Still Working at 65? Should You Purchase Medicare Supplemental Insurance?
What factors should you consider when deciding whether you need Medigap insurance, and how should you approach healthcare once you reach retirement age?
Medicare supplemental insurance — often referred to as Medicare Supplement or Medigap — proves useful for many retirees, but what if you’re still working at 65? According to Bloomberg, more than 18 percent of Americans were working at least part time after the traditional retirement age as of the second quarter of 2017, and more than 30 percent of workers between 65 and 69 held jobs.
Access to better healthcare and the need for more retirement savings contribute to the increase in post-retirement-age employment. While there’s nothing wrong with continuing to work past age 65, you have to decide whether you want to apply for Medicare Supplement plans.
WHAT IS MEDICARE SUPPLEMENTAL INSURANCE?
Medicare supplemental insurance is a separate insurance policy from Original Medicare. It fills in some of the gaps that Original Medicare leaves in terms of expense coverage.
You can choose from 10 Medigap insurance plans, each of which offers a different level of coverage. The plans are standardized, which means that every insurance company that offers a plan provides the same coverage levels. Each insurer sets its own premium for every plan it offers.
Medicare Supplement plans cover expenses like deductibles, coinsurance, and copayments so you pay fewer out-of-pocket costs when you visit the doctor or stay in the hospital. Plans with greater coverage tend to come with higher premiums, so comparison shopping is essential before you choose Medicare supplemental insurance.
If you’re retired at age 65, your Medigap initial enrollment period begins on the first day of your birth month and continues for six months. During that time, you can apply for Medigap insurance plans available in your zip code. When you’re still working, however, you have other options.
HOW MANY EMPLOYEES DOES YOUR EMPLOYER HAVE?
If you work for an company with 20 or more employers, you’re not required to sign up for Original Medicare or Medicare supplemental insurance. You can continue to use your employer group coverage until you retire.
Delaying your Medicare enrollment won’t result in any penalties. You’ll still have access to an initial enrollment period for both Original Medicare and Medigap insurance.
If you work for a company with fewer than 20 employees, however, you’ll need to sign up for Original Medicare. Even if you have group insurance, it becomes the secondary payer under current Medicare rules, which means that Medicare will pick up the tab first.
You also become eligible for Medicare supplemental insurance. Your initial enrollment period works just the same as it does for retirees at age 65, so you’ll have a six-month window in which to apply for the Medigap plan you want in addition to Original Medicare.
Nobody is required to have Medigap, but it can help you save money on out-of-pocket costs when you rely on Medicare as your primary payer. For instance, many Medicare supplemental insurance plans cover deductibles and copayments you would otherwise have to pay out-of-pocket when using healthcare services.
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DO YOU QUALIFY FOR PREMIUM-FREE PART A?
Most people don’t have to pay a premium for Original Medicare Part A, which covers inpatient hospital visits. If you qualify for premium-free Part A, you can enroll up to three months before you turn 65 and for up to three months after.
There’s no penalty for enrolling in Original Medicare Part A while deferring Part B until you retire or you’re no longer covered by group health insurance. Keep in mind that Original Medicare Parts A and B are completely different from Medicare Supplement Plans A and B.
You might also want to consider Original Medicare Part D, which covers prescription drug costs. If you’re paying more than you’d like for your prescription medication through group health insurance, Original Medicare can relieve some of your out-of-pocket expenses.
DO YOU HAVE POST-RETIREMENT GROUP COVERAGE?
You might still have group coverage through your employer even after you’ve retired. For instance, some corporate benefits packages continue to pay part or all of your health insurance premiums for a period after you retire.
In this case, Original Medicare still becomes your primary payer. Group health coverage will only pick up leftover costs up to your plan benefits. Additionally, you can apply for Medicare supplemental insurance to reduce your costs even further.
The same is true if you have COBRA, which is group insurance coverage that continues after you’re laid off or you quit your job. In many cases, you’re responsible for up to 102 percent of the premium.
First, Original Medicare becomes the primary payer as soon as you turn 65. You still have to enroll in Original Medicare, and you become eligible for Medicare supplemental insurance. Since you’ll generally pay less for Original Medicare Part B and a Medigap plan than you would for COBRA, you might be better off dropping COBRA entirely.
HOW SHOULD YOU DECIDE WHAT HEALTHCARE PLAN YOU NEED?
If you’re not sure what type of healthcare coverage you need after turning 65, visit your employer’s human resources department. A benefits coordinator or similar professional can guide you through your options and let you know what your healthcare costs will be.
You can also contact the Social Security Administration with questions about Original Medicare. Use that time to sign up for Original Medicare Part A if you qualify for coverage without a premium.
Medicare supplemental insurance is private coverage, so you’ll need to get quotes in your zip code. As long as you apply during your initial enrollment period, you won’t be subject to underwriting. Any insurance company that offers your desired plan in your area must give you its best rate.
Many people like their jobs or want to save more money, so they continue working after age 65. There’s nothing wrong with that.
Deciding whether you need Original Medicare or Medicare supplemental insurance depends on your specific circumstances. If you’d like to supplement your Original Medicare coverage, use Ensurem’s Medigap Quoter to get instant quotes from providers in your area.
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Denise Austin, 65, Ensurem Ambassador
Best-Selling Author, Creator of Fit Over 50 Magazine
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