If you work for a small employer, your insurer can deny your claims
When the Medicare health insurance program launched in 1966, benefits kicked in at the then-common retirement age of 65.
Flash forward, and we now live in an economy where working past age 65 is more common. For some, it’s to buy more time to shore up retirement savings, for others it’s a desire to keep at something they enjoy doing.
If you expect to continue to work at age 65 and beyond, you run the risk of making a potentially crippling financial mistake with your health insurance coverage.
The Medicare Part B trap
A quick tour of Medicare: The two major pieces are Part A for hospital costs, and Part B for just about everything else, other than prescription drugs (that falls under Part D).
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If you’ve worked for at least 10 years, you can sign up for Part A at 65 without owing any premium. There’s no reason not to sign up for Part A at 65.
Part B is trickier because most everyone pays a monthly premium for Part B coverage. In 2021, the minimum monthly Part B premium is $148.50. That’s per person. There is no household coverage under Medicare. While lower-income enrollees may qualify for premium relief, individuals with income of at least $88,000 and spouses filing a joint tax return with income of at least $176,000 will pay higher premiums.
It’s totally logical if you’re still working at 65 and have workplace insurance to presume you don’t yet need to sign up for Part B and take on the premium costs.
That can be a costly mistake.
The insurance company that runs your company’s health insurance plan may deny you coverage for all the care that falls under the umbrella of Part B of Medicare. On top of that, you will also run into a penalty for your Part B premium that will stick with you for the rest of your life.
What matters at 65: How many employees are there at your business?
—You work for a firm with at least 20 employees: Good news, assuming your employer offers coverage at age 65, you can stay on the company plan and it will pay your covered expenses.
—You work for a firm with fewer than 20 employees: You need to sign up for Medicare Part B right when you become eligible around your 65th birthday.
For small employers, health insurance is not the “primary” payer once someone turns 65. If you are still working at 65, your workplace health insurance is within its rights to assume that Medicare will be the primary payer for your care. And your insurer doesn’t really care if you didn’t sign up for Medicare. It’s on you to understand what’s at stake. You may be denied all coverage, or the plan may agree to pay only those expenses that wouldn’t have otherwise been covered by Medicare Part B.
Working past 65 for a small firm? Don’t make this mistake
Let’s say you work for The Amazing Company, which has 15 employees. You’ve had great coverage for years, and when you turn 65 you enjoy your work so much you decide you will keep at it for a few more years. The person who handles benefits at your small firm confirms you can stay on the plan, which is great because your out-of-pocket costs are super low.
Then you hit a health speed bump. A serious injury or illness racks up a lot of bills, but you just flash your member card from the Amazing Company’s insurance plan, and relax because HR said you were covered.
But a few days or weeks later you will hear from the health insurer that because you are 65, and because your firm has fewer than 20 employees, it is denying all your claims, because it is not the “primary” payee. Medicare is.
You didn’t bother signing up for Medicare coverage? That’s your problem.
When to sign up for Medicare Part B if you’re still working for a small employer
If you work for a firm with fewer than 20 employees you want to sign up for Medicare Part B during a seven-month window around your 65th birthday. The three months before your birthday, the month of your birthday, and the three months after you turn 65 is deemed your “initial enrollment period.” Sign up in this window and you will be guaranteed the lowest possible monthly premium for the rest of your life.
If you no longer have primary coverage from work when you turn 65, and you fail to sign up for Part B during that seven-month window, you will be hit with a penalty for late enrollment. The penalty is 10% of what your premium for each year you are late. Sign up at 67 when you should have signed up at 65 and your Part B premiums will forever be 20% higher once you are enrolled.
When to sign up for Medicare Part B if you work for a larger employer
If there’s more than 20 employees, you indeed can delay signing up for Medicare Part B.
At the point that you leave your job you will have a different window where you can sign up for Part B without running into any penalty charge. This is known as the “special enrollment period.” It runs for eight months starting the month after you stop working, or your group coverage stops covering you, whichever happens earlier.
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