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Should you stay on your employer health insurance or get Medicare?

Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.

I will get to as many questions as I can here, but please accept my apologies that I am not able to answer everyone’s questions.

Ellen – N.Y.: I am turning 65 in August and am still working and plan to continue working until age 70. I cannot collect Social Security until I turn 66. I plan on canceling my employer’s health insurance and enrolling in Medicare by this August when I turn 65. How do I pay for Part B this first year on Medicare if they can’t take it out of my Social Security check since I won’t be collecting Social Security for at least another year?

Phil Moeller: First off, Ellen, I would advise you to proceed very carefully here. In most situations, you will be better off keeping your employer health insurance. Most likely, you will be entitled to do this. If you have done your homework and determined that Medicare is your best deal, then by all means you can leave your employer plan. This could be a one-way trip, however, as the plan might not have to take you back should you later change your mind. As for your Medicare premiums, you will need to pay them directly to Medicare every three months. You can sign up for a program that will deduct these payments from your bank account.

Robert – N.Y.: I have employer-provided health insurance. I was told that at age 65 my employer health insurance would become my Medicare Part B insurance and that any premiums collected from me by Social Security would be rebated to me by my employer health insurance. Is this true? Also, Plan D is drug coverage, correct? I have drug coverage from my employer health insurance. Will this mean that I do not have to enroll in Plan D coverage?

Phil Moeller: This is not the way it would work. By law, employer group health insurance plans must continue to cover you at any age so long as you continue working. Turning 65 would not force you to take Medicare so long as you’re still working. The only exception is if your employer has fewer than 20 people (or fewer than 100 if you are disabled). In this event, you’d need to get Medicare, because it would become your primary health insurance, and your employer plan would become the secondary payer of health claims, and it might cover some things that Medicare would not cover.

Employers have been devising all sorts of ways to limit their exposure to rising health insurance premiums, but if they continue to offer group health insurance, they must abide by this rule. Still, better safe than sorry, so I advise you to check with your employer. In any event, you either would be on an employer plan or on Medicare if you’re retired. You would not be on both, meaning that you would not have Medicare premiums deducted from your Social Security payments if you’re still covered by employer health insurance. And there would be no rebates involved. As for Part D, if you continue to work and have what’s called a “creditable” drug plan through your employer plan — meaning the coverage is as least as good as a typical Part D plan — you can keep your employer drug coverage and do not need a Part D plan. Your employer is supposed to provide an annual notice that its drug coverage is creditable.

Daniel – Fla.: I am 84 and live on my Social Security. I receive a Low-Income Subsidy for my medications. How do I apply to get Part B paid for by Social Security and not have it taken out of my retirement check each month?

Phil Moeller: If your income is low enough, you can get help with your Medicare premiums. If this happens, your Part B premium would be reduced or even eliminated. To find out, you should get in touch with a Florida counselor who works for the State Health Insurance Assistance Program (SHIP). They can help you figure out if you’re eligible for any relief and also help with your application. There is no charge for this service.

Nancy – Ore.: About three years ago, my husband declined to enroll for Medicare, as he is covered by my workplace health plan. His health has deteriorated, and I am wondering if it makes sense to sign him up on Medicare now to help cover costs my workplace health plan doesn’t cover? Can he do this without a penalty?

Phil Moeller: If it makes sense to do this, he will not face a late-enrollment penalty. But you need to proceed carefully here, because if he leaves your plan, he might lose access to it in the future if you change your mind. If he has either filed for his Social Security or has enough work experience to qualify for benefits, he can get premium-free Part A hospital insurance from Medicare. He can do this and still stay on your workplace plan. Then, if he is hospitalized, he would have to pay a deductible of $1,288 before Medicare coverage would kick in. It would pay secondary to your workplace plan, but it’s possible this would still be a good deal for you.

Otherwise, he would need to leave your plan. He would get Parts A and B of Medicare, a Part D drug plan and either a Medigap or Medicare Advantage plan. You would then need to look at the costs of his Medicare, see how much better it would cover him than your workplace plan and then compare these costs with what you’re paying to have him on your workplace plan. In some cases, employers offer health reimbursement accounts to pay some of these costs for people who leave the plan. If your employer offers these accounts, you could see if this would make the decision more attractive.

