| 07 April 2010
Knowing when and whether or not to enroll in Medicare are important questions that are coming up more frequently these days among my clients.
While I always believed that things got easier as you got older that is surely not the case when it comes to deciding on the use and purchase of Medicare and supplemental coverage. In fact, for many people, Medicare overall is a confusing and daunting topic. I hope this article will lay out some of the basics for employers with employees who are nearing the age of eligibility.
Questions That Matter
Many questions affecting Medicare eligibility and coverage need to be considered, and different decisions will be made based on how these questions are answered:
- Am I going to continue to work after 65?
- Do I have coverage available through my employer?
- Is my current prescription drug coverage creditable?
- How old is my spouse?
- Will I retire?
- Where will I retire?
The answer to each of these questions affects enrollment in Medicare A, B, C, D and supplemental coverage. Importantly, most people are unaware that their decision, or lack thereof, could potentially affect their current coverage and/or their future insurability. Knowing when an individual is eligible and whether or not to enroll is the critical question.
The Basics
Medicare is a health insurance program for people age 65 and older; those under age 65 with certain disabilities, and people of any age who have end-stage renal disease. Original Medicare has four parts:
- Part A - Hospital Insurance
- Part B - Medical Insurance
- Part C - an alternative to A & B but offered through Medicare-approved private carriers
- Part D - Prescription Drug Coverage
Original Medicare Parts A and B are administered by Medicare; Part C and Part D are available through private insurance companies.
Part A is for most individuals free, as it has been paid for through payroll taxes. Part B is optional and the cost is tiered by level of income. The average monthly cost for Part B in 2009 was $96.40.
Individuals who choose both Part A and B may then also purchase a Medicare Supplement plan to help reimburse them for the deductible and co-pay expenses that exist within both Part A and B. Or, they may purchase Part C (Medicare Advantage) which is the privatization of Medicare. Insurance companies contract on an annual basis with CMS (the Centers for Medicare and Medicaid Services). Part C plans must cover at least all of the services Original Medicare covers, but can charge different out-of-pocket costs due to different deductibles, coinsurance and copayments. The premiums and availability for these plans can change annually.
Part D - Prescription Drug Coverage is not available from the government, but only from private insurance companies. CMS has created the standard offering but it is the private insurance companies that offer the Part D plan(s) with an actuarial equivalent. Part D may be purchased as stand-alone coverage or may be incorporated in some Part C plans. It is not necessary for an individual to place their Prescription Drug coverage with the same company as their Medicare Supplement. Part D plans are regional plans and need to be purchased from a carrier that handles the region in which residence is claimed. The government has established a late enrollment penalty for those not enrolled when eligible.
Get Smarter
An enrollment package will be sent in the mail about three months prior to the birth month in which an individual turns 65. Medicare & You is an official government handbook. It is mailed out by CMS with the initial informational packet, but is also available at www.MyMedicare.gov. It is a VERY helpful guide and reference tool. With the Medicare Modernization Act of 2003, insurance brokers must pass an annual certification course with CMS as well as for each carrier they plan to represent.
Knowledge is power. My recommendation is to start an analysis early, six months ahead of when someone is turning 65. Review the information from CMS, discuss it with an employer or employee(s) if it pertains, and lastly, contact a certified insurance broker.
Rebecca Deelstra is a Senior Consultant at Northern Capital Life & Health, spending most of her time helping people and companies make health insurance decisions. For more information call Rebecca at 952-996-8845 or check out www.nclh.com.