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I do not want to retire just because I am 65! What about Medicare and my group insurance?

Author: Beth Perry    Posted: July 22, 2015

Your options for healthcare after you turn 65 are pretty straightforward but it is important to know what category you are in:

  • Your employer has fewer than 20 employees: Any Medicare insurance you have is primary or is billed and pays first and your employer coverage is secondary or is billed and pays second.
  • Your employer has more than 20 employees: In this case your employer insurance is primary or pays first and your Medicare insurance is secondary and is billed and pays second.

It is important to know who is to be billed first and second so your bills are paid properly and with a minimum of delay and fuss. If you are not sure which category your company falls, talk to the HR representative. This all has to do with TEFRA regulations and is an important factor in determining whether to purchase Medicare coverage, have dual coverage, elect Medicare Part A only or delay enrollment to retirement.

Remember when planning, as long as you are a full time employee and eligible for benefits, your employer cannot require you to take Medicare and as long as you have group coverage with Creditable RX benefits, you can enroll later in Medicare.

Have a High Deductible Health Plan and Health Savings Account? Read the next blog for more information.

Heath Savings Accounts and Medicare. Stay out of trouble with the IRS

If you have a High Deductible Health plan and have been putting money into a Health Savings Account (HSA) tax free, you may have a substantial pre-tax nest egg set aside for future medical expenses. This is great! But now that you are 65 it is important to know the rules as they relate to Medicare.

It is against HSA rules for you or your employer to place money into the account if you have additional healthcare coverage. This includes Medicare. When you turn 65 you may be tempted to enroll in Medicare Part A. Part A pays for most of a hospitalization and this may look good when facing a $5,000 deductible. Add to that the fact that Medicare Part A comes at no cost to most Americans and you may see this as an answer to a potentially large medical bill in the future. Before you enroll in part A, ask yourself these questions:

  • How much money is my employer putting into my HSA? If I enroll in Part A I will lose this contribution.
  • How much am I saving per year in taxes on the money I am putting in? Do I want to lose this?
  • Does my employer have a non-HSA plan option I can move to that would serve me better with Medicare Part A?

Look at the financial gains and losses if you make a move or enroll in Medicare Part A and have a High Deductible Health Plan. Then make a decision with all the facts. Whatever you do, if you have Medicare do not add more money to the HSA and if you have fully funded the account for the year, prorate and take the extra money out. It is never worth the taxes, penalties and hassles to tangle with the IRS!

Medicare and COBRA: costly errors

Over my years in insurance and as a COBRA Administrator I have seen far too many people make a very costly error in regards to COBRA if you are over age 65. They have great group coverage and may be in the middle of treatment for a condition and are worried about moving to Medicare. So they elect COBRA. This may be the biggest and most costly mistake someone over the age of 65 can make.

If you are over 65, Medicare is primary and COBRA is secondary and there are NO EXCEPTIONS! This means that in order to have full coverage you must have Medicare A, Medicare B and COBRA. If you do not have Medicare A and/ or B, the COBRA coverage will pay all claims as though you had A and B. This means that you, the COBRA electee will be responsible for all of the services that normally would be paid by A and B. This is a huge liability that could bankrupt a retiree if the claims are large enough.

Added to this is the fact that it can take up to 15 months for a person to enroll in Medicare Part B if you are not experiencing a Special Election Period. The annual General Election Period is from January 1 to March 31 each year. This allows you to enroll in Part B effective July 1 of the same year. Outside of that time, unless you are losing group coverage or just turning 65, you cannot enroll. You may have also late enrollment penalties for Part B and RX coverage for the remainder of your life.

Be sure you understand the rules of the coverage you are enrolling in. Get the advice of an expert to help guide you before you make a choice and election. COBRA might be the right plan for you, but only with the right mix. Mistakes are costly. Try to avoid them

Retiree Plans: What to know and Look for

You may be one of those fortunate people who worked for a company that offers Medicare type benefits to its retirees. This can be a great lifelong benefit but like all benefits, know your options. Here are some questions to ask:

  • What is the monthly cost to me for premiums and what does the coverage include (medical only, maybe dental and vision too?)
  • What is the deductible and coinsurance for the plan that is being offered? The cost of insurance is the cost of premiums but also the cost to use the coverage.
  • Am I taking a medication or getting treatment of some sort that is covered by my retiree plan but not covered by a comparable Medicare Supplement, Advantage or RX plan? Check the plan and if the answer is yes, this a good reason to choose retiree benefits.
  • Are you helping parents with an older and expensive retiree plan? These may have very different rules than the new plans so be sure to look carefully and ask lots of questions.

