Medicare and Private Health Insurance When You Retire

Are you nearing or looking forward to retirement? Assuming you are disciplined and have lived within your means and/or invested wisely, retirement can lead to positive changes. For example, retirees can enjoy less stress, a reduction in expenses, and the opportunity to explore interests that bring pleasure. Depending on your age, however, retirement may also bring changes to your healthcare options. As such, it is important to understand Medicare coverage and when it can replace or be supplemented by private health insurance during the retirement years.

Medicare

Generally speaking, Medicare coverage begins when you turn age 65. The initial enrollment period spans seven months and starts three months before the month you turn 65 and ends three months after the month you turn 65. Coverage starts on the first of the month and is dependent on which month you sign up during the initial enrollment. For example, if you sign up one month after your 65th birthday, coverage starts two months after sign-up, but if you sign up within the same month that you turn age 65, coverage starts the next month. For those that retire prior to age 65 and lose group health insurance coverage, private health insurance coverage may be available for purchase until you qualify for Medicare. If you retire right at age 65, you may be automatically enrolled in Medicare Parts A and B provided you are actively receiving Social Security benefits when you become Medicare eligible. For those persons who work past the age of 65 and have group health plan coverage, or you or your spouse work for an employer that provides your health coverage, you can sign up for Medicare Parts A and B while you are still working.

Supplemental Private Health Insurance

Your own healthcare needs will impact the level of healthcare coverage needed in retirement. Combining benefits from Medicare along with private health insurance may provide you the best coverage and help reduce any out-of-pocket expenses that may be caused by gaps in Medicare coverage. Original Medicare (Parts A and B) is a federal program. Coverage, costs, and benefits will not differ for original Medicare by state. And, retirees can go to any doctor or facility that accepts Medicare. Medicare Advantage (Medicare Part C) plans have a fixed network of doctors, and hospitals and premiums do vary by state. These plans include inpatient services normally covered by Part A and outpatient services generally covered by Part B. In addition, Medicare Advantage plans may include Part D (prescription drug coverage) along with hearing, dental, and vision benefits. Medicare Advantage plans are administrated by insurance companies and not the federal government. Because most individuals will not have to pay a premium for Part A, it is possible to enroll in Medicare Part A for free while still on an employer health plan. Part B requires a monthly premium to maintain benefits. For those individuals on a group employer health plan, you will have the option to opt out of Part B coverage until you stop working or otherwise terminate your group health plan coverage.

While the federal government helps to subsidize healthcare costs for retirees who are 65 years and older, it is possible that you will be responsible for some portion of your healthcare costs in retirement. Planning ahead will not only help you determine the level of health care coverage necessary for your retirement situation, but also help you avoid higher costs and penalties associated with late enrollment in the Medicare programs.