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!