More and more frequently, Americans who become eligible for Medicare are not retiring. If you become eligible for Medicare and still plan on working, you will have to decide whether it is better to remain on your employer’s coverage or enroll in Medicare. Unfortunately, this is not a black and white issue. The answer will be different from one person to the next, depending on multiple factors. Here are 5 things to consider when making this important life decision.
1. Understand Your Employer’s Health Coverage Costs
In the past, many employers offered health care with little or no premium required from the employee. Employees are now required to carry a bigger and bigger portion of the premium. It is important to not only know the employee portion of premium, but all other relevant costs like deductibles, coinsurance, and Maximum-Out-of-Pocket (MOOP).
2. Learn How Much Medicare Will Cost You
Medicare Part B premiums are determined by level of income. Knowing this amount is critical in deciding between employer coverage and Medicare. Part D prescription premiums may be increased due to income, so be sure to know what that premium level will be if you enroll for Medicare. You may be able to pay a lower premium by choosing Medicare Advantage over Original Medicare (Part A and Part B).
3. Find Out if Your Employer Health Insurance is Creditable
When deciding between group coverage or Medicare, it is important to know whether or not your employer insurance qualifies as “creditable coverage”. Your Human Resource director or plan administrator should know. There are penalties that may accrue if you do not have “creditable coverage”. You may have to pay a cost for the rest of your Medicare life.
4. Learn About Your State’s Rules on Leaving Employer Coverage Voluntarily
Every state has different rules that apply to leaving employer coverage. In some states, you are afforded guaranteed Issue rights whether your coverage ended voluntarily or not. This is especially critical for those people with a chronic illness who wish to purchase a Medicare Supplement. The only time you may qualify for a plan may be during your initial open enrollment when you get your Part B Medicare. If your state does not allow Guaranteed Issue rights for a voluntary loss of coverage, you may find yourself without the ability to get coverage. Learn more about Medicare in your state here.
5. Understand Your Employer’s Drug Coverage
Currently employer prescription coverage is typically better than what an individual can get from Medicare. The formularies are usually broader and the copays are typically lower. Since prescriptions can be one of the biggest costs for those on Medicare, verifying drug costs could save you a lot of money in the long run.
While it is possible to have group insurance and Medicare, it generally doesn’t make financial sense to have both. Secondary coverage doesn’t provide much actual benefit. So when you are turning 65, try to gather all of the information needed to effectively compare your options. For example, you should know your state laws and talk with a trusted advisor. If you decide to keep group coverage, it would be advisable to compare the coverage to Medicare every year since both costs and benefits may change annually.
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