“If I get this wrong, it could cost us everything – including decent health coverage.”
I began conducting phone consultations with clients in December to provide information on retirement health care. Many of these calls center on the optimal time to transition from employer provided group health insurance onto Medicare as well as providing a clear understanding of Medicare coverage selections. A few common misconceptions or myths about Medicare consistently surface during these calls. Debunking these myths can have a significant, positive impact on managing retirement health care costs.
Myth 1. “I thought everyone had to enroll in Medicare at age 65”
In many situations, Medicare in its entirety can be deferred. This even includes deferring “free” Part A. If your client (or their spouse) is employed and has group health insurance from an employer with 20 or more employees they most often can defer Medicare enrollment. They simply need to confirm with their employer that the group plan provides coverage as extensive as Medicare coverage. Most group plans easily meet this standard. Your client will need to defer their Social Security retirement benefit since commencing this benefit will automatically enroll them in Medicare Part A. Your clients with health savings accounts can continue to fund their HSA since they are not enrolled in Medicare. Upon retirement, your client will have a special Medicare enrollment period during which Medicare coverage including choices of prescription drug coverage, a Medigap policy or Medicare Advantage Plan can be made free from late enrollment penalties and free from medical underwriting.
Myth 2. “I thought I could switch from one Medicare plan to any other Medicare plan during the annual open enrollment period”.
Each year Medicare does offer an open enrollment period where many changes in coverage selection can occur. One critical limitation regards Medicare Supplement Policies, more commonly called Medigap policies.
When your client enrolls in Medicare Part B they have a Medigap “open enrollment period” during which they are entitled to purchase a Medigap policy regardless of any health conditions. Once this open enrollment period expires, insurance companies can deny coverage, impose waiting periods or charge higher premiums based on existing health conditions. A few states provide more liberal Medigap purchase guarantees but for most of the country, the Medigap decision needs to be made alongside Part B enrollment.
Watch for my next newsletter where more myths are debunked.