Question:
Question from Mark: Last week you explained that those who are working and getting health insurance from their employer after age 65 can opt out of Medicare Part B without a late enrollment penalty. What about Part A? I’m going to be working after I turn 65 and I get good health insurance from my employer. Do I need to enroll in Part A?
Answer:
Answer: Part A has no cost and there’s no late enrollment penalty for those who opt out for any reason. Although the majority of people should enroll in Part A, working or not, there is a group of people who need to opt out of Part A.
Who needs to opt out of Part A? What makes a plan an HDQHP?
Those who are still working, or have a spouse who is, and get health insurance from an employer that’s considered a “High Deductible Qualified Health Plan (HDQHP)” almost always want to opt out of Part A. HDQHPs must have a minimum deductible of $1,700 for an individual and $3,400 for a family. They also have no co-pays and all covered services, with the exception of those considered “preventative”, even doctor visits and prescription drugs, are billed at full cost until the entire deductible has been met.
HDQHPs and Health Savings Accounts
HDQHPs are also eligible to be paired with a Health Savings Account (HSA). More employers are choosing HDQHPs because they’re less expensive than conventional health insurance plans that have co-pays for doctor visits, urgent care, the emergency room, and prescription drugs. Many employers who insure their employees with an HDQHP make a tax-free contribution to an HSA on their employee’s behalf to help them cover some or all the out-of-pocket expenses for medical care and prescriptions. The employee is also able to make additional contributions that can be deducted from their income taxes. HDQHPs are my favorite way to insure clients because I love the tax benefits they provide, and utilizing an HSA can be a great addition to a diverse investment portfolio. I’ve been insuring myself and my family with a HDQHP and making the maximum contributions to an HSA for almost 20 years.
However, in order to be compliant with the IRS tax code and take advantage of the tax breaks, you cannot be enrolled in Part A! Those who are enrolled in Part A and have contributions made to an HSA by an employer, or contribute themselves and took the tax deduction, could be subject to pay back taxes with penalties and interest!
Who should enroll in Part A?
Those who get conventional health insurance from their employer always want to enroll in Part A, even when they opt out of Part B. There are two reasons: Number 1, it’s no cost. Number 2, it can save those who have higher deductibles and a large Maximum Out of Pocket (MOOP) thousands of dollars in the event of a hospitalization.
Don’t ever take advice regarding opting in or out of either Part A or B from friends, family, someone in HR at your employer, or even a representative at Social Security! If you’re not 100% sure if you should or shouldn’t enroll in Parts A or B, reach out to us at the office, 724-603-3403, or email me personally, Aaron@GetYourBestPlan.com. Even if you’re not a client, we’ll ensure you make the right decision!