Why you need to check your Medicare status at age 65
It’s not just retirees who need to think about Medicare.
Anyone planning to continue working when they reach the age of 65 should consider how or if Medicare will fit their health coverage.
The general rule of the program is that unless you meet an exception, you will face late enrollment penalties if you do not register for a seven-month period beginning three months before the month of your 65th birthday and ending three months later.
One such exception is having qualified insurance through your employer. However, not all job coverage counts. And getting it wrong could cost you a fortune.
“The biggest mistake … is to assume you don’t need Medicare and lose enrollment when you should be,” said Danielle Roberts, co-founder of Boomer Benefits.
Here’s what you need to know.
First, the basics
Basic Medicare consists of Part A, which is hospital coverage, and Part B, which is outpatient coverage.
Part A has no premium as long as you have at least 10 years of history of contributing to the program through payroll taxes or self-employment. Part B includes a standard monthly premium of $ 170.10 for 2022, although higher-income recipients pay more through monthly adjustments; see chart below.
More than 40% of beneficiaries choose to get their Part A and B benefits through an Advantage Plan, or Part C, which usually includes prescription drug coverage, or Part D, and may or may not have a premium.
The rest of the beneficiaries adhere to basic Medicare and can combine it with a policy called Medigap and a standalone Part D plan. Keep in mind that higher-income recipients pay more for drug coverage; see chart below.
Late enrollment penalties last a lifetime. For Part B, this surcharge is 10% for each 12-month period in which you should have been enrolled, but not. For Part D, the penalty is 1% of the national base premium ($ 33.37 in 2022) multiplied by the number of months you did not have Part D or creditable coverage.
Company size matters
The general rule for employees with at least 20 employees is that you can delay your Medicare subscription until you lose your group insurance, that is, you retire or leave your job.
Many people in this situation delay Part B, but enroll in Part A because it is free as long as you have a 10-year employment history to pay for the program through payroll taxes.
“It doesn’t hurt to have it,” Roberts said.
However, he said, if you have a health savings account, or HSA, combined with a high-deductible health plan through your employer, keep in mind that you can’t make contributions once you sign up for Medicare, still which is only part A.
Also, if you stay with your current coverage and delay all or part of Medicare, make sure the plan is considered eligible coverage for both Part B and Part D.
If you don’t know if you need to sign up, it’s a good idea to check with your human resources department or insurance company.
“I think it’s always good to just confirm,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent agent and general agent for Medicare plans.
In the meantime, if you have health insurance through a company with less than 20 employees, you should normally enroll in Medicare at age 65 to avoid future penalties.
This is regardless of whether you stay in the employer’s plan. If you choose to continue, Medicare will be your primary insurance.
In addition, anyone who obtains insurance through the public health exchange, whether healthcare.gov or a state market, is expected to switch to Medicare at age 65.