When approaching the age for Medicare, there are some common questions: Do I have to apply for Medicare when I turn 65? What if I’m still working and receiving employer-sponsored health care? Should I defer enrolling in Medicare, and if I do, how can I be sure I won’t be penalized? On this episode of The Prosperous Life, Tracy Russo, President of HTA, is here to shed some light on Medicare enrollment, timing considerations, and more.
In this podcast, you will learn:
Megan: Today on the show, we’re welcoming Tracy Russo, President of HTA. Tracy is a nationally recognized specialist and advocate for Medicare and long-term care education. Tracy’s knowledge of the Medicare marketplace and products is unparalleled in the industry. She has the capability of utilizing a number of different instruments when determining the best solution for each client’s goals, objectives, and budgets.
Maggie: Thank you so much for joining us on our podcast, Tracy. It’s nice to have you back again.
Megan: Thanks so much for joining us!
Tracy: Thanks so much for inviting me. I’m excited to be back.
Maggie: So let’s just jump right in. It’s the second time you’re on our podcast, and in case our listeners did not hear our last podcast with you and HTA, can you give us a brief overview of Medicare and when people become eligible for Medicare?
Tracy: Sure, absolutely. Medicare is the health insurance that becomes available to you when you turn age 65. Now, if you’re under 65 and you go on Social Security disability income, or you have any kind of permanent kidney issues, you may qualify earlier. But for most individuals, you’re going to qualify at age 65, and that’s going to be the health insurance that takes you through your retirement. At age 65, you have the choice of either enrolling at that time or deferring the coverage until later.
But really, once you go into the coverage, there are going to be four main parts and pieces. You’re going to have Parts A and B through the federal government, and then you’re going to have Parts C and D through private insurance companies. Medicare Part C is also known as Medicare Advantage, or you have the option to choose a Medicare supplement or Medigap insurance (if you have ever heard any of that terminology), and the D is the drug coverage in Medicare. So, think of D for drugs. In order to have comprehensive coverage in retirement, you’re going to need all four parts and pieces: A, B, C, and D.
Megan: What can happen to somebody if they do not enroll in Medicare when they’re supposed to? Are there consequences for that?
Tracy: Unfortunately, there are. As I said, you become eligible at age 65. And unless you have a valid reason to defer, the consequences can be quite catastrophic. There are important deadlines that you have to make and only a seven-month window surrounding your 65th birthday to get enrolled. That’s three months before your birthday, the month of your 65th birthday, and three months following your 65th birthday. If you don’t enroll during that time, then you’re going to be locked out. And there’s only once a year that you can enroll thereafter unless you have special circumstances, such as coming off of some kind of credible coverage.
In addition, there could be penalties involved. So again, without some kind of Medicare credible coverage, you would accrue penalties if you didn’t enroll at a rate of 10% for each year you wait after age 65, and that would be added to your premium later. In addition to that, there could be situations where the coverage that you’re currently on prior to age 65 stops paying in full once you turn 65. There are certain types of insurance that are considered that you have to have Medicare as primary once you turn 65, or you will not have full benefits. The main consequences will be deadlines, penalties, and possibly coverage issues if you don’t enroll when you’re supposed to.
Maggie: That’s really interesting. You mentioned that 65 is the age where most people enroll. But you also mentioned that some people could choose to defer. What is the reason for people deferring and when can they do that?
Tracy: Right. So, in order to defer your Medicare at 65 without getting into trouble or having any of those consequences, you need to have what’s called credible coverage in the eyes of Medicare. Credible coverage in the eyes of Medicare has two main factors. Number one, it has to be group health insurance. So individual plans through the ACA, Obamacare, or something that you buy on your own—that is not credible coverage for Medicare standards.
If you have group coverage, the other criteria are that it has to be based on current active employment. So, if I am covered by my employer and I’m going to continue working, I have group coverage through my current active employment and that would be considered credible. Or if I’m covered by my spouse’s employer, as long as my spouse is continuing to work for that employer, that too would be considered credible coverage. Whoever the primary insured is must continue to be working and must continue to stay on that group health plan in order to legally defer Medicare.
Megan: For those who are in that situation where they do have credible coverage at age 65, and they want to defer Medicare, how would they go about that? Is there a type of form they need to submit or someone they have to contact?
