Ask The Medicare Specialist

Welcome to Part 2 of my “New to Medicare,” series designed to help educate those going on Medicare Parts A and B in the near future. Please be advised the series, as well as past and future columns, are not meant to be a substitute for a meeting with one of our experienced and licensed agents.

Question: Do I have to enroll in Medicare when I turn 65 if I’m still working? Are there penalties for not doing so? Who should and shouldn’t enroll in Medicare Part B?

It’s not necessary to enroll in Part B at age 65 when one is getting health insurance through their own or a spouse’s employer. And in this case, when opting out, there are no late enrollment penalties, the details of which I will explain shortly. In addition, people on employer plans can enroll in Part B during any time of the year when they decide to retire or leave their employer coverage. They don’t have to wait for enrollment periods such as the Annual Election (AEP) from October 15th to December 7th, or the Open Enrollment ( OEP) from January 1st to March 31st.

However, those who work past 65 or have a spouse that works past 65 should have one of our licensed agents look at plan details and costs to determine if staying on an employer sponsored plan or enrolling in Medicare and a Supplement or an Advantage Plan is the better value.

There are several factors that go into this decision. I estimate that 75% of those we meet who get insurance through an employer are better off remaining on their plan and opting out of Part B. However, some employers only cover 50% of their cost, which usually makes Medicare the better choice. It’s also not uncommon for an employer to contribute less towards the spouse’s premium than they do for the employee, and in many cases we recommend the employee stay on their work plan and the spouse go on Medicare.

To offset inevitable annual premium increases, employers may be forced to offer plans with higher deductibles and out of pocket costs, which may become a critical factor to consider, especially for those who are higher utilizers of health care. We see more and more people who have $2,000 to $5,000 deductibles with their employer plans.

Two other factors that must be considered are coinsurance and the annual Maximum Out of Pocket (MOOP). Coinsurance is the percentage of the remaining bill one is responsible for paying after the deductible has been met. Some plans cover 100% of claims after the deductible has been satisfied for major medical services like MRI’s, CT scans, outpatient surgeries, and hospitalizations. However, plenty of folks can be on the hook for 10% to 30% of costs after the deductible, which can result in meeting one’s MOOP, which represents the most out of pocket costs one can responsible for in a 12-month policy period. MOOP’s on many plans can be as high as $8,500. Even with just 10% coinsurance, anyone who had an expensive surgery or hospitalization of $80,000 or more would meet their MOOP. Many people who have higher deductibles, coinsurance, and/or MOOP may want to pay a little more upfront for Medicare and a plan that eliminates the prospect of getting bills in the $5,000 to $8,500.

Lastly, because Medicare Part D prescription coverage that those on Supplements need (Stand Alone Part D) as well as that provided by Advantage Plans, is usually not as good as what drug coverage on employer plans. I can recall several occasions where I was on the verge of recommending someone go on Medicare until they told me what meds they were taking.

There are penalties for those who don’t have employer sponsored health care and are late to enroll in both Medicare Parts B and D. With Part B, that penalty is 10% for each year one went without! And that penalty will be paid for one’s entire lifetime!

Those who are getting free or reduced cost health insurance from a company they retired from should never opt out of Part B!. You or your spouse must be “working” to do so without penalty. We have met far too many people, mostly retired teachers, who were given as much as seven years no cost health insurance as an early retirement incentive that took them past age 65. Not only do those who didn’t know better face Part B late enrollment penalties of $18 to $126/month in addition to the standard $175 premium, they also can only enroll in Part B during the OEP that runs January through March. This can put people in a situation where they must wait almost a year for Part B to become active. In between, someone in this situation would either need to pay for COBRA, which can be as much as $1,500 per month, or purchase a full cost ACA ( Obamacare) plan through the Marketplace that are also expensive $600 to $900/month and not nearly as good of coverage as Medicare and a Supplement or Advantage Plan There’s also a Part D late enrollment penalty of 1% for every month one goes without a plan after their initial Part B effective date. Many people make the mistake of not choosing Part D because they take little or no medication. The penalty for someone who didn’t enroll for three years would only amount to about $15/month so, it’s not what needs to be feared. It’s the prospect of being diagnosed with Cancer and needing an oral chemo drug that costs over $10,000 per month. Someone who was prescribed an expensive medication more than three months past their initial Part B effective date or after the Medicare AEP, he or she would not be able to have a plan go into effect until the following January, leaving them to come up with a way to pay for their medications entirely out of their own pocket. Anyone who has an employer health insurance that also covers prescriptions does not need to enroll in Part D and will not have a late enrollment penalty when they go on Part B and a Supplement or Advantage Plan.

Be advised, you can’t opt out of Part B and keep a subsidized ACA plan when you’re Medicare eligible! Doing so will not only result in a late enrollment penalty, but you will also be forced to pay back every dollar in subsidies that were received after turning 65. We’re talking about as much as $7,000 or more. I also don’t suggest Federal retirees who can get a plan that covers them without Part B opt out. The same holds true for Veterans with VA coverage. There are too many variables and uncertainties in the market to take that chance.

If you have any questions regarding the columns or would like to set up an appointment for a no cost consultation, please call one of our offices or reach out to me personally at aaron@ GetYourBestPlan.com.

Part 3 of the New to Medicare series will focus on the costs of Medicare Parts A and B and what they cover as well as the choices in Medicare plans and how they differ in regard to coverage, premiums and out of pocket costs, access to doctors and hospitals, and how claims are approved and paid.