It can be hard to know which medical insurance to use during the age of retirement when someone continues working. This is especially true when someone still has health insurance through a longtime employer. Medicare is managed by the Centers for Medicare and Medicaid Services (CMS) and often works with the Social Security Department. Medical coverage becomes dicey when someone works beyond the age of retirement for Social Security.

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Individuals can retire when they are age 62. For each year that a person retires before their qualified age, their benefit rate will be lower, hence there are benefits to deferring retirement until someone is 70 and continues to accumulate Social Security benefits. The retirement age to qualify for Social Security is rising. For those born in 1960 or later, the retirement age is 67; for those born between 1955 and 1959, the retirement age is 66 plus 2 months for each year (e.g., 1955, 66 and 2 months; 1956, 66 and 4 months). Although Social Security is a financial benefit for individuals, Medicare is a health benefit. It is beneficial to enroll in Medicare before retiring and collecting Social Security, even though CMS will pick up on the lost benefit if one is not already enrolled. It can also be beneficial to apply for Medicare before retirement and use it to supplement the insurance provided by an employer. There are long-term cost saving benefits to applying as soon as the benefit is available.

Whether working or not, aging seniors should still apply for Medicare benefits three months before their 65th birthday. If someone waits longer, Medicare’s medical insurance (Part B) and prescription drug coverage (Part D) may cost more. Medicare is a health insurance program for people age 65 or older, people with disabilities under the age of 65, and anyone with end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant). There are four parts to Medicare: Part A (Hospital Insurance), Part B (Medical Insurance), Part C (Medicare Advantage Plan), and Part D (Prescription Drug Coverage). When the Social Security Department automatically enrolls an individual, it does not enroll them in Part C or Part D because of their additional costs and consumer options. If someone does not apply for Medicare, within three months after the month of one’s 65th birthday then there is risk of a 10% surcharge on Medicare Part B premiums for each year one is not signed up; meaning if if one is 68½ when you apply, you may be paying a premium that is 30% higher than when first eligible involving Medicare Part B, Part C and Part D. It is essential for individuals to take control of their insurance plan decisions prior to turning 65, and plan their retirement benefits accordingly.

Case Study

The author’s firm, Medwise Insurance Advocacy, recently worked with a client who had an ERISA insurance plan with an employer well after he qualified for Medicare. At age 65, he asked his employer about Medicare and was told to not enroll in it while still covered by the company insurance. Unfortunately, the client became ill at age 75, and in January the employer decided to eliminate his position. When he got sick in December, he was in and out of a hospital where his bills totaled $622,000. The employer would pay the money out through the ERISA plan and then take the money back. This went on for five or six times, before the family reached out to the author to advocate their case. After the client’s large medical bills started in December, he stopped working in January and his health insurance with Medicare did not begin until the following July 1. The ERISA plan wouldn’t pay for medical coverage, stating that his Medicare plan should have been his primary insurance and should have covered his medical expenses. This represented a major conflict of interest, wherein the insurance carrier believed there was no reason for him to delay getting Medicare, even though the employer directed him not to apply at age 65. Due to the client not being enrolled in Medicare, the insurance company sought him to pay out-of-pocket.

This was an unacceptable position taken by the employer’s ERISA plan. The patient was explicitly told to not apply to Medicare by the employer’s human resources department. After the author worked with the employer and the insurance carriers to resolve the issue, his medical bills were negotiated and covered by primary ERISA coverage; then, his continued care became the responsibility of the Medicare plan, which began the following July.

It is important that individuals either become their best advocates for medical coverage and hold their insurance companies accountable for what they should cover, or they have to seek out a third-party advocate to assist in lowering their out-of-pocket expenses. The employer’s human resources department in this case gave their employees poor advice. The individual in this case was paying $2,600 per month for the employer’s medical plan; if he had applied for Medicare when he turned 65, he would have paid a lot less and would not have had the issues he later did over coverage. Even while working, it is important to apply for Medicare during the open enrollment period at age 65.

Adria Goldman Gross, FIPC, is the CEO and founder of MedWise Insurance Advocacy, Monroe, N.Y.