Should I Quit My Retiree Plan Because Of Medicare?

Q: I have retiree coverage and am turning 65 so I will get Medicare. I wonder if now that I have Medicare I should quit my retiree plan?

A: Sometimes when individuals retire, their previous employer offers them health insurance as part of their retirement package.

This is often prior to Medicare coverage, but when you age into Medicare, there may be continued retiree coverage.

This is an important option to review. This retiree coverage is often more comprehensive (complete) than Medicare options available to the general public.

Even if you have been on Medicare and your retiree product for a while, it is worthwhile to evaluate the options periodically.

It is very important to enroll in Medicare Parts A & B when you turn 65. Medicare benefits always start the first of the month, so you want to enroll in Medicare before your birthday month.

If you have just become eligible for Medicare, before you can follow any advice or suggestions from me, you must first contact your insurance plan or plan administrator (your previous employer). They can tell you what will happen to your benefits after you become eligible for Medicare. Some companies continue to offer the same benefit package you currently have, some companies change the benefits, and some companies stop the benefits all together.

Once you have this answer, you can decide what to do next. You then must look at the price you pay for your retiree plan. There are many retiree plans that change the price of the premium after you reach the age of Medicare eligibility.

If your benefits continue to be the same, that is wonderful, assuming you can afford the cost of the premium. Remember that part of this benefit may be prescription drug coverage. Most of these plans offer very comprehensive prescription drug coverage. So even if you pay a higher premium, you may end up spend less overall with this more comprehensive coverage.

If your benefits are changed, the premiums become unaffordable or your benefits stop altogether you may want to consider dropping your retiree coverage and getting a Medicare insurance product available in your area.

It is very important to realize that once you disenroll from the retiree plan your previous employer offers, you may never re-enroll in this plan. This is a very important decision and should not be made lightly. Often retiree plans like you have offer additional benefits that Medicare does not offer. For example, benefits like dental coverage, eye care and eyewear, and maybe prescription drugs. These benefits are expensive and could be impossible to replace in another plan.

The prescription drug coverage is a significant issue to consider. Most retiree plans do not have a coverage gap, also known as a “donut hole,” in their prescription drug coverage. This means that your prescriptions likely cost the same amount for you anytime you fill them throughout the year. Sometimes this makes an expensive monthly premium a very good investment.

Also remember that Medicare plans are calendar year plans. The new plans start in January and run through December. Changes to the plan are generally made for the new year. Retiree plans can be different. For instance, a retiree product from a school district is usually a July to June year. The annual enrollment period for the school retiree plan would have a start date of July 1. This can lead to confusion about when you have the right to change plans. If you stay with your retiree plan your annual enrollment period is in May and June to begin July 1. If you switch to a Medicare plan, your enrollment period is October, November and December to begin Jan. 1.

The most expensive option available to you may not be the best option for you. Paying more for your health care premium does not necessarily get you better coverage. The least expensive option also may not be the best. If your plan has a premium that is $0 each month, but your doctors don’t participate, you are paying nothing to get coverage that doesn’t work for you.

With Medicare insurance plans (either a retiree benefit or a plan available to the general public) you want to be an educated consumer and be certain that you find a plan that suits you and best meets your needs. Remember that each situation is unique and what works for your neighbor may not work for you. Good luck to you with your insurance journey. Don’t hesitate to ask someone for help if it becomes overwhelming. Help can be found at the Office for the Aging, insurance professionals, my office or by calling Medicare at 1-800-MEDICARE (633-4227).

To contact Janell Sluga, GCMC with questions or concerns, please call 720-9797 or email her at janells@lutheran-jamestown.org.