What older workers need to know about the hybrid health care world

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.

Medicare rules and private insurance plans can affect people differently depending on where they live. To make sure the answers here are as accurate as possible, Phil is working with the State Health Insurance Assistance Program (SHIP). It is funded by the government but is otherwise independent and trains volunteers to provide consumer Medicare counseling in state and local offices around the country. The non-profit Medicare Rights Center is also providing on-going help.

Moeller is a research fellow at the Center on Aging & Work at Boston College and co-author of “How to Live to 100.” Follow him on Twitter @PhilMoeller or e-mail him at medicarephil@gmail.com.

Diana – Texas: How do I use employer health insurance in conjunction with Medicare Part B? Friends have told me that it is possible to continue employer health coverage along with Medicare Part B. In some cases, Medicare will pay first and then the employer health insurance will kick in, while the order may be reversed in other situations. However, when I bring this up to Medicare personnel they do not understand what I am talking about, nor do individuals in the human resources department where I work. Will one have to pay the Medicare Part B premium in addition to the employee health coverage premium?

Phil Moeller: Great question! More and more people find themselves in this hybrid health care world. They are continuing to work past the age of 65 and are Medicare-eligible. Such coordination of service issues can be very confusing. First off, it’s usually not mandatory for you to sign up for Medicare at age 65 if you have employer-provided health coverage through either your employer or your spouse’s employer. However (and there is always an however), employers with fewer than 20 employees may use a health plan that only pays after Medicare has paid its share of covered expenses. In this situation, you may be required to get Medicare. It will be the first or primary payer and the employer plan will be the secondary payer.

You can’t be forced to get Medicare if you are covered at a plan offered by an employer with more than 20 jobs. This employment ceiling goes up to 100 if you’re disabled and younger than 65. At such larger employers and multi-employer plans, Medicare is usually the secondary payer for those situations where employees have both coverages.

Even though you may not be required to get Medicare, perhaps your employer coverage isn’t so hot, and having Medicare to back you up makes sense. Regardless of the reason, if you get Medicare, you will need to pay the Part B premium. Before proceeding, have a conversation with Social Security about whether or not to sign up for Part B (Social Security handles a lot of Medicare administrative tasks). Get the name of the representative, and the date and time of your call, as well as the outcome. Keeping this information in a safe place may protect you in the event of errors down the road.

Dee – Texas: I have been on disability since 1995. I will be 65 in February and my husband will be 63 then and will retire soon. My medical care ends when he retires, so should I apply for Medicare Advantage, and an eye and dental plan during the special enrollment period? Thank you. This is so confusing.

Phil Moeller: Assuming your husband will not have some form of retiree health insurance, then, yes, you should sign up for Medicare. If you are doing this right when you turn 65, you will have no problem enrolling in whatever Medicare insurance you choose. However, if your husband doesn’t retire until you are more than several months past your 65th birthday, you may need to qualify for what’s called a Special Enrollment Period. To do this, you will need to provide Social Security with proof that you’ve been continuously covered by private health insurance since you turned 65.

Once you have Part B (see our primer on the different parts of Medicare), you can enroll in a Medicare Advantage (MA) private health plan. These plans usually also provide Medicare Part D prescription drug plan coverage. You will have a 63-day Special Enrollment Period to enroll in either a Medicare Advantage plan or a stand-alone Part D prescription drug plan, dating from when your husband’s employer coverage ends. Or, you might wish to enroll in a Medigap supplemental insurance plan, which would work together with basic Medicare to cover your health care costs. Medigap doesn’t cover drugs so you would still need a stand-alone Part D plan. Stand-alone means it’s not part of an MA plan – you can’t have both a Medigap and an MA plan.

Some MA plans offer limited coverage for vision, dental or hearing services. To see if such coverage meets your needs, you can use the Medicare Plan Finder or the Medigap Policy Search. The insurers who sell MA and Medigap plans also can direct you to separate dental and vision coverage. If you need counseling help, the Texas SHIP is called the Health Information Counseling and Advocacy Program (HICAP) and is at (800) 252-9240.

Wendy – Colo.: At 66, I am divorced and continue to work full time. I have health insurance through my employer and have started using a flexible spending account (FSA). This year I also started receiving Social Security from my ex-spouse and so I had to sign up for Medicare Part A. After reading about health savings accounts (HSAs) and IRS penalties, am I in trouble? Is this also true with the FSA benefit? Do I need to drop my FSA payroll deduction?

Phil Moeller: Wendy has discovered one of the Maven’s pet peeves. People enrolled in Medicare are no longer eligible to participate in tax-deductible HSAs. With more and more Medicare-eligible people continuing to work, and more and more employers moving to high-deductible health plans, this prohibition needs to be rethought.

Fortunately, FSAs do not have the same restrictions about enrollment in Medicare as do HSAs, according to the Medicare Rights Center. FSAs (and Health Reimbursement Accounts, or HRAs) differ from HSAs, primarily in not permitting unused account balances to roll over to the next year. However, to play it safe, you should speak with your employer (and, if you’ve got one, a tax adviser) and make sure your FSA is not affected by Medicare enrollment. If it turns out that it is, you may be able to withdraw excess contributions if you do so within a specified time frame. See the “Excess contributions” section of IRS Publication 969.

Al – Calif.: Can I change my MediGap policy during the open enrollment period each year before Dec. 7th?

Phil Moeller: No, you can’t. Medigap is not like Medicare. In most states, you are guaranteed access to a Medigap plan during the six-month period beginning the month you turn 65. After that, the private insurers who sell these plans may reject you for Medigap coverage or charge you higher rates based on your age and health. Some states provide consumer safeguards for better access to policies, so you need to check out the rules where you live. In California, you can reach the Health Insurance Counseling and Advocacy Project (HICAP) at (800) 434-0222; readers in other states can check with a SHIP office to find out the rules where they live.

Ron – Texas: I believe your article on Medicare premium increases was not quite accurate. The increase is based on adjusted gross income, not taxable income, making it very unfair for many people. If a person borrows money to invest, for example, investment income is considered in the premium calculation, but not the interest expense for borrowing the money. So, it is not really a measure of the income you have that is available to pay the Medicare premium.

Phil Moeller: I’ve never met a rule that isn’t unfair to someone, and Ron’s observation is certainly correct. For most people, however, adjusted gross income does correlate with taxable income. And, as the piece noted, there are grounds for appealing what’s called the Income Related Monthly Adjustment Amounts (IRMAA) for Part B and Part D premiums. And, also as noted, unusual swings in adjusted gross income will influence premiums only for a single year.