By Nicholas Hamner
Investment Advisor Representative
[email protected]
Getting & keeping healthcare coverage in retirement without losing your shirt sounds simple enough, but is it?
Let’s start with Medicare.
- If you are uninsured when you turn 65 and do not file for Medicare within the initial seven-month offering window (three months prior to turning 65, the month you turn 65, and the three months following), you open yourself up to penalties on Parts B and D whenever you do file for Medicare. The penalties on Part D are temporary, but the penalties on Part B are permanent.
- If you retired before the age of 65 and are on an ACA plan, private insurance plan, or a spouse’s employer’s insurance, or if you’re retiring at 65 and transitioning directly from your employer’s insurance, you can transition to Medicare without an issue.
- If you or your spouse are still working past your Medicare eligibility window, provided you continue to maintain insurance coverage, you can keep that coverage and hold off on filing for Medicare so long as that coverage exists. The insurer may require you to file for Parts A and B, depending on the company’s size and policy restrictions, but you will be able to keep that coverage and transition to Medicare whenever that policy lapses without any penalty.
What stops Medicare from charging penalties if you file late? “Creditable coverage”. Not credible, creditable. What is “creditable coverage”? The government definition is wordy and long, but essentially: if an insurance offers equal or better benefits than what Medicare offers, it’s creditable.
For any Feds reading this, there are similar concerns about maintaining FEHB healthcare coverage in retirement. Your concern isn’t “creditable coverage”, it’s “continual coverage”. You have to have maintained your FEHB continually for the final five years of your federal employment in order for your FEHB benefits to carry into retirement. Thankfully FEHB is flexible.
Kids age off your policy so you move from self + family to self + one? Doesn’t matter. Your coverage continues. Maintained vision for your nearsighted wife and the two of you divorce so you drop it? Your coverage continues. Swap from a Basic or Standard Blue Cross Blue Shield plan to the Foreign Service Benefit Plan with Aetna? Doesn’t matter, your coverage continues.
So long as your health care coverage is never cancelled in those last five years, it doesn’t matter how much you change it. But remember, regardless of your choices while employed, if you want to keep your spouse and family covered under FEHB in retirement, you have to maintain survivor benefits for your spouse. Them’s the breaks.
So after reading this, you might be asking why anyone wouldn’t want to take Medicare at 65. Why would you want to keep your employer benefits? As a Fed, why would you want to carry FEHB into retirement?
For one, you might have really good coverage, or a really specific disease that your insurance is already set up to cover. But the biggest, most-likely reason is IRMAA. IRMAA stands for Income-Related Monthly Adjustment Amount, it’s a heavy penalty for high earners, and it’s an article unto itself. Luckily, we already wrote that article. You can read it here.
Everybody good? Everybody still have their shirts? Good.