Employers and employees may be at odds with regard to how old is too old to be working. According to a 2018 report by the Transamerica Center for Retirement Studies, employers see age 70 as the cutoff, whereas employees cited 75 as a solid retirement age.
No matter your personal opinions, the reality is there are hundreds of thousands of workers ages 70, 75, and even 85 and up in the workforce today. The increased number of older workers in the workforce complicates one of the reasons so many Americans seek gainful employment (aside from income, of course): healthcare benefits.
Many people know that individuals become eligible for Medicare coverage at age 65 (younger individuals can receive Medicare due to disability), but that’s the extent of most people’s understanding. As more and more workers extend their careers past 65, they’ll need a deeper knowledge of how Medicare works and how it interacts with employer-sponsored coverage.
Here are five things employees of all ages should know about Medicare:
1. Medicare Comes in Four Parts
Medicare isn’t a “one-and-done” plan; it’s actually pretty expansive. When you break it down into its individual parts, it’s a bit easier to digest:
- Part A covers care in hospice, hospital, inpatient, and skilled nursing facility settings. It also covers certain at-home health services, but not long-term assisted living care.
- Part B covers care provided by doctors, health aides, and part-time skilled nurses.
- Part C, also known as “Medicare Advantage,” is purchased from private insurers and combines Parts A, B, and usually D. Individuals with Part C cannot also have supplemental Medigap insurance plans.
- Part D covers prescription drugs.
- Medigap is supplemental optional coverage that helps cover the out-of-pocket cost gaps Original Medicare (Parts A and B) does not cover.
2. Eligibility Is Not So Cut and Dry
You become eligible when you turn 65 years old. This is the Medicare fact most know. (Younger individuals receiving Social Security disability insurance benefits for 24 months can also receive Medicare.)
That said, there are a few other, often overlooked requirements for those who qualify by age. Applicants must have paid or been married to someone who has paid 10 years’ worth of Medicare taxes, and they must be a US citizen or permanent US resident for the past five years.
3. Medicare Might Be More Affordable Than Employer-Provided Coverage
Many people want to keep their employer-provided health insurance after age 65 for reasons including spouse and dependent coverage, as well as the belief that employer coverage is better than Medicare. However, employees may discover the benefits of switching to Medicare if they crunch the numbers and compare prices.
In some cases, Medicare can be much more affordable than your employer’s plan. For example, the average annual deductible for employer-provided single coverage is $1,573, while the Medicare Part B annual deductible is significantly lower at $185.
Along with lower deductibles, you may see additional savings when comparing annual premiums, out-of-pocket costs, or prescription drug coverage. Medicare can provide a customized approach to healthcare for older workers, especially in comparison to the one-size-fits-all plans offered by many employers. The different parts of Medicare, along with supplemental coverage, could give an older worker with specific healthcare needs some key advantages.
That said, employer plans vary significantly from employer to employer, so some older workers could see benefits while others may not notice any significant differences. The most important thing is to take a closer look before choosing between Medicare and employer-sponsored coverage.
4. Medicare Enrollment Isn’t Automatic for Everyone
Medicare enrollment isn’t automatic for individuals who work past retirement age. If you are working when you turn 65, you should take some time to evaluate your employer healthcare against Medicare’s offerings. Rising deductible costs and other out-of-pocket expenses are leading many workers to choose Medicare once they become eligible. Make note: Medicare’s initial enrollment period is a seven-month window. It starts three months prior to your 65th birthday and goes on to include your birth month and the three following months.
If you miss your initial enrollment period, your next chance to enroll is January-March of the upcoming year, with coverage starting in July. Along with the delay in coverage, you may have to pay a penalty. For each year someone should have been enrolled in Medicare, the lifetime Part B penalty adds another 10 percent to the Part B premium. There is a Part D penalty, too, which multiplies the months they should have had Part D by 1 percent of the national base beneficiary premium ($33.19 in 2019).
5. Even With Employer-Provided Insurance, Signing Up May Not Be Optional
If you work for an organization of less than 20 employees, you are required to sign up for Medicare once you turn 65. This is because Medicare becomes your primary payer, and your employer becomes a secondary payer, which means your employer plan only kicks in after Medicare’s contribution. In short, that means if you don’t sign up for Medicare and wind up having healthcare needs, you would need to pay out of pocket for everything Medicare would have covered before your employer plan kicks in.
Employees at larger businesses are not required to use Medicare when they turn 65. They have the option to continue with employer-provided coverage. However, the penalties outlined above do apply for workers at large companies if they miss their Medicare enrollment windows upon retirement. Specifically, they will face the Part B penalty if they don’t sign up within eight months of leaving their job, and the Part D penalty occurs even sooner. People must receive Part D coverage within 63 days of losing their prior prescription drug coverage to avoid the penalty.
As with anything in life, it pays to be in the know — especially when it involves something as incredibly important as your health insurance. Equipped with this Medicare information, employees should feel empowered to make the coverage decisions that work best for them.
Tricia Blazier is the director of healthcare insurance services at Allsup.