retiree coverage that's gonna kick in when they retire and leave their active employer group coverage. In many cases, they may have some retiree coverage. They need to understand this because even if they have retiree coverage, they still might need Medicare to provide full coverage of their health needs when they retire. In some cases, a retiree program can provide secondary coverage, and so, they would need to get Medicare, and they'd use the employer program as secondary coverage. So in a lot of situations, of course, there is no employer retiree coverage, and you pretty much are gonna be relying solely on Medicare. In that case, as a new enrollee in Medicare, you will have a seven-month initial enrollment period that begins three months before your 65th birthday month and then extends three months past that date, so you have a seven-month period to sign up for Medicare. Complying with this enrollment period is important because if you're late in that, you might face late enrollment penalties. They can last the rest of your life, and you really don't want those if you can avoid them. So that's really important, but it's not nearly as important in my view as making sure that you have continuous health coverage. So as an example, say you lose your employer coverage at the end of June. You still have several months to sign up for Medicare, and you say, "I'm within that initial enrollment period. "I'm fine," but you're not fine because you might have a lapse in your health coverage. So I advise people to find out, again, when their employer coverage is going to end and make sure that they enroll in Medicare early enough so that they don't have a break in coverage because that's the thing you don't want. I would always err on the side of making sure that you have coverage. The other issue, of course, if you are this employee and you're gonna lose group coverage when you're 65, is to make sure you understand the coverage needs that your spouse may have, or perhaps you have a child or more than one child that's insured on your group policy. You're gonna have to work to make sure that they're covered when you lose your employer coverage because you're retiring. The other situation is that you're turning 65, and you have no intention of not working. You're gonna continue to work, and a lot of people do this. Increasingly, people are continuing to stay at work past the age of 65. So in that situation, there are sorta two pathways that can affect people. The first pathway exists for those people who work for small employers, which in this case, are defined as people with 20 or fewer employees. So if you have fewer than 20 employees, in most cases, your employer plan will require that you get Medicare when you turn 65. In that situation, usually, the employer plan reverts and becomes a secondary insurance provider, and Medicare becomes your primary insurance provider. If that's the case, then you have some decisions to make about what kind of Medicare to get, and this is why it's important for you to understand what your employer benefits are gonna continue to be when you turn 65. Another key thing you need to worry about in this situation is your drug coverage. When you turn 65 and get Medicare, it's important to understand whether your employer's gonna offer you any kinda drug coverage. In this case, the employer drug coverage has to be at least as good as Medicare. In that situation, the employer will tell you that, and you don't need to worry about getting a Part D plan. So there are a lot of retiree programs that do provide some kind of Part D coverage, and you need to find out these details. If you have a spouse that's covered on your plan or children covered on your plan, in most cases, they should continue to receive employer coverage. You may have to get Medicare, but they will still be covered on your employer plan. However, I always urge people to make sure that they talk to their benefits people ahead of time. A lot of Medicare problems occur because people don't do this ahead of time. They sort of wait until after the decisions have been made, and if there's an adverse decision, it can be very complex and time-consuming to fix that. So the best thing to do is not have the problem in the first place and do your homework ahead of time. Going back to the two pathways I mentioned, the second pathway occurs for people who work at larger employers that have more than 20 people. The Medicare rules in that situation require the employer to continue offering you group coverage when you turn 65 and continue offering you group coverage regardless of how old you are as long as you're active employee and covered by that plan. So in this situation, you have another set of decisions you can make. They can be complicated, but they don't need to be. Again, I would urge people to begin by saying go to your benefits folks and understand how your employer plan make work or complement Medicare coverages that are available to you. Traditionally, employer coverage was pretty good. Employers paid a large percentage of your overall health care costs, and the easy and sorta default decision