At age 65 you are eligible to apply for Medicare, the federal health insurance
program. While most would-be Medicare participants sign up as soon as
they qualify, others may want to weigh their options and consider waiting
to apply. Certain factors, such as where you work, if you are still working,
and whether or not you are contributing to a health savings account can
significantly affect your decision.
Understanding the Initial Enrollment Period
Medicare applicants can sign up during the Initial Enrollment Period, which
covers a 7-month time frame. The Initial Enrollment Period includes the
1 month you are eligible to apply, as well as the 3 months prior to eligibility
and 3 months afterward. If you do not sign up for Medicare Part B during
this period, your premium when you do enroll may go up as much as 10%
for every year you did not join. Your Part D premium will also increase
by roughly 1% each month until you enroll. There are exceptions to these
penalties for those who are still working when they become eligible.
You can typically avoid Part B penalties if you are still working, your
employer has more than 20 employees, and your employer’s insurance
is considered your primary insurer. There will be a special 8-month enrollment
period for you to enroll in Medicare once you stop working. This rule
can also extend to your spouse if he or she is over 65 and covered by
your employer’s insurance. If your spouse is under 65 and covered
by your insurance, it could be more cost-effective for you to delay Medicare.
If you work for a smaller company with fewer than 20 employees, you will
likely be better off signing up for Medicare during your Initial Enrollment
Period. Medicare becomes your primary payer at 65 when you work for a
smaller company, and that company’s insurer will not cover the expenses
covered in Medicare. You may consider keeping your employer’s coverage
as a secondary payer, but this is not always worth it. Ask your employer
about your options in this situation.
Those still working also have the option of enrolling in Medicare Part
A without consequences. Part A is free for most beneficiaries, and covers
hospital care, skilled nurse facility care and certain home health care
agencies. However, if you are contributing to a Health Savings Account
(HSA) through your work, you will be unable to sign up for Medicare, regardless
of the size of your company. If you already receive Social Security you
will be enrolled in Part A automatically, and will therefore have to stop
paying your HSA. It is important to weigh your options if you have an
HSA to decide whether or not it is worth it to continue paying it in lieu
of Medicare coverage.
If you have private insurance you may be able to delay Medicare Part D,
prescription drug coverage without suffering penalties. This is called
“credible coverage,” or an insurance that is at least as good,
if not better, than Medicare’s coverage. Your insurance will be
able to tell you if they qualify. You could also avoid Part D if you enroll
in Medicare Advantage, which also offers prescription drug coverage.
Contact Jorgensen, Brownell & Pepin, P.C.
to discuss your options, today!