Switching from your employer’s insurance to Medicare can be a complex and tricky matter. Making a mistake when switching enrollment can be costly, causing you to accidentally rack up penalty fees, or lead to gaps in coverage. Here are some of the most important things to ask and keep in mind when switching to Medicare:
When is the Medicare enrollment process automatic?
If you have already begun claiming social security benefits by the time you reach age 65, then you will be automatically enrolled in Medicare.
If you haven’t already begun receiving Social Security, Medicare requires you to sign up in the seven-month window before and after your 65th birthday, unless you have employer coverage for yourself or through your spouse. If you retire after 65, you will be able to take advantage of an eight-month special enrollment period that begins the month after your employment ends. In both of these cases, the enrollment process is not automatic, you must enroll yourself.
If you do not enroll in Medicare during your initial enrollment period, you can be subject to various late enrollment penalties. Please visit this guide for more information on late-enrollment penalties.
What should you do if you are offered COBRA health insurance when you leave your job?
You should still enroll in Medicare during your initial enrollment period. Although you may need COBRA to provide medical coverage for a spouse or dependent child, Medicare must be your primary insurance coverage once you are over age 65. If you do not enroll in Medicare right away, even if you are receiving COBRA, you will be subject to late-enrollment penalties.
In addition to leading to penalties, missing the special enrollment window could mean going with nothing but COBRA coverage, which provides limited coverage to retirees, until the next open enrollment period, which may be up to a year away.
Should you enroll if you are still working by age 65?
This depends on your employer. If your employer has fewer than 20 insurance-eligible workers, Medicare should be your primary coverage, so you should enroll during your initial enrollment period.
If your employer has 20 or more insurance-eligible workers, you can choose to remain with your employer’s coverage and forestall Medicare enrollment until you retire. However, the insurance must be similar to Medicare benefits as measured by a set of standards set by the program. You can also choose to enroll in Medicare, which can provide secondary coverage and fill gaps in your employer’s plan.
However: Do not enroll in Medicare if you contribute to a Health Savings Account linked to a high-deductible employer plan. You are prohibited from making contributions to an HSA if you are enrolled in Medicare.
What should you do if your former employer provides a retiree health benefit?
You should still enroll in Medicare during your initial enrollment in order to avoid late penalties. Employer-provided benefits can usually provide a secondary layer of coverage – often covering co-pays or providing a drug benefit. However, you should compare these retiree plans to what is currently available on the open Medicare market. You may be able to find less expensive Medigap or Medicare Advantage plans that are comparable or better than your employer’s retiree coverage.
You’ve retired and begun receiving Medicare, but decide to go back into the workforce. Now what?
If your new employer provides health insurance, you are able to drop Medicare and re-enroll when you finally retire without paying late enrollment penalties. If you decide to go back into the workforce and claim health insurance through your employer, it is important that you call the Social Security Administration (1-800-772-1213), who will then send a form for you to sign that creates a record of what you are doing. The paper trail is important because it helps you avoid late enrollment penalties when you return to Medicare.