By making these basic comparisons you will find out if the coverage is affordable.

WARNING: In almost all cases, once terminated, a retiree plan can never been elected again. It is therefore vital that you understand all the benefits and cost comparisons before you terminate a retiree plan. You can never get it back! If in doubt, keep the retiree plan. The only reasons you should ever terminate these plans would be huge cost increases in premiums or the inability to retain your doctor or providers under a new plan.

Medicare Part B enrollment after age 65

You may enroll in Medicare A and B at age 65 and for 3 months after the month of your 65th birthday. This is best done online and takes about 30 minutes. How do you enroll in Medicare Part B though if you continue to work and had employer insurance after that time?  The process takes a bit of time so be prepared:

  • If you are losing group coverage after age 65 this creates a Special Election Period that allows you to enroll in part B within 60 days of the termination of the group coverage with no late enrollment penalties. You may start this process up to 90 days before the effective date.
  • First you must get the enrollment form from Social Security. You may call them or go to your local Social Security office and ask for the form. This enrollment cannot be done online.
  • Fill out the form and have the employer sign the appropriate section. The employer must verify group coverage and termination date. Be sure to keep a copy for your records.
  • Return the form to Social Security. If your effective date is 60 to 90 days away, you may mail it using accountable mail or a return receipt. If not, you may want to take it to Social Security and hand-deliver it to a representative.
  • It usually takes 3 to 4 weeks to receive an answer in the mail. You may be able to check online for the status of the application, call Social Security or go back to the SS office.

Once you have confirmation of enrollment, you may apply for other coverage as well.


General Election Rules and Penalties

The General Election for Medicare Part B occurs annually from January 1 to March 31. You may go to the Social Security office and apply for Medicare Part B during this time and it will be effective July 1 of the same year if you are otherwise eligible. You can expect to pay late enrollment penalties of 10% for each 12 month period you were without Part B coverage for the remainder of your life. These will be waived only if you had employer group insurance.

Medicare rules allow each person 7 months to enroll in Medicare when they turn 65 and 2 months if they lose group coverage after 65. If you miss these election periods, the wait for coverage and the penalties are stiff. Be sure you enroll in Medicare when you are eligible.

Medicare Part D / RX Late Enrollment Penalties

Medicare rules are plain and have few exceptions…if you do not enroll in a Medicare Part D prescription plan when you are first eligible (generally at age 65) you will have to wait for coverage and pay late enrollment penalties later on. These can be 1% per month of time you were not covered based on the national average of premiums. This penalty will be paid for the rest of your life.

There are 2 main exceptions to this:

  • Penalties will be waived if you are eligible for Low Income Subsidy or Extra Help with the cost of RX premiums and costs. Go to for more information
  • If Medicare records show you did not have RX coverage after age 65 you will be asked to provide proof of creditable group RX coverage. Retain the Creditable coverage letters from your employer or other proof of coverage after age 65, provide this information as requested and they will waive the late enrollment penalties.

RX coverage is an important part of your medical benefits. Be sure to enroll when you are eligible.

I want to retire but what about my spouse’s coverage?

There are several ways to ensure your spouse remains covered if you chose to retire. The important thing is to make sure they enroll in coverage with no lapse if possible but at the least they do not miss any narrow window of open enrollment.

  • COBRA: Your spouse may be eligible to retain the employer benefits at your own expense for up to 18 months after the termination of employment. See the employer for more details
  • Individual coverage: This is available through the carrier directly or through the State Exchange. You can chose plans, deductibles and cost. The new regulations guarantee the ability to enroll with no limitations within a limited time frame after terminating the group coverage. This is the Special Election Period. Check with the carrier for more details.
  • Enroll in a group plan through their own work. Your spouse may have waived coverage with their job to enroll in a better or less expensive plan with you. This is again a Special Election Period that allows them to go onto any plan they would otherwise be eligible for.

Explore your options before the termination of your insurance to avoid stress and last minute decisions. The new regulations allow for enrollment in the middle of the year but if you miss the window of opportunity, you have to wait until the end of the year. Be prepared!


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