Welcome back to “New to Medicare!”
Welcome to Part 3 of the series, “New to Medicare,” which I’m writing to help guide those who will soon be going on Medicare Parts, A, B, or both.
If you’ve missed the previous columns, you can read them on our website as well as listen or watch the podcast and webcast versions.
This Week’s Question
Do I have to enroll in Medicare when I turn 65 if I’m still working? Are there penalties for not doing so? Who should and shouldn’t enroll in Medicare?
Though it is not mandatory…
It’s not necessary to enroll in Part B at age 65 when one is getting health insurance through their own or a spouse’s employer. And in this case, when opting out, there are no late enrollment penalties, the details of which I will explain shortly. In addition, people on employer plans can enroll in Part B during any time of the year when they decide to retire or leave their employer coverage. They don’t have to wait for specific enrollment periods such as the Annual Election (AEP) which runs from October 15th to December 7th, or the Open Enrollment (OEP) that takes place from January 1st to March 31st.
However, those who work past 65 or have a spouse that works past 65 should let myself or another of our licensed agents look at plan details and costs to determine if staying on an employer sponsored plan or enrolling in Medicare and a Supplement or an Advantage Plan is the better value.
There are several factors that go into this decision. Obviously, cost is the first. I estimate that 75% of those we meet who get insurance through an employer are better off remaining on their plan and opting out of Part B. However, some employers only cover 50% of the cost which usually makes Medicare the better choice. It’s also not uncommon for an employer to contribute less towards the spouse’s premium than they do for the employee. In many cases, we recommend the employee stay on their work plan and the spouse go on Medicare.
With many employers forced to offer plans with higher deductibles to offset premium increases, the amount of the deductible has also become a critical factor to consider, especially for those who are higher utilizers of health care. We see more and more people who have $2,000 to $5,000 deductibles, as well as plans where all medical services are subject to a deductible. These are known as HDHP’s, High Deductible Health Plans that are Health Savings Account compatible. I give my employees this option and actually insure myself and my kids with an HDHP.
Maximum Out of Pocket (MOOP)
Two other factors that work in conjunction with one another are coinsurance and the annual Maximum Out of Pocket (MOOP). Coinsurance is the percentage of the remaining bill one must pay after the deductible has been met. Many, if not most employer plans pay 100% after the deductible has been satisfied for major medical services like MRI’s, CT scans, outpatient surgeries, and hospitalizations. However, plenty of folks can be on the hook for 10% to 30% of costs after the deductible, which can result in meeting one’s MOOP, which represents the most out of pocket costs one can responsible for. MOOP’s on many plans can be as high as $7,000. Let’s use a heart bypass surgery as an example. According to a Health and Human Services peer reviewed manuscript written in 2016, the mean cost of a bypass operation including the related hospital stay was $151,271. Even with just 10% coinsurance, anyone who had a medical service this expensive would meet their MOOP. Many people who have higher deductibles, coinsurance, and/or MOOP may want to pay more for Medicare and a plan that eliminates the prospect of getting bills in the $5,000 to $7,000 range.
The “Donut Hole”
Lastly, because Medicare Part D prescription plans, both “Stand Alone” that those on Supplements need and Part D provided by Advantage Plans, are subject to the “Donut Hole,” what medications one is taking is the last factor that goes into the decision of opting out of Part B or going with Medicare. Those who fall into the Donut Hole can spend thousands more on the same medications as those on employer plans. I can recall several occasions where I was on the verge of recommending someone go on Medicare until they told me what meds they were taking.
Again, those who can get insurance through an employer, their own or a spouse’s, can opt out of Part B without penalty. Anyone who is getting their insurance at little or no cost and have a reasonable deductible, coinsurance, and MOOP are best to do so.