Tracy: No, actually, it’s really easy. It’s going to depend on if you’re collecting Social Security income before your 65th birthday, because if you’re collecting Social Security income (maybe you started collecting early at 62, or 63), you will automatically be enrolled in Medicare, and you’re just going to get your Medicare card in the mail when you turn 65. If you find out that you have credible coverage and can defer, you would just send that Medicare card back. It comes with instructions that say if you don’t want your part B (which is the part that you pay for), just send this card back within 60 days and they’ll send you a new card in the mail (it will just have Part A on it, and Part A is free). So, you would take the free part and wait to enroll in the part you have to pay for when you come off your credible coverage.
But if you’re not collecting Social Security income prior to your 65th birthday, you will not be automatically enrolled in Medicare. So really, to defer, you just simply do nothing: you don’t go enroll, you don’t need to tell anybody you’re not enrolling, and you don’t need to show any proof of your credible coverage at that time. That will come later.
Let’s say you’re 68 now, and you’re getting ready to retire and come off that group health plan. That’s when you go to Medicare and say, “I want to apply,” and they’re going to ask you for a form signed by your employer. That form lists the dates you or your spouse were employed and the dates that you were covered by that group health plan. And that form that you turn in later when you actually go to enroll is going to be your proof of credible coverage and it will negate any of those consequences.
Maggie: We heard that the size of your employer might make a difference on whether you need to enroll. Can you talk a little bit about that?
Tracy: Yes, that’s actually correct. We talked about avoiding deadlines and penalties–you just need to be working, or your spouse needs to be working, at the employer that’s providing you the benefits–that means you won’t get deadlines or penalties. But I also mentioned a third consequence about Medicare possibly being required for additional insurance to have full benefits once you turn 65. And that’s what is dependent on your group size. If your company or the company that your spouse works for where you get your benefits has more than 20 employees, you have nothing to worry about. Your group health plan is going to remain your primary insurance and provide you full benefits as long as you continue working and stay on that plan. But if your company has less than 20 employees, the group health plan may require Medicare to be your primary insurance once you turn age 65. If you’re on that type of group, and you don’t enroll in Medicare at age 65, the group plan could take a step back and say, hey, we’re only the secondary payer here; we’re not paying your full bills anymore. If you don’t have Medicare in place to do that, that is now your responsibility. And that doesn’t happen with every small group under 20. There are a few exceptions. But generally speaking, with almost all companies of that size across the United States, Medicare is required to be primary.
Megan: Are there any other considerations or perhaps red flags that people should be aware of?
Tracy: There are a couple of unique scenarios where you definitely want to have some heightened awareness. Number one would be retiree coverage, COBRA coverage, or severance. So basically, what these types of plans are, they’re group insurance. So, you would think, okay, this is a group plan. It’s considered credible for Medicare, but they’re not based on active employment. If you’re on a retiree plan in COBRA or severance, it’s because you’re no longer working for that employer, and because there’s no active work attached to that group plan, it is not a credible plan for Medicare.
If you are thinking about retiring, or you get laid off, or something happens, and COBRA, a retiree plan, or a severance package is offered to you that includes benefits, it definitely would make sense to talk to an expert, hopefully the folks at my team, to walk you through that to make sure you’re not missing anything you need to do with your Medicare enrollment. Because the worst thing that could happen is maybe you go on COBRA for 18 months (we see this happen all the time), somebody retires, and their spouse is not yet 65. And they say, well, since my spouse doesn’t qualify for Medicare yet, we’ll both just take COBRA for the next 18 months, and then we’ll go into Medicare when my spouse qualifies for Medicare. At the end of 18 months, you go to Medicare to enroll, and they’ll say, okay, show us your proof of credible coverage. And you’ll hand in your slip from your employer, but it’s going to say you stopped working 18 months ago, and you’ve missed your deadline. And they’re going to say sorry, but not only can you not get in right now (there’s only once a year you can get in), we’re also going to have to add a penalty to your premium because for the past 18 months, you have not had credible coverage. So, COBRA, severance, and retiree plans are a big red flag.
The other thing to always be mindful of is HSA plans. If you’re on a group health insurance plan (a high deductible health insurance plan that’s coupled with a health savings account), and either you or your employer are making contributions to this health savings account, that’s going to have some serious impacts when you’re deciding what to do at age 65 with your Medicare. Because as I mentioned earlier, you don’t need to enroll in Medicare if you’re still working and staying on that group coverage. But a lot of people say, well, Part A is free, why wouldn’t I just take the free Part A? And more often than not, people say somebody told me I have to take part A or I’m going to get a penalty. Well, number one, that’s not true; you will not get a penalty as long as you qualify for free Part A, which means you’ve paid at least ten years of Medicare taxes, so it really is your choice if you’re going to keep working. But at the same time, it’s free–it’s a government benefit. And it does provide a little bit of inpatient hospital coverage on top of your group health plan.
