Age 65 is kind of a magic time where the health insurance world changes. But many people are continuing to work beyond 65 these days. What should you do when you become eligible for Medicare but you’re still covered by your employer’s health insurance?
Avoid these common mistakes that can lead to higher premiums, penalties, or missed enrollment opportunities.
1) Paying for Part B when you don’t need it
While Medicare Part A is free if you have been working in the U.S. for most of your life, Part B comes for a monthly premium (in 2012 it was $99 for most people). If you have health insurance through your employer, you’re allowed to defer Part B. Otherwise, there is a late enrollment penalty (10% of the premium for each year you didn’t have Part B). Contact Social Security to delay Part B but remember to sign up as soon as you retire or you could be hit with the penalty.
2) Using your Medicare first
As long as you’re working and covered by your employer’s plan (or your spouse’s plan), Medicare considers that coverage to be your primary insurance.* That means Medicare won’t pay for anything that your primary plan doesn’t cover. They’ll only pay a portion of the bill after the primary plan pays a portion (yes, odd Medicare rules, right?).
So let’s say your employee plan is an HMO, and you go outside your physician network. Don’t expect Medicare to cover anything. However, if you do go to a network doctor, your primary insurance will pay first, and then Medicare will pay a portion, up to the Medicare benefit level. Bottom line? The two sources of coverage aren’t interchangeable. Rely on your employer insurance, and think of Medicare as a bonus, not an alternative.
3) Not Getting Part D when you should
A lot of people put off enrolling in Part D when they have prescription drug coverage through their employer. And that’s usually just fine. You’ll run into trouble however, if your drug plan is not considered “creditable coverage.” That means Medicare has decided the plan meets certain standards of being equivalent to a Medicare Part D plan. Most employer plans are creditable, but you should still check with your HR department. If your plan isn’t creditable, you’ll end up paying a late enrollment fee for every month you didn’t have Part D as long as you have Medicare.
You’ve probably noticed by now that Medicare is pretty strict when it comes to how employer health insurance coordinates. And that means little forgiveness if you don’t follow the rules. Questions? Contact Medicare Coordination of Benefits.
Or need more individualized help with Medicare? SHIP, the State Health Insurance Assistance Program, is a federal program that provides free one-on-one Medicare assistance. Search for the one in your area through Medicare.
* If you work for a small employer (20 or fewer employees), the rules are a bit different for you. Medicare is always your primary insurance!