You have been paying taxes for this thing called “Medicare” your entire working life, and you are finally approaching age 65 and your Initial Enrollment Period (IEP.) You are healthy and will continue to work, and you have no plans to retire any time soon. You have a big decision to make – do you keep your current group insurance and delay Medicare, enroll in Medicare, or do nothing at all? As you approach this occasion, it would be wise to have a great understanding of what choices to make!
Size of Employer Matters
Medicare coordinates with group coverage based on the size of the company. Employers that have 20 or more employees pay first, meaning their group coverage is the primary payer with Medicare being secondary. Depending on that particular coverage, you might still want to enroll in Part A since it is likely free, but you might want to delay enrolling in Part B to conserve your Initial Enrollment Period for when you retire and lose group benefits. Part A covers hospital costs and is likely free, so signing up for Part A could save you money if you have a high deductible. The standard premium for Part B in 2021 is $148.50 per month, so you might be paying an unnecessary amount for coverage that you are primarily paying for through your company. Many people make the mistake of signing up for Medicare Part B at 65 because they are uninformed; they could have delayed coverage until when they need it in the future.
If your company has 20 or fewer employees, Medicare is the primary payer and your group coverage is secondary. You could be making a huge mistake if you don’t sign up for Medicare Part A and Part B. If you don’t sign up during the IEP, you might find yourself paying all of what Medicare would have covered and your group paying only the small amount it pays as a secondary payer.
Your Situation Matters
Below are cases that Benefits 4 Seniors has encountered with clients. Names have been changed for privacy, but the situations are accurate:
Eddie signed up for Medicare and enrolled in Part A and Part B when he turned 65 three years ago based on a friend’s recommendation. His company has hundreds of employees and maintains great group benefits, which Eddie is still enrolled with. He has also been paying the Part B monthly premium on a bank draft for that time frame since he is not yet receiving Social Security. In 2021 it will cost him $1,782. He works for a large employer with a low premium and a $1,500 deductible. He would have been better off not signing up for Medicare Part B until he retires and loses group benefits.
Teresa works for a small company. She turned 65 two years ago but turned down Medicare during the IEP because she planned to work for several more years. It wasn’t until she had a large claim that she found out that she was on the hook for what Medicare would have paid, and her group coverage paid second. To make matters worse, she couldn’t sign up for Medicare until the General Enrollment Period (GEP), which runs from January 1 to March 31 each year. After she enrolled, her coverage did not begin until July 1, and she also picked up a lifelong penalty for not enrolling in Part B when she was eligible.
One Other Point to Consider
If you have a Health Saving Account (HSA) at work and sign up for any part of Medicare, you will no longer be able to contribute to the HSA without encountering tax penalties. The reason for this is you cannot contribute pre-tax dollars while having any plan other than a high deductible plan. If you plan to continue working and keep contributing to an HSA, you will want to delay Part A and Part B and take advantage of your Special Enrollment Period in the future. One final note – if you plan to start receiving Social Security at 65, you will automatically be enrolled in Part A. So you’ll either want to delay Social Security or stop utilizing the HSA.
To ensure you are making good decisions, remember you are not in this alone. Check with your HR department as you near this milestone. The odds are they have encountered your situation many times before and can help save you a lot of time and energy. Utilizing professionals – like the agents at Benefits 4 Seniors – to explore your health insurance options would also be prudent. An independent broker can help you navigate the options that are available to you and craft a plan to execute as you near retirement. You’ve worked for years to get close to retirement, so make sure you ask the right questions to set yourself up for the next stage of life.