- August 21, 2020
Are you retired and approaching Medicare eligibility with a retiree group plan? If so, today’s topic is for you. We’re going to answer the question, “How does a group retiree plan work with Medicare?” We’ll do this by covering five key areas you need to understand about retiree plans and Medicare. Let’s get started.
Must Enroll in Medicare A & B at 65
First and most importantly, if you or your spouse are no longer working and are on a retiree plan, you must enroll in Medicare Parts A and B when you turn 65. While those who are still working at 65 can wait to enroll, those who are retired are required to enroll right at 65.
Must Pay Part B Premium
When you enroll in Medicare Part A and B, you have to pay your premiums. Now, most people never have to worry about paying for Medicare Part A. As long as you’ve paid into the Medicare tax system for 40 quarters (10 years of work), then Medicare part A is completely free to you. But Medicare Part B has a monthly premium. This year, the Part B premium for most people is $170.10. If you’re in the high-income bracket (above $174,000 adjusted gross income for couples and above $87,000 adjusted gross income for singles), you will have to pay a higher Part B premium. But again, most people are going to pay $170.10 each month for their Part B premium.
Medicare First, Retiree Second
There are specific, set-in-stone guidelines determining how your retiree and Medicare benefits are coordinated. Medicare will always pay first, and your retiree plan (should you choose to keep it) will always pay second. Some people decide they don’t want to keep their retiree plan, so they purchase a Supplemental plan to help fill in the gaps in Medicare coverage. If you go with a Supplemental plan, Medicare will once again be in the first payor position, and the Supplemental plan will pay second.
Here’s how it works: When you have a claim, the medical bill will be sent to Medicare first. They will pay their portion and then send it on to either your retiree plan or (if you opted out of the retiree plan and instead purchased a Supplemental plan) your Supplemental insurance company, who will then take care of their portion of the balance.
Some of you with a retiree plan will be offered an Advantage plan. Advantage plans are different from Supplemental plans in that they replace original Medicare. So when you have a claim, Medicare does not pay first. Instead, the bill is sent directly to the Advantage plan company.
Part B Date is Critical
Let's suppose your birthday is January 3rd, 1956. That means you’re turning 65 in January of 2021. So when you enroll in Medicare at 65 (which you must do if you are retired), you’ll receive a card in the mail. On this card, your Medicare Part A and Part B effective dates will be listed as January 1, 2021. The Part B effective date is critical because it signifies the beginning of your Medigap open enrollment period.
The Medigap open enrollment period begins on your Part B effective date and lasts for the next six months. During this time, you can enroll in any Supplemental plan you want, regardless of your health conditions. Typically, Supplemental (also called Medigap) carriers require you to go through a medical underwriting process, meaning if you have pre-existing health conditions, you may not be able to purchase a Supplemental plan. But again, during the first 6 months after your Part B effective date, you are free to enroll in any Supplemental plan, no health questions asked. You may decide to stick with your retiree plan and get an Advantage plan, but if you are planning on going with a Supplemental plan, keep in mind that you need to sign up for one within the first six months of enrolling in Medicare A and B.
Retiree Plan Options: Keep it? -or- Drop it?
When you go on Medicare with a retiree plan, you have two options: you can keep the retiree plan or you can drop it. The decision to keep or drop the plan typically comes down to finances.
When you go on Medicare, you automatically have to pay the monthly Part B premium (most people’s Part B premium is $170.10). This cost is unavoidable. So the question is, how much does it cost you out of pocket to keep your retiree plan? As a general rule, if you’re paying more than $150 to $200 per month for your retiree plan, you probably should drop the plan and purchase normal Medicare coverage. If, however, you’re happy with the retiree premiums and deductibles and it provides good coverage, you may want to stick with the plan.
Another reason you may want to stay on your retiree plan is if your younger spouse is covered by the plan and has no other insurance options. If you drop the plan, they will also lose their coverage, so in this case you would probably want to keep it.
A final reason you may want to drop your retiree plan is if your company only offers Advantage plans with the retiree plan. If you don’t like something about Advantage plans (network restrictions, pre-certifications, co-pays, etc.), you may want to drop the retiree plan and get regular Medicare coverage (Medicare A and B with a Supplemental plan).
We understand how difficult making the right Medicare decisions can be. To take the next step, watch our full course here, or schedule a free one-on-one call with a certified Medicare School Guide who can answer your questions, compare plans options, and even help you enroll. Click here to get started.