Guest Post by Danielle Roberts
If the thought of retirement ignites thoughts of leisure, liberty, and a chance to give your mind and body a break from the restraints of routine, join the club. Still, as you reach this stage of life, it becomes increasingly clear that there is a lot to learn before you make the leap into retirement.
You must start making major life decisions that involve tax-advantageous retirement account withdrawals, Social Security distributions, and the big one — enrolling in Medicare.
But really, how hard can it be?
Whether you are on an employer health plan or have an individual ACA plan, your coverage through Medicare is an entirely different ball game. The enrollment periods, rules, and plan options that Medicare offers can make the transition process appear daunting.
Good news — if you follow three steps, you will be on your way to reaping the benefits of a national healthcare system that you have likely been paying into your whole working life.
Original Medicare consists of Medicare Part A and Part B. You’ll enroll in Original Medicare through the Social Security Administration (SSA). If you start taking Social Security benefits four or more months before turning 65 years old, you will be auto-enrolled in both Part A and Part B. In this case, your Original Medicare will start on the 1st of your 65th birthday month.
If you are not yet receiving Social Security benefits, you will need to apply for Original Medicare. The earliest you can apply for Original Medicare is three months before the 1st day of your 65th birthday month. That day is the start of your Initial Enrollment Period (IEP) — this period lasts for a total of seven months, running an additional three months after your 65th birth month.
If you turn 65 in June, your IEP starts March 1st and ends September 30th. During this time, you can apply for Original Medicare online at SSA’s website. If you do so during the first three months of your IEP, your Medicare will start on the 1st of your 65th birthday month. Apply any time after that but still during your IEP, and your coverage could be delayed one to three months.
Failure to enroll in Original Medicare during your IEP could result in lifelong late penalties. However, if you plan to work past 65 for an employer who has 20 or more employees and plan to stay on their group health insurance, you will likely be able to delay signing up for Original Medicare beyond your IEP.
There are two paths you can choose once enrolled in Medicare – Original Medicare or Medicare Advantage. Many Medicare beneficiaries choose the Original Medicare path. If you choose Original Medicare, you should consider enrolling in a Medicare Supplement plan to help offset the cost-sharing expenses such as deductibles and coinsurance.
Medicare Supplement plans (also known as Medigap plans) pay secondary to Original Medicare and cover things like your Part A deductible, Part A coinsurance, and Part B coinsurance. Without a Medigap plan, you will be responsible for all cost-sharing amounts Original Medicare throws your way, without any maximum out-of-pocket limit.
Your Medigap Open Enrollment window will start the same day as your Medicare Part B effective date. This window lasts six months and is the best time to enroll in a Medigap plan as there are no health questions.
In this time, you cannot be denied a Medigap plan due to pre-existing health conditions. After your Medigap Open Enrollment window has ended, you can still apply for a Medigap plan but will likely have to answer health questions.
Medigap plans are labeled from A to N. These plans are standardized by Medicare so that regardless of the insurance carrier you go through, your coverage is the same.
A Plan G offered by ABC Company for $199 per month will have the exact same coverage as Plan G offered by XYZ Company for $129 per month. These plans are sold by private insurance carriers but always standardized by Medicare.
Once you have determined which letter plan is the right fit for you, find a Medicare broker who can compare all or most carriers in your area by premium, average rate increase history, and financial rating. It can be tempting to pick a plan and go with the first option you see or with a company you’ve known for years. Since these plans are standardized, it is in your best interest to compare companies by more than just their brand recognition.
Now, if you’re like 39 percent of Medicare beneficiaries, you may decide a Medicare Advantage plan is the most cost-effective path for you. If so, you’ll still need to sign up for Original Medicare but instead will get your coverage through a private insurance carrier.
Medicare Advantage plans, also called Part C plans, are an alternative to Original Medicare, and like Medigap plans, are sold by private insurance carriers. This type of plan works similarly to group health plans. They generally have networks, copays, and built-in drug benefits.
The earliest you can sign up for a Medicare Advantage plan is during your Initial Election Period, which coincidentally is usually identical to your Initial Enrollment Period mentioned above. While your Initial Enrollment Period is dependent upon your 65th birthday month, your Initial Election Period is dependent upon your Part A effective date.
Unlike Medigap plans, Medicare Advantage plans never have any health questions to answer when applying for coverage. However, also unlike Medigap plans, you can’t apply for Medicare Advantage plans at any time throughout the year. If you miss your Initial Election Period, you’ll have to wait until the fall Annual Election Period (AEP) to sign up for a Medicare Advantage plan. The AEP runs from October 15th–December 7th every year.
A Medicare broker can help you compare several Medicare Advantage plans from several carriers to help you find one that your most important doctors accept, covers your medications, and offers the benefits that are most important to you.
The third step to signing up for Medicare is to enroll in a Medicare Part D plan. If you enroll in a Medicare Advantage plan that includes a Part D plan, you can bypass this step. A Medicare Part D plan will provide you with prescription drug coverage.
The initial window to enroll in a Medicare Part D plan is the same as your Medicare Advantage Initial Election Period. If you miss this election period or want to change Part D plans later, you’ll have to wait until the AEP unless you qualify for a special election period. You should consider enrolling in a Part D plan during your Initial Election Period, even if you aren’t currently taking prescription medications, so you can avoid a lifelong late penalty.
Make it through these three steps and you are that much closer to the leisure and liberty that retirement can offer. That said, if anyone tells you it is smooth sailing ahead once you’ve signed up for Medicare, they aren’t painting the full picture for you.
The truth is issues do come up with Medicare and premiums do increase. Each year, you’ll want to compare your Medicare plans, such as Medigap, Medicare Advantage, and Part D plans, with others in your area.
Medigap plans can change their premiums, and Medicare Advantage and Part D plans can also change their premiums and benefits from year to year. Therefore, you’ll want to shop other plans annually to ensure you’re always enrolled in the most cost-effective plans available to you.
Danielle Roberts is a Medicare expert and the co-founder of Boomer Benefits, a licensed insurance agency that helps baby boomers navigate their entry into Medicare in 48 states. She and her team have helped more than 50,000 Medicare beneficiaries make their transition to Medicare at retirement. She is also the author of the best-selling book 10 Costly Medicare Mistakes You Can’t Afford to Make, which helps beneficiaries avoid critical but all too common Medicare pitfalls. Danielle is a member of the Forbes Finance Council and a past president of the Fort Worth chapter of the National Association of Health Underwriters. She now serves on the state board as its Medicare chairperson.
November 4th, 2021
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