If you’re still working and have insurance through your employer health plan, what do you do when you reach age 65 and you’re eligible to enroll in Medicare? The answer is, “It depends.”
If you’re already collecting Social Security Benefits i.e., you began collecting social security at age 62, when you finally do turn 65, you are enrolled automatically in Medicare. You can decide to disenroll in Part B which is Medical and involves a monthly premium, but few would recommend this. If you recall, you pay nothing at this point for Hospitalization (Part A) if you worked for 10 years and contributed toward automatically it in your paychecks.
If you are not enrolled in Social Security, you have to sign up for Medicare anytime from three months before you become 65 up to three months after. If you don’t sign up when you become eligible, you can enroll between Jan. 1 and March 31 each year, but you will pay a penalty, so it pays to sign up during your enrollment window.
Now, if you are still working in a company at 65 when you take out Medicare, and receive health insurance through them, does your health employer health plan pay or does Medicare, when you see the doctor of visit the hospital or need medication?
There are two ways Medicare works with your employer health plan:
1. If you work in a large company, defined as over 20 employees, Medicare is your secondary insurer. Your company’s plan pays first. Since it is the secondary payer, you can delay signing up for Part B without incurring a penalty.
2. If you work in a small company, defined as under 20 employees, Medicare becomes the primary insurer, and your employer’s insurance is the secondary payer. Here’s where it gets sticky: Because Medicare is your primary insurer, even if you still have an employer health plan, you need to enroll in Part B before your insurance will pay on a claim.
So what does all this mean in dollars and cents?
If you do the math, you are going to spend less on healthcare if you’re still working at age 65, if you are employed by a large company. One, you don’t have to enroll in Part B since your employer health plan is your primary insurer and so you avoid that monthly premium. And when you finally do enroll in Part B, there is no penalty.
The biggest savings however comes with your drug coverage. Because your group plan is paying for your meds, you avoid the “donut hole” that you fall into when Medicare pays for your prescription drugs. If you recall, you reach the donut hole when your Medicare Drug Plan has already spent $2,970 for your drugs. Once you spend $4,750 for the year out of pocket, you come out of the donut hole and Medicare pays again. When your employer health plan is the primary payer, you never go through a period when your drugs aren’t covered.
By the way, The Affordable Care Act is gradually doing away with the doughnut hole and it should disappear by 2020.
So bottom line, if you are working, find out who your primary payer is and do what you need to do: If it’s Medicare, enroll in Part B if you want them to pay for your doctor visits.