Health Insurance Before and After Retirement
Health Insurance Before and After Retirement
Most employees depend on their employers for health insurance today. It is possible to go into the open market and buy an individual health insurance policy under the Affordable Care Act, but these policies tend to be expensive. Premium subsidies are available, but only if you meet asset and income limitations. Of the insurance options available to working people under age 65, their own employer plan—or a spouse’s plan if available—is likely to be the best choice.
If a client retires before age 65, they will have to find different insurance to take effect immediately after the employer insurance ends. If the client’s former employer offers retiree insurance to tide them over to Medicare age, great. Or, if the spouse is still working, the client may be able to get on the spouse’s plan. If neither of these options is available, the client may go onto COBRA, which will keep the employer insurance in force at full cost to the client. As a last resort the client will need to go into the open market and buy an individual policy to last until Medicare starts at 65. The cost of this pre-65 insurance will, of course, need to be figured into the post-retirement budget, and the client would need to be confident about covering the costs before making the decision to retire.
Once a client turns 65, the Medicare option becomes available. If a retiree has an ACA plan, they will leap at the chance to get into Medicare in order to lower their costs. If they have a retiree plan, they will be forced to have Medicare, either because the retiree plan ends at 65 or shifts to secondary payer status (serving as supplemental insurance) with Medicare as the primary payer. If they are on a spouse’s plan, and if the plan covers 20 or more employees, they may be able to stay on the spouse’s plan. But take note: Some plans specify that dependent spouses must enroll in Medicare upon turning 65. So if a client turns 65 while on a spouse’s plan they will need to check with the plan to see if Medicare enrollment is a requirement. (An over-20 plan can’t require an employee to enroll in Medicare, but it can require it of a dependent spouse.)
Once Medicare becomes an option, by virtue of the client turning 65, health insurance should be reevaluated. Even if a client is still working and staying on an over-20 employer plan, or retired and staying on a spouse’s plan, the existing plan should be compared to Medicare, either traditional A and B with a drug plan and supplemental insurance, or a Medicare Advantage plan. Overall, employer insurance isn’t what it used to be: deductibles are up, cost-sharing is up, and certain specialist services may be hard to get. Clients should not assume that their employer insurance is better than Medicare paired with a good supplemental policy. It may be, but they don’t know that until they’ve compared benefits and potential out-of-pocket costs of both plans under their expected health care usage.
And that’s another thing that might change along with the passing of the client’s 65th birthday: they may need more health care services as they age. Employer plans are designed for younger, healthier populations. Deductibles can be high because employees don’t expect to get sick; in fact high deductibles are welcome if they keep premiums low. But high deductibles can be devastating for people who do get sick, or who contract conditions requiring expensive prescription drugs. Then you want a plan designed for more frequent and expensive health care usage. That’s Medicare, along with a supplemental policy and prescription drug plan or a Medicare Advantage plan.
Question of the week
Q: An individual retires after 65 and signs up for Medicare A and B plus a Medigap policy. Two years later she gets an offer to return to work at another firm with more than 20 employees with a good health care program. The job will last until she is 72. Once she takes this job can she suspend her Medicare B coverage? Can she resume Medicare B when this job ends AND can she get guaranteed GAP coverage again like she had the first time through or is this special enrollment benefit now gone since it has been over a year since she first signed up?
A: She can definitely disenroll from Part B and re-enroll when she leaves the job during a new Special Enrollment Period. As for the Medigap, she should SUSPEND the policy, not cancel it. The six-month open enrollment period for Medigap is one-time only. But if she suspends the policy she will be able to get it back. See this reference.