was, "Well, I'm not gonna get Medicare "because I've got a great employer plan "and I don't need to get Medicare," and that may still be the case, in which case, you can not get Medicare at 65 and continue with your employer plan. However, more and more people have been getting high deductible health plans at work. These can require you to pay up to several thousand dollars out of your own pocket before your employer plan starts to kick in the benefits. In that case, you may wanna consider whether you get Medicare in addition to your employer plan because as secondary coverage, Medicare could help pay that deductible amount of money that otherwise, you would pay out of your own pocket. In that situation, obviously, you have to look at what Medicare will cost you and what its benefits will be in helping you as a secondary source of coverage. So again, you could decide to keep your employer plan and get Medicare. The last possibility is that you can also decide, "Well, maybe I just wanna rely on Medicare "and not have an employer plan." Medicare's coverage can be pretty complete. You look at the cost of your employer plan, look at your annual out-of-pocket exposure, and look at employer plan versus Medicare or as I said earlier, employer plan plus Medicare, but in this context, you might wanna just say, "Well, I think I'm gonna drop my employer plan "and rely solely on Medicare," which you can do. Keep in mind that you should, again, talk to your benefits folks and make sure there aren't any unintended consequences of doing that and that the employer plan is set up with flexibility to allow you to drop it. The related aspect of that, of course, is you may not be the only person insured on that employer plan. So in that context, if you have a spouse or children that are covered by your employer plan, you wanna make sure that they're still gonna be covered, even if you drop the employer plan. This could be a little bit more complicated. Again, I urge people to sit down and talk to their benefits people and work out the details and make sure that they're making an informed decision. Another question I get asked a lot is how does Part D coverage work if you're going to keep your employer plan when you turn 65? This is, again, an issue that a lot of people don't understand, but under Medicare rules, if you're eligible for Medicare, meaning you're 65 or older, and you're gonna keep your employer coverage, that employer coverage has to offer drug protection that's at least as good as a typical Part D drug plan in Medicare. Again, historically, this was sort of a no-brainer. Employer drug coverage was pretty good, and you didn't really have a creditability issue with it. However, the rise of high deductible health plans means that in some contexts, your effective drug coverage is not nearly as good as a Part D plan. The Part D annual deductible is never more than several hundred dollars, and so, you could have a health plan with your employer where you could be paying a couple thousand dollars for drugs out-of-pocket as part of that initial deductible in your employer plan, in which case, it might be that your employer plan is not creditable, and you'd have to get Part D. Now, your employer is required under law to provide you an annual statement as to the creditability of its drug coverage. I've never met an employee who even knew that such a statement existed, let alone whether they should ask for it, but you should because if your drug coverage is not creditable and it turns out you needed a Part D plan and you failed to get one, you could get hit with late enrollment penalties later on when you ended up having to get Part D and you ended your employer coverage, but the other reason to do this is because you could be much better off financially and have much better coverage having a Part D plan along with your employer coverage because that Part D plan could really help pay for some of the drugs in this deductible portion of your employer group plan. So in addition sorta the basic pathways that you have to choose, there are a couple of other situations I wanted to review that affect a lot of people based on the reader questions that I deal with. The first one involves what's called COBRA. COBRA is an acronym for a law that was passed in the 1980s that provides people guaranteed access to health insurance if they lose the employer insurance. It can be continued for up to 18 to 36 months, and for a lot of people, COBRA is a great deal. It really relieves a lot of stress if you happen to lose your job. You got a lot of worries about not having a job, and one of them you don't wanna have in that group is whether or not you're gonna have health insurance, so COBRA allows you to continue your health insurance. However, for people who are nearing age 65, there's a wrinkle in the COBRA rules that a lot of people don't understand, and that is that if you're on COBRA and you turn 65, COBRA will cease providing primary insurance coverage to you and will become a secondary provider of insurance coverage. A lot of people don't know this and assume that COBRA is going to be their primary