PUBLISHED THU, FEB 20 20208:01 AM ESTSarah O’Brien@SARAHTGOBRIEN
KEY
POINTS
·
By 2026, the share of
people ages 65 to 74 in the workforce is projected to reach 30.2%, up from
17.5% in 1996.
·
The rules for Medicare
signup when you already have insurance depend partly on whether you work for a
large or small company.
·
If you delay picking
up Medicare, there are various deadlines you’ll face when you retire or
otherwise lose your coverage through a job.
If you’re counting on working past your 65th
birthday, be sure to consider how Medicare may factor into your plans — even if
you already have health insurance through your job.
While workers at companies with fewer than 20
workers generally must sign up for Medicare at age 65, people working for
larger companies typically have choices: They can stick with their group plan
and delay Medicare without facing penalties down the road, drop the company
option in favor of Medicare or go with a combination of the two.
“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 ages 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.
First, 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,
starting three months before your 65th birthday month and ending 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). Stand-alone Part D prescription drug plans have
monthly premiums averaging $30. And again, higher-income beneficiaries 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 recipients 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 such as
dental and vision. However, they also might charge a premium, which would be in
addition to your Part B premium.
Other people stick with basic Medicare and pair
it with a stand-alone 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 for a big
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.
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.
Also, if you stay with your current coverage and
delay all or parts of Medicare, make sure the plan is considered “creditable”
coverage for both Parts B and D. Your insurance company should provide you with
that information.
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 businesses
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
Medigap and a 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 the 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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