By Ross Blair
As more people work past age 65, the eligibility age for Medicare, more people will need to navigate an increasingly complex web of employer and Medicare coverage.The decisions they make today could have costly, long-term implications.
A recent survey of caregivers conducted by eHealth, the parent company of PlanPrescriber.com, found that 80 percent of baby boomers expect to be working after their 65th birthday.
Many will have health insurance through their employer. But this group must also consider how Medicare impacts their coverage and their choices. The same survey found that many baby boomers do not understand basic parts of how the Medicare program actually works. Certain parts of Medicare coverage are only guaranteed when you first become eligible for the program – even if you are working.
5 Tips: Applying for Medicare While Working
When you turn 65 and continue to work, you have some decisions to make about employer coverage versus Medicare. To avoid costly mistakes, keep these five things in mind.
- Understand the basics of how Original Medicare (Parts A and B) works and be aware of some cost-sharing gaps.
Original Medicare is a great benefit that covers core services. For example, when you are admitted into a medical facility, like a hospital or skilled nursing facility, Medicare Part A typically pays for your care. If you see a doctor or specialist in an outpatient setting, like a doctor’s office or rehab center, Part B typically pays for your care. But, original Medicare benefits have some gaps. Neither Part A nor Part B will pay 100 percent of your costs, and neither Part A nor Part B covers prescription drugs.
Parts A and B have their own separate deductibles, and Part A’s deductible typically resets 60 days after you are discharged from a hospital or skilled nursing facility. After you reach your Part B deductible, there is cost-sharing “coinsurance” wherein Medicare pays a percentage of every bill (typically 20 percent to 45 percent). And Parts A and B may have additional cost-sharing for other services or for care that extends past a set number of days. These gaps are typically what prompt a person to stay with their employer-based coverage as long as possible, or to buy Medicare supplemental insurance.
- Understand how your employer-based insurance works with Part A.
Most of us are automatically enrolled in Medicare Part A when we turn 65, even if we have employer-based insurance.The way Part A works with your employer’s plan will depend on the size of the company where you work.
In most cases, if you work for a company with fewer than 20 employees, Medicare will become the primary payer of your hospitalization costs. Your employer’s insurer becomes the secondary payer and covers gaps in coverage. If you work for a larger company, the company’s insurer typically remains as the primary payer.
Most people become eligible for Part A (hospital insurance) at age 65, and most people do not pay a monthly premium for Part A. Even with employer-based coverage, Part A can help pay for costs not covered by your employer’s plan.
- Understand how your employer-based insurance works with Part B.
Those with employer-based insurance can wait until they lose that insurance to enroll in Part B. Part B has a premium – most people pay a standard premium amount, which is $104.90 a month in 2013. If you have private insurance through another source, like an employer or union, there is no reason to pay that $104.90 until you have to.
But there are some caveats. You typically must enroll in Part B within eight months of losing the job that gave you health insurance or within eight months of losing the health insurance from that job, whichever comes first. Waiting longer than eight months creates a gap in your coverage, and any gap in Part B coverage benefits can be penalized, permanently. It’s a good idea to talk to your employer health benefits administrator or a licensed agent who can clearly explain your options to you.
- Know how COBRA works with Part A and Part B.
COBRA provides certain former employees and spouses the right to temporarily continue health coverage at group rates. However, it’s expensive, so people who qualify for Medicare often decline costly COBRA and switch to Medicare. But if your spouse is not 65 and therefore not eligible for Medicare, COBRA may be their best option.
Here is where it gets tricky. By law, a person can stay on COBRA for 18 months. But if you’re eligible for Medicare, you only have eight months to sign up for Part B after your employment, or employer-based health insurance, comes to an end. Even if you’re on COBRA.
If you are on COBRA, do not wait until your COBRA ends to enroll in Part B. If you do not enroll in Part B during that eight-month period, you will incur a 10 percent Part B premium penalty for every 12-month period that you were not enrolled. If you miss the first enrollment window, you will need to wait until Medicare’s Annual Enrollment Period (Oct. 15 through Dec. 7) to sign up for Part B. And your coverage will not begin until Jan. 1 of the following year.
- If you want to supplement your Medicare coverage, know the deadlines.
There are a couple of ways to help fill the “cost-sharing” gaps in original Medicare, including Medicare Advantage and Medicare Supplement plans.
People can enroll in Medicare Advantage (also called Medicare Part C plans) as an alternative to original Medicare. These plans allow a person to receive their Part A and Part B benefits, as well as Part D in most cases, from a private insurance company through a single consolidated plan. While Medicare Advantage plans can and often do have some of the same cost-sharing (deductibles, copayments and coinsurance) associated with Original Medicare, they cap your out-of-pocket expenses at $6,700 or less, depending on the plan.
According to eHealth’s 2013 Medicare Advantage Plan Landscape Data Summary, the average Medicare Advantage plan costs $60 a month on top of what one pays for original Medicare; and the average cap on out-of-pocket costs for 2013 is about $4,500. By comparison, original Medicare has no such cap on out-of-pocket expenses.
Remember, you’ll typically be signed up for Part A automatically when you turn 65. When you stop working and lose your employer-based plan, you have eight months to enroll in Part B. And you have three months to sign up for a Medicare Advantage plan (Part C) after you’ve signed up for Medicare Part B. Choosing a Medicare Advantage plan can be tricky.
Medicare Supplement plans (also called Medigap plans) are offered as a supplement to original Medicare, not as an alternative like the Medicare Advantage plans. In most states a person can enroll in one of 10 standardized Medicare Supplements plans, which must all provide the same core benefits, regardless of which insurer offers them. Plans typically do not include a prescription drug benefit, but the most comprehensive supplement plans often cover virtually all of a person’s Part A and Part B out-of-pocket costs.
The Open Enrollment Period for Medigap policies (supplement insurance) starts the first month a beneficiary is both 65 and enrolled in Part B, and it lasts for six months. As long as you have coverage through your employer, you typically won’t need Part B or a Medicare Supplement plan. Once you sign up for Part B, you don’t want to miss the Medigap Open Enrollment Period.
Outside of your initial Medigap Open Enrollment Period, your application for a Medigap plan could be declined if you have a pre-existing condition. Or if your health condition is covered, your premium may be higher. Some Medigap plans may require you to pay premiums but wait a few months before they’ll cover any expenses.
For many baby boomers, becoming eligible for Medicare means access to more affordable health care. When you are working after age 65, you have more options. Taking the time to understand all your options will help you select the coverage that is best for you.