PUBLISHED TUE, JAN 14 202010:25 AM ESTUPDATED AN HOUR AGO
KEY
POINTS
·
The share of people
age 65 to 74 in the workforce is projected to reach 30.2% in 2026, up from
26.8% in 2016 and 17.5% in 1996.
·
If you work at a
company with more than 20 employees, you generally have the choice of sticking
with your group health insurance or dropping the company option to go with
Medicare.
·
If you delay picking
up Medicare, be aware of various deadlines you’ll face when you lose your
coverage at work (i.e., you retire).
It’s becoming a common scenario: You’re creeping
closer to your 65th birthday, which means you’ll be eligible for Medicare, yet
you already have health insurance through work.
Sound familiar? If so, you might have options.
While workers at businesses with fewer than 20
employees generally must sign up for Medicare at age 65, people working for
larger companies typically have a choice: They can stick with their group plan
and delay signing up for Medicare without facing penalties down the road, or
drop the company option and go with Medicare.
“The
advice I give is to calculate the financial impact for each option,” said
Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent
broker and general agent for Medicare plans. “Figure out your cost based on
your usage and your medication, and do a comparison on what your outlay may
be.”
The share of people age 65 to 74 in the
workforce has been steadily rising for years. It’s projected to reach 30.2% in
2026, up from 26.8% in 2016 and 17.5% in 1996, according to the Bureau of Labor
Statistics.
And among those age 75 and older, the trend has
been the same: The share projected to be working in 2026 is 10.8%, up from 8.4%
in 2016 and 4.6% in 1996.
Here are the Medicare rules that apply to
would-be beneficiaries who are still working, along with costs to consider.
The basics
Original, or basic, Medicare consists of Part A
(hospital coverage) and Part B (outpatient and medicare equipment coverage).
You get a seven-month window to sign up that
starts three months before your 65th birthday month and ends three months after
it. If you don’t sign up when eligible and you don’t meet an exception, you
face late-enrollment penalties.
Having qualifying insurance — i.e., a group plan
through a large employer — is one of those exceptions.
Many people sign up for Part A even if they stay
on their employer’s plan. That’s because it’s free as long as you have at least
a 10-year work history of contributing to the program through payroll taxes.
However, if you happen to have a health savings
account paired with a high-deductible health plan through your employer, be
aware that you cannot make contributions once you enroll in Medicare, even if
only Part A.
Part B comes with a standard monthly premium of
$144.60 for 2020, although higher-income tax filers pay more through monthly
adjustments (see chart above). Standalone Part D prescription drug plans have
monthly premiums averaging $30. And again, higher-income enrollees pay more
(see chart below).
Additionally, those adjustments are based on
your income from two years earlier. In other words, your 2018 income is used
for your 2020 premiums. (There’s a form you can fill out to request a
reduction in that income-related amount due to a life-changing event, such as
retirement.)
Roughly a third of Medicare enrollees choose to
get their Parts A and B delivered through an Advantage Plan. Those options
typically include Part D prescription drug coverage, along with extras like
dental and vision. However, they also might charge a premium, which would be in
addition to your Part B premium.
Other enrollees stick with basic Medicare and
pair it with a standalone Part D plan. Some also add a Medicare supplemental
policy — a.k.a., Medigap — which covers Medicare costs such as copays and co-insurance
that you’d otherwise pay out of pocket. However, you cannot have both an
Advantage plan and Medigap.
A 65-year-old male will pay anywhere from $126
to $464 monthly for a Medigap policy, according to the American Association for
Medicare Supplement Insurance. For 65-year-old women, the range is $118 to
$464.
So when you’re doing the math to compare your
options, you’d have to see what your best Medicare option would be and the cost
of that coverage — using some assumptions about your use of the health-care
system and the cost of your prescription drugs.
If you work at a large company
The general rule for workers at companies with
at least 20 employees is that you can delay signing up for Medicare until you
lose your group insurance (i.e., you retire). At that point, you’d be subject to various deadlines to
sign up or else face late-enrollment penalties.
While everyone’s situation is different, there’s
a good chance your current insurance through work is a more cost-effective
option, said Danielle Roberts, co-founder of insurance firm Boomer Benefits in
Fort Worth, Texas.
This may be due to lower premiums and other
cost-sharing aspects such as copays or co-insurance, or lower costs for
prescriptions under the group plan.
“We often find that their insurance is already
quite good and it doesn’t make sense to leave it,” Roberts said.
We often find that their insurance is already quite good and it doesn’t
make sense to leave it.
Danielle Roberts CO-FOUNDER OF BOOMER BENEFITS
Again, however, if Part A is free, you can sign
up as long as it wouldn’t interfere with your plans to contribute to a health
savings account.
There are, of course, instances where Medicare
might be the better option.
“If you’re going to, say, therapy every week and
it’s a $40 co-pay, it might be cheaper to go on Medicare and get a supplement
with it,” Gavino said.
On the other hand, if you take a specialty drug
that is covered by your group plan, it might be wise to continue with it if
that drug would be more expensive under Medicare.
Some 65-year-olds with younger spouses also
might want to keep their group plan. Unlike your company’s option, your spouse
must qualify on their own for Medicare — either by reaching age 65 or having a
disability if younger than that— regardless of your own eligibility.
At small employers
For older workers with health insurance through
a small company (under 20 employees), you must sign up for Medicare regardless
of whether you stay on that plan or not. If you do choose to remain on your
employer’s plan, Medicare is your primary insurance.
However, Roberts said, it often is more
cost-effective in this situation to drop the employer coverage and pick up a
Medigap and Part D plan — or, alternatively, an Advantage Plan — instead of
keeping the work plan as secondary insurance.
Often, workers at small companies pay more in
premiums than employees at larger firms.
The average premium for single coverage through
employer-sponsored health insurance is $7,188, according to Kaiser Family
Foundation. However, employees contribute an average of $1,242 — or about 17.3%
— with their company covering the remainder.
At small firms, the employee’s share might be
far higher. For example, 35% are in a plan that requires them to contribute more
than half of the premium for family coverage, compared with 6% of covered
workers at large firms.
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