If you’re still working past the age of 65, should you switch to Medicare?
Unfortunately, there’s no clear answer, because every situation is unique. We do find that for most people, switching to Medicare with a Medicare Supplement can save a lot of money, but this isn’t always the case.
Medicare and Working Past 65
There are 4 main reasons to switch from your employer’s group coverage to Medicare:
- High monthly premium
- High deductible
In Kansas, the average premium for a single employee’s group plan is $413 per month (according to the Department of Health and Human Services and the IRS). It’s common to see deductibles of $1,500+, and copayments can cost you an average of $30 per visit. Factor in coinsurance, which is usually 20%, and you’re shelling out quite a bit to be on your employer’s group plan.
The exception here would be if your employer aids in these costs. Perhaps you don’t have to pay a monthly premium, which only leaves you responsible for the deductible and co-costs.
Even then, these costs add up, so it can be to your advantage to take a look at the costs involved with Medicare and a Medigap plan.
Costs of Medicare
Medicare Part A is free. Part B costs $134 per month for the majority of Americans (it costs more if your income is a higher tier).
If you choose Medigap Plan F, you won’t pay any deductibles or coinsurance associated with Medicare, but you will have a monthly premium. This premium varies depending on a variety of personal factors. You can read more about Medicare Supplement rates here.
For the purpose of this illustration, we will use a 67-year-old female in the state of Kansas. Her monthly premium would be about $183.
When you compare a group plan versus Medicare with a Medigap plan, you can see that in many cases, it makes sense to switch, even if you’re 65 and still working.
|Average Monthly Premium||Average Deductible||Average Copay||Average Coinsurance|
|Group Health Plan||$413||$1,500||$30||20%|
|Medicare + Medicare Supplement||$317||$0||$0||0%|
You still need to add in a prescription drug plan, and that cost will vary depending on what your current prescriptions are. The average nationwide monthly premium is $34, but you still have a deductible, copayments, and coinsurance. To calculate exactly what your plan would cost, you can run a cost comparison on Medicare.gov. We have put together a cheat sheet with screenshots and tips if you need extra guidance.
If your employer covers your monthly premium, the decision becomes a little tough. Speaking with a licensed agent can clarify the situation as well as your options. We recommend setting up a short appointment to go over your options.
If you’re still not sure, here are the main factors you need to consider when working past age 65:
1. Networks with a group plan are going to have limitations.
There is no “Medicare network.” It’s accepted everywhere. If you’re currently having to drive 30+ miles to go to a doctor that’s in your network, that might have an effect on whether or not you want to switch over to Medicare.
2. It’s pretty typical to have a substantial deductible with a group plan.
It’s not uncommon to have a $1,000, $2,000, or even $5,000+ deductible. Medicare’s Part B deductible is only $183. If you get a Plan G Medicare Supplement, everything is covered except for that $183 deductible. And if you get a Plan F Medicare Supplement, you won’t have to pay that deductible at all.
3. Your coinsurance is your responsibility under a group plan.
With a Medicare Supplement, you don’t have coinsurance. Your Medigap plan will pick up those extra costs.
Even if the monthly premium ends up being more to switch to Medicare, it’s important that you shift your perspective to the longer term value.
Another important thing to know when working past retirement age is that all Medicare Supplement plans are standardized by the government. That means that you can price shop the plan you want and choose the carrier that has the cheapest option.
Medicare Enrollment When Working Beyond 65
If you’re working past age 65 and want to enroll in Medicare, there are certain times when you’re allowed to do so.
Note: There are many moving parts to Medicare, and the smallest difference can change your entire enrollment process. For example, each state has different regulations that affect your Medicare enrollment. Other examples include whether you work for the railroad or take a prescription that isn’t on the approved list. Please use the outline below for reference only. Speak with an agent before enrolling into Medicare after age 65.
→ Enroll in Medicare Part B when you lose your group plan or when you know that your group coverage is going away. You can do this up to 3 months before you lose your coverage.
→ If your group plan has credible drug coverage, you should sign up for Part D the month before you’ll need to replace it. This is called a Special Enrollment Period (SEP) for those moving from an employer’s group plan to Medicare.
For example, if you know you’re losing your group coverage on May 1, you should sign for a Plan D drug plan during the month of April. This will ensure that you are coverage starting on May 1.
→ Choosing a Medicare Supplement can happen up to 6 months before you enroll in Medicare Part B. You won't have to pay for that supplement until your Part B becomes active. During this time, you can select any supplemental plan with no health questions.
If you already signed up for Part B (over 6 months ago), you have 60 days after you lose your group coverage to sign up for a supplement. This is a Guaranteed Issue (GI) situation, which means there are no health questions. The downside? You’re limited to Plans A, B, C, and F. If you can pass health questions, you can go through underwriting and choose any plan you like.
We always recommend speaking with an expert before making big changes to your health insurance, especially when you’re working past age 65..