insurer, and because they have COBRA, they further assume that they don't need Medicare at 65. They fail to enroll in Medicare, and in that situation, they could face a really unpleasant surprise if they have a big medical expense and they file a claim only to learn that COBRA's only gonna be secondary coverage. It's not gonna provide primary coverage. That can entail a big financial hit if you have a serious medical issue, so I urge people to be aware of the fact that if you have COBRA and you are eligible for Medicare by virtue of turning 65, you have to get Medicare on a timely basis because COBRA will no longer be your primary insurance provider. The second situation that arises in these Medicare at 65 decisions is for people who have a high deductible health plan. If you have a high deductible plan, many employers will help you set up a health savings account to help you deal with those expenses in the deductible phase of your plan. HSAs are funded with pre-tax dollars. Usually, your employer puts in some, and you can put in the rest up to a specified annual limit that is set and changed every year by the IRS. Not only can you fund it with pre-tax dollars, but you can spend those dollars on any qualified health expense, and you will not incur a taxable event when you spend the money. So HSAs can be a great vehicle because they're rare and that they're funded with pre-tax dollars, but when you spend the money out of the account, it's not a taxable event, so it's tax-free going in, tax-free going out. It can be a great tool, and the other nice thing about HSAs is that if you have unspent monies in an HSA, you can carry them over from year to year, so you can build up some pretty big balances in an HSA, and I've actually advised people in some settings to not use their HSA. Just use it as almost a retirement vehicle. Build up big balances in HSA so when you do retire, you can spend those balances tax-free on any qualified expense, including, by the way, Medicare premiums, which are a qualified medical expense when you retire. So HSAs can be terrific. However, there's a wrinkle in that HSAs are not compatible with Medicare. So if you have Medicare, you are no longer allowed to contribute to an HSA. You can use the funds in the account, but you can't contribute new funds to the account, and your response may be, "Well, that's fine "because I'm gonna continue to work, "and I'm gonna continue to use my HSA, "and I'm not filing for Medicare." However, a lot of people as they get older, especially when they reach the latest claiming age of 70 for Social Security, it really behooves them to file for Social Security. When you file for Social Security, by law, you must receive Part A of Medicare. You can't avoid it. If you wanna get Social Security benefits, you have to be enrolled in Part A. If you're enrolled in Part A, it means you can't continue making contributions to an HSA. People rarely understand this. I get a lot of questions from people who simply are surprised when they run into this roadblock, and so, I'm telling you today that there is a roadblock you should be concerned about, so you shouldn't unintentionally enroll in Part A, and in some cases, it can influence the timing of when you do apply for Social Security. However, I don't know of any situation when you're better off not taking Social Security benefits and using the benefits of contributing to an HSA, especially if you're waiting until age 70 to file. You should just file for Social Security and understand that that means you won't be able to continue contributing to your HSA. So the COBRA and HSA situations are issues that catch up a lot of people, and I just wanted you to be aware of it. I get asked a lot of questions about how people enroll in Medicare, and some people think that they are automatically enrolled in the program, you know, when they are blowing the candles on their 65th birthday cake. This is not the way it works. When you turn 65, you need to actually affirmatively enroll in the program, and there are multiple ways you can do this. Social Security handles Medicare enrollment, so you can call the Social Security Administration or go online, but you can also work through Medicare.gov, and they can help facilitate your enrollment in Medicare, but again, remember, this is something you have to do when you turn 65. It won't be done for you. I really appreciate you spending a little time with me today. I hope I've helped answer some of your Medicare questions. I realize you may have lots of other questions. Medicare can be pretty complicated. MedicareMadeClear.com provides lots of answers to your basic questions, so if you still have them, I urge you to go there and see if you can get the answers you need. Thanks again for spending time with me today.
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Channel: Medicare Made Clear
Views: 41,262
Rating: 4.6064401 out of 5
Keywords: medicare, working past 65, HSA, COBRA, retirement, health care
Id: DDS7K-6Urfs
Channel Id: undefined
Length: 18min 31sec (1111 seconds)
Published: Tue Sep 17 2019
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