Joe – Fla.: My wife will retire in two years at 65. I will be 63 then. I am disabled and have had a liver transplant. Our big worry is after she loses her company health benefits, how do I afford my immunosuppressant drug? I take Rapamune.

Phil Moeller: This is a tough one. Unless your wife decides to keep working, you will be forced to get health insurance on the Florida state exchange set up under the Affordable Care Act for two years (until you turn 65). You should compare plans and see which ones provide better deals on your medication. You also should check out whether you can get manufacturer discounts for this drug. Of course, a lot can change in the next two years. But right now, this is the choice you have. Good luck!

Paula – N.J.: My brother is 67. He has Medicare Part A but not Part B, because he is working and has an employer-sponsored health plan with prescription coverage.  Does he have to apply for a Medicare Part D drug plan also? In addition, does he have to apply for Social Security and suspend because he is working?

Phil Moeller: The short answer is that your brother doesn’t need to do anything now. Check my answer above to Robert’s question on the subject of his health insurance. As for Social Security, his monthly benefit payment will rise at the rate of 8 percent a year until it reaches its maximum amount at age 70. I support waiting until then to file unless he has life-shortening health issues or pressing current spending needs.

Hilary – Ariz.: For financial reasons, I took early retirement at 62. I have a small British pension that has diminished by nearly $100 a month this year due to exchange rates. I turned 65 on January 1, so my first Medicare premium of about $104 was deducted from my December 2015 Social Security payment, which occurs every month. My income is currently below $1,000 a month, and my rent and living expenses now exceed my income. I am also handicapped (polio in 1953), but I have never claimed disability. I am trying to figure out what to do but with no success so far.

Phil Moeller: If your health is good, your lowest-cost Medicare solution would be a zero-premiums Medicare Advantage plan. You most likely would have to continue to pay that monthly premium, which is for Part B coverage. Part B doesn’t cover all your needs. But a zero-premium Medicare Advantage health maintenance organization (HMO) plan with a bundled-in Part D drug plan (normally abbreviated as an MA-PD plan) would protect you from catastrophic health and drug expenses. Of course, you’d need to be comfortable with using the doctors, hospitals and other health care providers in the plan’s network. You don’t say if you also are eligible for Social Security benefits, but if you qualify for premium-free Part A Medicare coverage (which I assume you do if your only current Medicare payment is for Part B), then you might explore whether you could earn some extra income from Social Security. As you might know, your British pension might reduce your Social Security income due to Social Security’s Windfall Elimination Provision. The United States and the United Kingdom have what’s called a totalization agreement that might affect your WEP reductions in Social Security. Here’s an online tool you can use to find out more.

As for your childhood polio, this condition might have entitled you to earlier Social Security Disability benefits, but it will not be the basis of any benefits now since you have been retired for several years. Besides, these benefits would not increase the amount of money you might be due from Social Security. If your pension is your only source of income, you should explore whether you’re eligible for low-income assistance programs. You could call a counselor for the State Health Insurance Assistance Program (SHIP). There are broader old-age programs that you also could explore. A good source here would be the Arizona affiliate of the National Association of Area Agencies on Aging. Good luck to you.

Rick – Wash.: I am retired and will be 65 this November. I am not collecting Social Security at this time. I am also covered by Federal Employees Health Benefits as my insurance plan. Does applying for Medicare and Social Security become more complicated or easier if I am already covered by FEHB?  Do I have to pay for Medicare in addition to my FEHB payments?

Phil Moeller: Your FEHB plan is the exception to the rule that retiree health coverage always pays secondary and that Medicare is thus required. Your retiree coverage should continue to pay primary and you might not even need Medicare. Check with your benefits folks on this. If this is the case, then you need do nothing when you turn 65. Social Security, which administers Medicare enrollment, may send you a Medicare card after your 65th birthday. Assuming you won’t need Medicare, you should decline Medicare and send the card back. As for Social Security, this should be a separate process. Assuming you don’t have a federal pension that might run into the WEP rules addressed today in Hilary’s question above, your application for Social Security should not be affected by your retiree health coverage. As for the timing of your filing, you should be aware of both early filing reductions for claims before age 66, as well as delayed retirement credits should you wait until after turning 66 to file.