So why wouldn’t I take that free Part A benefit and defer Part B, the part that I have to pay for, until I’m ready to come off my group health plan? In most situations, that’s fine–take the free Part A. It gets you established with Medicare, gets your Medicare number, and makes the whole process a little bit easier later when we enroll in Part B. But it is not okay if you have a health savings account.
So just keep in mind that Health Savings Account would be another red flag. You’re going to want to talk to somebody prior to your 65th birthday to get the lay of the land with how it works. But you will not want to enroll in Part A even though it’s free. And even though it’s tempting, do not enroll in the free Part A when you turn 65 because that will disqualify you from being able to make any future contributions into that health savings account. You can’t contribute once you’re enrolled in Part A, and your employer cannot contribute. So unless you want to stop saving money in the HSA, you would definitely want to stay away from enrolling in Part A.
Another red flag with that (and this is why we always say call us at 64 so we can talk through the timeline of your retirement), because when you go to retire in Medicare later, let’s say you’re now 68 and you’re saying okay, I want to retire. When you go to enroll at 68, they’re going to give you whatever date you ask for your Part B benefits (the part you pay for). But they, meaning the government Social Security Administration, is always going to backdate your Part A by six months.
I don’t mean to be confusing. I know this is a lot of information about HSAs. But the bottom line is an HSA is a big red flag, and we definitely want to plan far enough in advance. We always tell people to call us at least eight months before they plan to retire if they have an HSA so we can talk to them about what their maximum contribution can be this year for their HSA, knowing that their Medicare enrollment is going to come into play and probably be backdated for them.
So big red flags: retiree, COBRA, severance coverage, and HSAs. Those would be the ones you definitely want to make sure you talk to an expert about.
Maggie: Wow, that’s a lot to think about, and you went over a lot of really good points. Can you do a quick summary of just the key takeaways from today’s podcast?
Tracy: Absolutely. Let’s break it down real simple. If you or your spouse will keep working through the employer who is offering you benefits and that employer has more than 20 employees, you don’t have to do anything with Medicare when you turn 65. You start planning maybe four to six months before retirement to start getting enrolled in the Medicare system and get the ball rolling, but you really have to do nothing when you turn 65. You can defer Medicare or you can take the free Part A if you want to, but you don’t have to; it’s completely up to you.
If you have an HSA plan, not only can you defer Medicare, but you definitely want to defer both Part A and Part B. Now, if you’re working for an employer with under 20 employees, you may need to enroll in Medicare when you turn 65. So that would be something you would want to talk through with an expert to see if your group health plan will remain primary or not. And if you have individual coverage, COBRA, retiree, or severance coverage, you absolutely have to enroll in Medicare, or those nice consequences will definitely happen to you.
Megan: Well, thank you so much, Tracy. That’s excellent information. Can you just let our listeners know what the best way to contact you is?
Tracy: Sure. You can reach out to us through our website, which is www.HTAfinancial.com, or you can give us a call at 610-430-6650. Option one is for Medicare questions.
I have a great team that’s here to help. We provide all of our services, support, and consultations absolutely for free. There is never a cost to you. All of our employees are salaried employees; they are not bonus or commission incentivized to try to push through sales. So, you’re going to find it a very comfortable environment. And we can help you understand what you need to know about your enrollment decisions, what plan options are available, and we can even help you get enrolled in all of the different plan options available to you. And the best part is you don’t pay any more for the coverage by using our services and letting us help you with all of the enrollments. It would cost the same if you went direct to Aetna, United Health Care, or AARP as it does as if we help you with that. So, our services are 100% free to you.
Maggie: I think you mentioned last time that HTA makes money from the insurance carriers.
Tracy: Exactly. Yes, they pay us to help with the enrollment, so nothing comes out of your pocket as the client. And we will give you as much time as you need to make sure you understand leading up to your 65th birthday and going through retirement what you need to do with your Medicare choices.
Maggie: I think that’s great. And thank you so much for being on our podcast again. We will definitely put your contact information in our show notes.
Megan: Thanks again so much, Tracy.
Tracy: Wonderful. Thanks for inviting me back. I had a great time!
Contact Tracy Russo at HTA
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