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How does Medicare work with employer insurance?

Journalist Philip Moeller answers your questions about health, aging, and retirement. Phil is the author of the book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.

Glen: I work for a large employer with thousands of employees. I am in my 50s, but my wife will soon turn 65. She has serious health needs and so we always reach our out-of-pocket maximum in January each year! I had always expected that things would stay this way after she turned 65, and that my employer-provided major medical plan would remain as our primary coverage. Recently, however, I received a letter from my employer stating that my coinsurance (or maximum out-of-pocket) limits go away when she turns 65. I called one of the consultant firms that advises us on behalf of our employer, and was informed that my understanding is correct, and that I will not have an upper limit on my spending through my employer’s plan and that my wife would need to get Medicare to get such protection.

Phil Moeller: Thanks for the detailed and thoughtful question. At first glance, I agree with you and am at a loss to understand why your employer is not in violation of Medicare rules.

I reached out to a Medicare advocacy group to double check and a spokesperson said your employer cannot do this. Here was his exact reply:

The employer should not be able to do what they are proposing, unless they are changing the policy for all employees or all spouses. “Employers are required to offer to their employees age 65 or over and to the age 65 or over spouses of employees of any age the same coverage as they offer to employees and employees’ spouses under age 65, i.e., coverage that is primary to Medicare. This equal benefit rule applies to coverage offered to all employees (full-time and part-time).”

Please let me know how this goes.

Jeanne – Arizona: I work for an organization which has more than 100 employees and was told I could not continue my health insurance after I turned 65 and would be eligible for Medicare. Was this legal? I do not have anything in writing which can prove this; our chief financial officer is the one who made the determination.

Phil Moeller: What you say is at odds with my understanding of Medicare’s rules, as explained to me by an agency spokesperson and included in this article. Your employer does have an obligation, it seems to me, to provide you a formal description of its insurance plan. Please let me know how things turn out.

Elaine – New York: I am retired and will not turn 65 until next year. I have an exit contract with my employer that states they “agree to pay 100 percent of my medical insurance, including vision, upon her retirement.” Do I need to sign up for Medicare and, if so, how do I get reimbursed the premiums from my employer?

Phil Moeller: I wrote an article that included an explanation of when and how an employer can repay a person’s Medicare premiums. If you think you qualify for such reimbursements, I’d ask your former employer for details. It seems unlikely to me that your contract would satisfy Medicare’s rule that only people with active employer coverage when they turn 65 can defer enrolling in Medicare. However, there is a form your former employer can sign testifying that its coverage does amount to active employee coverage. If it signs this form, you then would not need to enroll in Medicare.

Denise – Pennsylvania: My husband recently turned 65. He gets health insurance through my job. I pay $500 each pay period for him and my son, but I only have to pay 10 percent of the cost of my own health insurance. Would it be better, and cheaper, if my husband takes Medicare, and have my insurance pay for his Part B premiums?

Phil Moeller: I’d at least look into this, but you should talk with someone at your company’s insurance carrier to understand what’s possible. Medicare rules, for example, usually prohibit an employer from helping to pay someone’s Medicare premiums.

How to maximize Social Security payouts

Gilbert – Arizona: I’ve read that delaying your Social Security claim from full retirement age (FRA) to 70 will increase the benefit by 32 percent. Does this mean to say that you have to keep working and continue making the Social Security contribution after reaching FRA, or can you stop working at FRA, sit at home, make the claim at 70, and still get the 32-percent boost? I haven’t worked for 35 years, which I understand is the maximum number of earnings’ years used to compute Social Security benefits.

Phil Moeller: Even if you stopped working and your FRA was 66, your age-70 benefit would be 32 percent higher than if you filed at your FRA. However, if you continued working, your benefit would grow a bit more than this, because your additional years would be included in your top-35 earnings years that Social Security uses to determine benefits.

By the way, delayed retirement credits increase at the rate of 8 percent a year. Your 32-percent example is based on an FRA of age 66. The benefit of deferring Social Security will be smaller for those born after 1954.