We received a frantic call from a client insisting they just had to talk to an advisor immediately!
I recognized the name – a brand-new Medicare client. The client was delighted I took her call. “DAVID! Thank goodness! This is Grace, and I just took a job that offers health care, dental, and vision! Can I cancel my Medicare and take the employer plan?” She asked excitedly.
“The quick answer is probably,” I replied. “But let’s review the details to see which is most appropriate.” “Firstly – is the employer plan Creditable – meaning as good as Medicare – and are there a minimum of 20 employees on the plan. If the employer plan doesn’t meet these two requirements and you leave Medicare, you’ll get an increasing penalty when you re-enroll later for each month you were not on a qualifying plan when eligible.” Grace confirmed ‘Yes’.
Next, because she was a high-income earner the previous year, IRMAA fees contributed to her Part B & D Medicare costs of $437.30 a month, instead of the base rate of $148.50 most Americans pay. (Remember, high-income earners pay a surcharge for Medicare benefits.) Grace supplemented her Original Medicare with Medigap Plan G ($130 a month) and a Part D drug plan ($13.50). In total, she was paying $580 a month for her plans, with no co-pays for medical, and her generic prescriptions were free.
Her new employer premium would be $200 a month with a $1500 maximum out-of-pocket for co-pays. “The answer is just math,” I explained. “Your plan at work in a worst-case scenario over a year would cost $3,900.” (12 months times $200= $2,400 + $1,500= $3,900). “But 12 months on Medicare will cost you $7,172.60.”($437.30 + $130 + $13.50 = $580.80 times 12 months = $6,969.60 + the once-a-year Plan G deductible of $203 = $7,172.60). “By switching to the employer group plan, you will be saving approximately $3,272 a year.”
“If I drop Medicare, will I pay the penalty to get back on?” Grace asked. No, when you leave a creditable employer plan, they provide a form that proves you had the employer health plan. To suspend your Medicare, call 800-Medicare and call the insurance companies to cancel your Medigap and Part D drug plan. Grace was elated to see that she would save over $3,000 a year. I reminded her that she should call us 4-5 months before she retires from the new job to review her future options for Medicare plans.
Call us to review the pros and cons of switching health coverage as everyone’s situation and needs are unique.