Retirees over 65 face a number of health care costs: premiums for Medicare Parts A and B, out-of-pocket expenses like deductibles, copayments, and coinsurance, and prescription drug plans. Supplemental health insurance, also known as Medigap policies, may help pay these out-of-pocket costs.
Retired employees typically have access to employer-sponsored Supplemental health insurance for retirees over 65 retiree health coverage, which is often a separate legal plan from the main company medical insurance for active employees. This separate retiree plan can offer lower cost-sharing, different coinsurance rates, or other perks. Large employers often self-insure this benefit by contracting with health insurers to make available their provider networks. These private insurers may provide supplemental coverage for an additional premium, or they may include pre-65 retirees in the same health insurance risk pool as active employees.
If you have a good understanding of your employer’s current plan, and how it works with Medicare, you can make a well-informed decision about whether to take that coverage with you when you leave the workforce. Many retirees are attracted to this type of coverage for the peace of mind it provides, but there are some things you should consider before making that decision.
A key consideration is that you can only enroll in a Medicare supplemental policy during the six-month period that begins the month you turn 65 and are enrolled in both Parts of Medicare. If you are interested in purchasing a Medigap plan outside of this window, you must undergo medical underwriting, which may result in being declined for coverage or paying more than the standard premium based on your health condition.
If your employer’s health plan offers retirees a Medicare Advantage plan, and it is the only source of supplemental coverage you have, you probably don’t need a separate supplemental plan. These types of plans work in conjunction with traditional Medicare to limit your out-of-pocket costs, but they typically require that you visit doctors who participate in the plan network. If you have a Medicare Advantage plan, you don’t need a Medicare Supplement plan, as these two plan types don’t work together.
Another option for people who don’t have employer-sponsored retiree health insurance is the Health Insurance Marketplace. These government-sponsored insurance exchanges allow people to purchase private plans with help from tax credits and subsidies that may decrease monthly premiums and out-of-pocket costs. Depending on your income, you may be eligible for Medicare or Medicaid. However, if you are already receiving Social Security benefits, or are getting them shortly before your retirement date, you can sign up for Medicare without going through the Marketplace. This is because you will be automatically enrolled in Medicare Parts A and B when you turn 65.