Changing from Employer Insurance to Medicare

May 14, 2018     About this blog:  click here

Changing from Employer Insurance to Medicare

Most people, as they get up in years, start thinking about when they might retire.  Many also wonder when and how they are going to switch from employer health coverage to Medicare.

Everyone else should wonder about that too!  Like most things Medicare, it’s not super-simple.

Do you have employer health insurance now, but you’re getting close to 65 candles – the magic number for Medicare?  Here are four different situations, and what you need to know for each one.

#1  You plan to keep working after reaching 65, and your company has less than 20 employees:

You want to sign up for Medicare, by contacting the Social Security office a few months before your 65th birthday.  You’ll also start paying your monthly Medicare Part B premium. Currently, that’s $134 a month.

Important:  If you don’t sign up and pay for Part B, and wait later on to do it, you’ll have to pay a bigger amount.  An extra 10% will be added for each year you wait.    Don’t wait, or you’ll regret it, big time.

You can also start shopping for a Medicare insurance policy, to start the same time you start on Medicare. It’s possible that your company might have a Medicare policy you can enroll in, so ask.

Otherwise, you’re on your own to start shopping for a policy.  Start shopping at least a few months before you hit the big 65.

#2  You plan to retire by age 65, and your company has less than 20 employees:

Same as #1 above —  You want to sign up for Medicare so it will start on your 65th birthday, and you’ll start paying Part B premiums.   And, you’ll want to shop for a Medicare policy, too.

How am I supposed to know if my company has less than 20 employees?   If it’s not obvious, ask your boss!  Even if there are just a few co-workers at your job, the same employer might have more than one location.   If the firm is big enough to have a Human Resources person, that’s the best person to ask.

#3  You plan to keep working after reaching 65, and you can still use the employer health insurance, and your company has 20 or more employees:

You can keep using the company insurance, and NOT have to sign up for Medicare just yet.  You will not get a penalty for waiting to start paying for Part B.

To do this, the company insurance must be good coverage, acceptable to Medicare.  The Human Resource person should know.

#4   You have been working past 65, you are on the employer insurance, the company has 20 or more employees, and NOW you finally decide to retire:

One choice you have is to pay for COBRA, which is an extension of the exact same employer coverage you have been using. You can do that for up to 18 months after you leave the job.

BUT, you probably don’t want to do that, because COBRA is VERY EXPENSIVE – you pay the premium you used to, PLUS the premium your employer had been paying all along.

The other, usually better, choice is to finally get on Medicare and start paying your Part B premiums.  You will pay the same premium that you would have if you had started at age 65, with no penalty.

There is one catch:  You have a grace period of eight months, after you stop working, to get on Medicare and start paying for Part B.

If you wait past eight months, BIG mistake:  You will have to pay the extra penalty:  10% extra for each year past age 65, remember?

And – you guessed it – you also want to start on some kind of Medicare insurance when your Medicare starts.

What kind of insurance to get?

Your employer might have its own group retiree Medicare insurance that you can get on.  That is often the best deal, if the employer is paying part of that premium, as a retirement benefit.

If the employer is not pitching in, then it could pay to shop around for other Medicare policies.  You might find one that has better value for you, for the money, than the one your employer offers.

And of course, if the employer offers none at all, then you have no choice but to shop around on your own.

And you were looking forward just to kicking back and relaxing, right?  Sorry, folks.

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