March 26, 2022 — Signing up for Medicare presents a lot of anxiety for most people. When do you have to apply, how do you do that, what does it cost, what is covered, and what’s with all those different parts (Parts A, B, C, D, and more)? But one of the most vexing questions comes for people who hit age 65 and are still employed. What happens if they have health insurance from either their job or a spouse’s employer? We will try to explain how to negotiate these questions in this article.
The easiest way to explain it is by looking at coverage by the various Medicare Parts.
Medicare Part A (hospital coverage) is free as long as you have been paying into the system for at least 10 years. So you might as well sign up for it as soon as you can for the extra protection it can provide. You are eligible for it 3 months before your 65th birthday. One drawback is you won’t be able to continue in a Health Saving Account (HSA) once you sign up. There is no penalty for not signing up for Part A.
Part B Coverage
Part B of Medicare covers the doctor and other medical expenses you might have. Many larger employers offer that type of coverage to their workers and dependents. If it meets the standards set by Medicare, you do not have to sign up for Medicare Part B (but some plans require spouses to have Part B). Employers with fewer than 20 employers have to meet a different standard (Medicare Part B pays for services first, then your employer’s plan pays), so it important to verify that your insurance meets eligibility standards.
When your employer health coverage ends, you have 8 months to sign up for Part B without incurring a penalty, and you will have to provide documentation about the insurance you had. If you turn 65 and do not have employer provided health coverage, you must sign up for Part B within 7 months, or face penalties for the rest of your life. COBRA coverage doesn’t count. You’ll pay an extra 10% on the premiums for each year you could have signed up for Part B, but didn’t.
Part B premiums are based on your past income. The minimum monthly premium is currently $170.10.
Part D (Prescription drugs)
The rules for Part D are similar to those for Part B. You must have “creditable” prescription drug coverage (usually provided by an employer) when you turn 65, or face penalties. You will pay a monthly premium depending on your income and the type of plan you choose. Like Part B, there is a penalty for late sign up (in this case 1% for every month you were not covered), and that penalty persists for the rest of your life. So, if you are 65 and employed, check with your organization to make sure you have “creditable” drug coverage. If not, to avoid future penalties, sign up within the initial enrollment period for a Part D plan that meets your needs and budget.
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