Ask the Medicare Specialist

QUESTION:

From Doug: I’m 68 years old and retired. I’m currently on my wife’s insurance through her work. Her company only has 10 employees. I never signed up for Medicare part A or B. Will I be penalized when I do? If she is going to retire sometime next year, do I need to enroll in Medicare and an Advantge Plan or Supplement while we’re still in the Annual Election Period?

ANSWER:

This is a great question and one that often causes confusion. Let me start by saying there is never a late enrollment penalty for Part A under any circumstance. Now let me explain how employer insurance works for those on Medicare. When it comes to employer group plans with less than 20 enrollees, Medicare is the primary payer and the health insurance secondary. The opposite is true for groups with more than 20 enrollees. With the way Medicare words it on their website and publications, I understand how those on plans that have less than 20 employees could be led to believe they would be subject to penalties. They aren’t. Period. If the Medicare beneficiary or their spouse is “working” and getting health insurance from that employer, there is never a Part B or Part D penalty. Be advised the key word is “working.” If someone is getting health insurance as a severance benefit or as an early retirement package and is no longer an active employee of that company, there would be a penalty for not enrolling in Part B. The tally would start a few months after the date of separation and the penalty for not having Part B when first eligible is 10% per year. We’ve met retired public-school teachers who were given seven years of no cost health insurance coverage as an early retirement compensation. Common sense is, “why should I pay $150 for Part B when I’m getting outstanding health insurance for nothing?” Unfortunately, the government doesn’t always take a commonsense approach and in this case, one must have Part B or face the late enrollment penalty. Say the seven years took the retiree into age 70 with no Part B coverage. The penalty would be 50% of whatever Medicare costs at the time of enrollment. In 2022, Medicare B is going to be around $160 per month. This particular public-school retiree would have to pay $240. And get this. The penalty is for life. There can be additional confusion because Medicare makes it very clear that those on employer group plans that have less than 20 enrollees must have Part B. That’s not the case for those who have Highmark Blue Cross Blue Shield. Although they’re not required to, Highmark, as of today, still pays claims for those who have opted out of Part B. UPMC just recently changed their policy and has notified those who are on smaller employer group plans that they do need to enroll in Part B and failure to do so will result in the insured being fully responsible for all costs on any outpatient services that would have been covered by Medicare Part B. The moral of the story is never take advice on whether to enroll in Part B or not from friends, your HR Department, someone from Social Security, or Medicare. Contact us. We will advise you correctly. What this UPMC announcement means for those who are affected is it just became much more likely that opting out of a small employer group plan may be the wiser choice financially. I normally say that only about 25% of people who are still working or married to someone who is working, getting insurance from an employer, and are eligible for Medicare are better off opting out of Part B and staying on their plan at work. In the case where one is forced to go on Part B, I’d say it would be flipped and estimate only 25% would be best to stay on an employer plan. Please be aware that what an employee is having deducted from their paycheck for health insurance isn’t the only factor considered when we evaluate if staying on an employer plan or going on Medicare and a Supplement or Advantage Plan is the better option. The amount of the deductible, coinsurance (percentage of the bill that must be paid after the deductible has been met), and the annual Maximum Out of Pocket (MOOP) also need to be taken into account because there is only a $200 deductible and almost no out of pocket costs with Supplements. There’s no deductible on 98% of Advantage Plans and when chosen wisely, they have very fair and affordable co-pays for major medical services such as MRI’s CT scans, outpatient surgeries, ambulance rides, and hospitalizations. The last determining factor when we advise someone on an employer is what Medications are being taken. Medicare Part D, be that from a Stand Alone plan or coverage that comes with Advantage Plans, has what is known as the Donut Hole. In 2022, once a Medicare beneficiary receives $4,430 worth of medications, he or she goes from paying a flat co-pay for Tier 3 brand name drugs of about $45 for a 30-day supply, to 25% of the retail cost. With the average brand name medication now retailing between $500 and $900 for a 30-day supply, the monthly payment once in the Donut Hole would become $125 to $225 for a single prescription. There’s no Donut Hole on employer plans. To answer the second part of Doug’s question, those who come off employer coverage and are eligible for Medicare don’t need to sign up during the Annual Election Period (SEP) that runs from November 15th through December 7th, or the Open Enrollment Period (OEP) that runs from January 1st through March 31st. Three months prior to and two months after employer coverage ends, those in Doug’s situation qualify for a Special Election Period (SEP) that allows them to get a Medicare Supplement and Part D coverage or an Advantage Plan at any time during the year. Parts A and B need to be applied for first however, and there’s a form called “Request for Employment Information” that needs to be filled out and signed by the employer to enroll Part B. Any of our agents can walk you through that process. I’d like to remind all readers that we still have more than three weeks left of AEP. If you’re on Medicare and not currently a client, I highly recommend you call us or email me personally to get an opinion if your current Medicare Supplement, Part D, or Advantage Plan is one of those we feel offers good value and recommend to our clients, or if you should consider others for 2022. I estimate that 50% of Medicare beneficiaries are not on the most cost-effective plan. If you have any questions regarding this column or any other Medicare related topic, please reach out to us. Thanks for reading. Stay safe everyone.