Do I Need to Turn on Medicare at Age 65?

A couple years back I received an excited email from my father in-law. The title of the email read: My Medicare Birthday! He thanked many of us for reaching out and wishing him a happy birthday. He also happily pronounced that he would be saving about $500 per month in healthcare premiums because of the switch to Medicare from private insurance. You may not be saving as much as my father in-law, but still Medicare can be a huge benefit over a private insurance policy. This post addresses your options when you hit age 65, your Medicare birthday.

Still working and have a group insurance policy through your employer

Maybe you have heard those horror stories about people not turning on Medicare when they turn 65. If you don’t turn on Medicare at age 65, you could face penalties for the rest of your life. This of course freaks most people out, and they feel like they have no choice but to turn on Medicare right at age 65. However, if you are still covered by an employer plan when you turn 65, you may not have to turn on Medicare, and you also avoid a lifetime of penalties.

If you are working and have employer provided life insurance, you will want to talk to your employer if you should turn on Medicare or not. Most employers will tell you no, and to stay on your current plan. Others may ask you to turn on Medicare part A, which is free, so that it can help supplement your current insurance. No one should also force you to take Medicare part B and pay a monthly premium.

It may seem harmless to turn on Medicare part A given that it is free. However, if you do turn on part A, you will no longer be able to contribute to an HSA. Therefore, your best option if you do have an employer plan, would to defer turning on Medicare until you retire. Still, talk to your employer at least six months prior to turning age 65. This will give you time to plan in the case you do have to apply for Medicare.

When you do retire and lose your employer healthcare plan, you will then need to apply for Medicare. In order to avoid a large penalty, you will need to complete a form to prove that you had coverage past age 65.

Spouse is still working and covered by an employer

If you are married and covered by your spouse’s employer, there is a good chance that you will be covered until he or she retires. Much like if you are working and covered, a spouse should not need to get Medicare yet, but always check with the company.

Have a retiree medical plan from a former employer

If you are able to continue your health insurance in retirement, consider yourself to be one of the lucky ones. Unfortunately, your benefit probably ends right here. Most retiree medical plans only get you to age 65, and then you are forced to purchase a Medicare policy. The good news is that many times, the Medicare benefit is actually better than the retiree medical benefit that you had prior to age 65.  There is a really good chance that you will need to purchase both part A and part B policy as well as a Medicare supplement plan or Medicare advantage policy. I have seen some employers, in particular certain unions, that will still pay for or offer discounts on a supplement or Medicare advantage policy. Always a good idea to check with your former employer as you approach age 65 to learn your options.  

Currently purchasing health insurance through a private company on the exchange

Woohoo! Probably the day that you have been waiting for. If you are buying your own health insurance through a private company, you are about to get a real nice pay raise. This is because Medicare should be much cheaper and you should have significantly more options. I have seen a couple go from $1,000 per month in premiums, for pretty bad insurance, before Medicare. The monthly premium dropped to $400 per month after turning on Medicare, for much better insurance.

It is very important that if you don’t have insurance or coverage through an employer, that you turn on Medicare as soon as you reach age 65. If you wait, you will have a penalty, via higher monthly premium payments as soon as you turn on Medicare. This is to dissuade people from waiting until they get sick before turning on Medicare.

If you do have coverage through an employer, or retiree coverage through a former employee, make sure you ask your employer how you should proceed.  Typically, if you are still working you will not need to apply for Medicare yet. If you have employer provided retiree medical, you will typically need to start Medicare now.  Are you are currently paying an arm and a leg for crummy health insurance? Well, Happy Medicare Birthday to you!

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