News briefs
Bridging the Medicare Cost Gap: Know Your Options
“Medicare can cover most of your health care needs when you turn 65, but it doesn’t pay for everything. And one of the most significant financial challenges to watch out for are the out-of-pocket costs you can face aside from monthly premiums—including deductibles and other types of cost sharing. Just how much you’ll pay, and when, depends on the type of Medicare enrollment that you choose: traditional Medicare, which is operated by the government and provides care on a fee-for-service basis, or Medicare Advantage, which is run by private insurance companies and operates on a managed care model. … And more generally, people enrolled in traditional Medicare with supplemental coverage are the least likely to report problems managing their costs, because they have the greatest level of protection, KFF research shows.” (New York Times—subscription)
UnitedHealth Wins Ruling Over $2B in Alleged Medicare Advantage Overpayments
“The Justice Department’s years-long court battle to force UnitedHealth Group to return billions of dollars in alleged Medicare Advantage overpayments hit a major setback Monday when a special master ruled the government had failed to prove its case. In finding for UnitedHealth, Special Master Suzanne Segal found that the DOJ had not presented evidence to support its claim that the giant health insurer exaggerated how sick patients were to illegally pocket more than $2 billion in overpayments. ‘A mere possibility of an overpayment is not enough for the government to carry its burden,’ Segal wrote in an initial ruling. She recommended that UnitedHealth’s motion to dismiss the case be granted. The recommendation, which is to be presented to the federal judge handling the case, can be appealed within two weeks.” (KFF Health News)
Trump Vowed To End Surprise Medical Bills. The Office Working on That Just Got Slashed.
“As President Donald Trump wrapped up his first term in 2020, he signed legislation to protect Americans from surprise medical bills. ‘This must end,’ Trump said. ‘We’re going to hold insurance companies and hospitals totally accountable.’ But the president’s wide-ranging push to slash government spending, led by billionaire Elon Musk, is weakening the federal office charged with implementing the No Surprises Act. Some 15% of those working at the federal Center for Consumer Information and Insurance Oversight, or CCIIO, were fired two weeks ago, according to the agency’s former deputy director in charge of operations, Jeff Grant. And while the full impact of the cutbacks is still coming into focus, the retrenchment is threatening work at an agency already laboring to run an overstretched system for resolving sometimes very large bills from out-of-network medical providers.” (KFF Health News)
What Is Medicaid, Again?
“Republicans in Congress have suggested big cuts to Medicaid. But what exactly is it? Medicaid, the state-federal health insurance program for people with low incomes or disabilities, is integral to the U.S. health care system. It keeps hospitals and other providers afloat, provides a key source of federal funds to states, and helps provide health insurance to people who couldn’t otherwise afford it. More than 79 million people in the U.S. receive services from Medicaid or the closely related Children’s Health Insurance Program. KFF Health News correspondent Sam Whitehead discusses Medicaid’s history and role in the U.S. health system.” (KFF Health News)
You’re Eligible for Medicare but Work Full-time. Here Are 3 Tips on How and When To Enroll.
“Here are three common scenarios: 1. You continue working full-time and delay Medicare enrollment: You’re happy with your employer-provided health insurance. When you do quit full-time work, you will have eight months after that insurance ends to get Medicare without paying a penalty for Part B coverage. (In Medicare lingo, this is called a “special enrollment period,” or SEP.) But be aware that if you go more than 63 days without creditable prescription-drug coverage, you’ll pay a penalty for every month that you lack this coverage. 2. You continue working full-time, keep your employer coverage and sign up for Medicare Part A when you turn 65: Part A, which helps cover inpatient stays in hospitals and skilled nursing facilities, is free for most people but comes with deductibles and copays. You won’t be able to contribute to your health-savings account once you enroll in Medicare Part A. 3. You continue working full-time, drop your employer coverage and rely entirely on Medicare: In that case, you’ll want to enroll in Medicare Part A and Part B (doctor visits, outpatient care) along with buying a Medicare supplement policy (Medigap) that covers deductibles and copays you’d otherwise pay out of pocket. You may also want to buy Medicare Part D (prescription-drug coverage). As an alternative, you can purchase a Medicare Advantage plan instead of original Medicare; these plans usually include prescription-drug coverage, so you won’t need Part D or a Medigap policy. Many people pick option no. 3—choosing original Medicare and declining their employer plan—because they’re fed up with having to see in-network providers. This choice can also help you save money for retirement.” (Marketwatch)
Elaine Floyd, CFP®
Director, Retirement and Life Planning
Horsesmouth, LLC