There are penalties for those who don’t have employer sponsored health care and are late to enroll in both Medicare Parts B and D. According to the Centers for Medicare and Medicaid, “If you didn’t get Part B when you’re first eligible, your monthly premium may go up 10% for each 12-month period you could’ve had Part B, but didn’t sign up. In most cases, you’ll have to pay this penalty each time you pay your premiums, for as long as you have Part B.”
Who shouldn’t opt out?
Those who shouldn’t opt out are those who are getting free or reduced cost health insurance from a company they retired from. You or your spouse must be “working” to opt out of Part B. We have met far too many people, mostly retired teachers, who were given as much as seven years no cost health insurance as an early retirement incentive that took them past age 65. Not do those who didn’t know better face Part B late enrollment penalties of $15 to $95/month in addition to the standard $158 premium, they also can only enroll in Part B during the OEP for a July 1st effective date. This can put people in a bad situation where they must wait over a year for Part B to become active. In between, someone in this situation would either need to pay for COBRA, which can be as much as $1,500 per month, or purchase a full cost ACA (Obamacare) plan through the Marketplace that are also expensive and not nearly as good of coverage.
The Part D penalty is 1% for every month one goes without a plan. Many people make the mistake of not choosing Part D because they take little or no medication. The penalty for someone who didn’t enroll for three years would only amount to about $13/month so, it’s not what needs to be feared. It’s the prospect of being diagnosed with Cancer and needing an oral chemo drug that costs over $10,000 per month. If one needed a medication like that after AEP, he or she would not be able to have a plan go into effect until the following January, leaving them to come up with a way to pay for the medication entirely out of their own pocket.
Be advised, you can’t keep a subsidized ACA plan when you’re Medicare eligible! Doing so will result in one being forced to pay back every dollar in subsidies that was received. We’re talking about as much as $7,000 or more.
I also don’t suggest Federal retirees who can get a plan that covers them well without Part B opt out. There are too many variables and uncertainties in the market to take that chance. I also don’t recommend Veterans who exclusively use the VA for their care go without Part B, especially those in rural areas that are a good drive away from a full-service VA hospital.
If you have any questions regarding this column or any other in the “New to Medicare” series or would like to set up an appointment for a no cost consultation, please call one of our offices or reach out to me personally at aaron@GetYourBestPlan.com.
Erie County Area
1105 West 12th Street, Suite – A
Erie, PA 16501
Fayette/Westmoreland County Area
121 North Pittsburgh Street
Connellsville, PA. 15425
21 Yost Blvd., Forest Hills, PA 15221
Mailing Address: 128 Forest Hills Plaza, Pittsburgh, PA 15221
Albuquerque/Santa Fe, New Mexico Area
821 Coors Blvd. NW
Albuquerque, NM 87121
Serving These Areas
We proudly serve the health insurance and Medicare needs of the following Pennsylvania areas: Connellsville, Uniontown, Greensburg, Mt. Pleasant, Scottdale, Irwin, N. Huntingdon, Murrysville, Monroeville, Plum, Lower Burrell, New Kensington, Pittsburgh, Plum, Oakmont, Penn Hills, Forest Hills, Wilkinsburg, East Liberty, Lawrenceville, Bloomfield, Natrona Heights, Leechburg, Washington, Morgantown WV, Latrobe, Monnessen, Jeanette, Erie, Edinboro, Northeast, Girard, Fairview, Union City, Harborcreek, Corey, Meadville, Waterford, Ligonier, Kittaning, Somerset, Waynesburg, Fayette County, Westmoreland County, Armstrong County, Butler County, Somerset County, Erie County, Crawford County, Venango County, Allegheny Valley, Pennsylvania
We proudly serve the following New Mexico areas: Albuquerque, Rio Rancho, Sante Fe, Bernalillo, Belen, Los Lunas, Espanola, Moriarty, Corales, Tijeras, Cedar Crest, Edgewood, Soccoro, Sandoval County, Sante Fe County, Bernalillo County, Rio Arriba County, Valencia County, Soccoro County, New Mexico
Not affiliated with the U. S. government or federal Medicare program.
We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.