San Antonio Express-News
June 10, 2003

Primary Health Insurance: Before v. After Retirement

copyright 2003, Paul Premack

When a person 65 or older works for a company that provides health care insurance, that insurance is typically liable for the medical bills before Medicare’s liability kicks in. The company insurance is called the primary payer, and Medicare is called the secondary payer.

There are legal exceptions, of course. If the health insurance provided by your company covers less than 20 employees, the plan can be written so that it becomes secondary payer and Medicare become primary payer. Also, if the reason for being on Medicare is disability rather than age, and if the health insurance provided by the company covers less than 100 employees, the plan can also be written so that it is secondary payor.

Like you, most people choose to begin receiving Social Security at age 65. If you qualify for Social Security, you are entitled to Medicare coverage as well. Medicare Part A covers many of the costs of hospitalization. Most people receive Part A without paying any monthly premium – so there is no cost associated with the coverage and is no reason to delay signing up for it.

Medicare Part B covers a portion of your doctor’s bills. Medicare Part B is optional, and has a base premium of $58.70 per month. Medicare assumes you want the coverage, so if you decide to opt-out of coverage, you must inform them.

If you opt-out, then you will save the $58.70 per month, and your company plan may cover the exposure. Check with your plan administrator to be sure that you will not be losing coverage. For instance, if you work for a small company that operates under the exceptions (making Medicare your primary payor) then you should not opt-out, but should enroll for coverage under Part B.

Even when a person opts-out of Part B, that person has the legal right to change that decision. However, when that person decides to opt back into Part B coverage, enrollment is only open one time per year, between January 1 and March 31. When that person enrolls, Medicare will impose an increase on its Part B premium by 10 percent for each year enrollment was delayed. If a person waits until age 70 to opt-in, his or her premium will be around $94 per month (instead of $58.70), or perhaps higher because of increases to the base premium over the intervening years.

Those penalties, however, only apply to people who were not covered by an employer health care plan. If an employee opts-out until retirement, then enrolls in Part B within 8 months of retirement, the employee will not be charged the 10 percent premium increase. If the retiree fails to enroll during that eight-month window, federal law requires the retiree to wait for the next general enrollment period (January 1^st of the following year) and imposes the ten percent penalty. So be sure to stay on top of the deadlines, and ask your plan administrator about the coverage offered by your company’s insurance.