Medicare is commonly viewed as the federal health insurance program for individuals 65 and older who are no longer working. This impression is partially correct – 65 is the earliest eligibility age (except for those who qualify due to disability). However, the “no longer working” provision is not accurate. Let’s look in more detail at what this means.
The majority of Americans receive health insurance through their employer, either as an employee or as a dependent of the employee. Each year, generally in the fall, employers offer an open enrollment period during which employees can make changes to their benefit elections. This is also when employers typically announce changes to their benefit plans, such as different insurance carriers, the amount employees will be charged for coverage, and modifications to deductibles and out of pocket maximums. Generally the new elections become effective at the first of the following year.
What about employees who are 65 or older and are still working for the company? Well, they have an option not available to younger employees – and that is to drop their employer medical coverage and enroll in Medicare. Medicare does not require anyone still working to remain on the company plan. Many employees in this category are unaware of this and never look at Medicare as a viable option.
The primary factors in evaluating Medicare verses a company plan would be coverage and cost. Coverage involves comparing how services such as doctor visits, hospitalizations, urgent/emergency care and prescription drugs would be paid for. Making a cost comparison involves looking at the respective premiums, deductibles, co-pays and out of pocket maximums, and projecting what each plan is likely to cost based on one’s anticipated use of medical services.
I recently worked with a couple, both over 65, who were covered under an employer plan. Their premium for Employee + Spouse coverage was $800 per month. The plan had a $3000 annual family deductible. So over the course of a year they would pay $9600 in premium and incur $3000 in medical expense before insurance paid out. After evaluating what their costs would be under Medicare, they decided to drop the company plan and enroll in Medicare. They were planning on retiring later in the year anyway and the analysis served to accelerate their Medicare enrollment timeline.
Hopefully this brief article has raised awareness of an option for the 65+ group that may not have previously been considered. Note that a strategy like this should be discussed in advance with the employer to ensure there are no adverse consequences to dropping coverage while still working. This is particularly true if any dependent is under age 65. Even if un-enrolling in the company medical plan in favor of Medicare makes economic sense, remaining on the employer’s dental and vision plans may be advisable since Medicare offers limited dental and vision coverage. Assisting you with a personal evaluation like this is what I do. Please contact me at your convenience to find out whether it makes sense for you.