Medicare vs. employer's HDHP

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Medicare vs. employer's HDHP

Postby samjuno » Thu Aug 05, 2010 3:56 am

I'm turning 65 soon and am faced with either staying on my employer's High deductible Health plan & keep contributing to my HSA or signing up for Medicare.

I plan to keep working a few more years and am in the 15%-25% tax bracket (depending on overtime). Am currently in decent health with no major health issues.

The HDHP currently has a deductible of $3100/yr. and I expect to spend almost $2800 out of pocket by year end. The HDHP premium is pretty low, around $30/mon., but will increase next year.

I know the cost of going on Medicare (parts A,B,D + medigap) will probably be at least $250-$350/month. And the penalty for not signing up for Part D will last forever once I do sign up.

The tax advantages of the HSA would make the HDHP seem like the better choice, but was wondering if there was some other reason to go the Medicare route now & deal with the hassle of picking plans.

sam

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Postby BruceM » Thu Aug 05, 2010 11:28 am

There are a number of factors at play here.

When you turn 65, if you are eligible for Social Security, you will be enrolled in Part A if you have started your SS benefits (which it sounds like you have not) or you contact Social Security to enroll. You may not contribute to a HSA if you are covered by another plan including Medicare, and according to Medicare, you may not 'opt out' of part A coverage. But once enrolled in Medicare, you may continue to use the HSA dollars to pay qualified medical expenses, including Part B premiums (but interestingly, not Medigap premiums).

It would seem then that you'd be eligible to make HSA annual tax deductible contributions at age 65 and older if you avoid enrollment in Medicare. However, this may not be a good strategy, as you could be subject to late enrollment penalty for Part B and Part D (although not sure about this, as you'd also not be enrolled in Part A).

Also, you'd want to check your HDHP about eligibility and coverage once you are eligible for Medicare, as there may be some restrictions or exclusions depending on the insurer and state laws.

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Postby dbr » Thu Aug 05, 2010 12:22 pm

I would be concerned that the employer health plan might be terminated and that having missed the open enrollment period for Medigap that no insurer would write you a Medigap policy. I would believe that virtually any employer medical plan would contain the terms that coverage can be modified or terminated at any time without notice. I do not know if COBRA would even apply to such a situation, and anyway that is a very termporary coverage.

Megacorp offers a similar situation and calls their continuing coverage "secondary" to Medicare but is unable to explain how "secondary" compares to the government mandated terms involved in actual Medigap. Megacorp does offer a Healthcare Reimbursement Account that helps pay for Part B and/or Medigap if the retiree opts out of the Megacorp medical plan.

I think health coverage in old age is too important to take a chance on not understanding what you are actually enrolled in.
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How About Medicare Advantage (Part C)

Postby mur44 » Thu Aug 05, 2010 4:17 pm

Since you are currently working, you have options:

1. Enroll now in Medicare Part A (No premium). No need to
enroll in Part B. As long as you are working, your
employer plan is your primary. After you retire from job,
you can enroll in Part B without any penalty premium.
Your total cost is $2,800 + $360 = $3,160.

2. Consider a Medicare Advantage Plan; you will have to
enroll in Part B ($110.50 per month). Depending on
how your annual $2,800 is spent currently, you may be
able to save. Use www.medicare.gov to calculate
your annual cost. Medicare Advantage is all in one
and is OK for healthy individuals.

3, If you want gold standard health insurance, take
Parts A, B, D and then a Medigap plan.

Also, you need to make sure, your dependents are
covered for health insurance. Please note that Medicare
is individual and not family coverage.



Disclosure: I am a Volunteer Medicare Counselor from NJ
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Re: Medicare vs. employer's HDHP

Postby grabiner » Thu Aug 05, 2010 10:28 pm

samjuno wrote:I know the cost of going on Medicare (parts A,B,D + medigap) will probably be at least $250-$350/month. And the penalty for not signing up for Part D will last forever once I do sign up.


Check your plan description. If you keep your employer plan and the plan provides comparable prescription drug coverage, you may not have to pay the penalty for enrolling in Part D late.

You can keep an HDHP even with Medicare (although you might want to change to a different plan if your employer offers one); however, you can't contribute to the HSA once you get Medicare. The plan documentation may also tell you how the plan is coordinated with Medicare; with both Medicare and the old plan, you may get Medicare benefits even before you have met the plan deductible.
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Part B penalty + HDHP

Postby samjuno » Fri Aug 06, 2010 2:53 am

My group HDHP is not a "credible plan" in terms of Part D, so there would be a penalty in delaying signing up for it.

It's unclear if I delayed signing up for Part A & B whether it would trigger a Part B penalty later.

I attended a Medicare info session today & was told the employer's plan would have to be "credible" along with my being employed in order to escape a Part B penalty when I eventually apply.

I called Social Security & was told they only care if I was working while on my employer's plan & that's all they would require not to assess a penalty for Part B.

If I could trust that information, I would delay Medicare entirely and just stay on my HDHP AND keep contributing to my HSA for another year. The tax savings would put that alternative way ahead of any others if the only penalties involved would be with Part D.

Medicare seems to be in flux right now and no one seems confident the dust has settled yet, which scares me enough to want to stay put.

Thanks for all the helpful input........

sam
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Part B Penalty + HDHP

Postby mur44 » Sun Aug 08, 2010 9:13 am

[quote]I called Social Security & was told they only care if I was working while on my employer's plan & that's all they would require not to assess a penalty for Part B[/quote]

What Social Security told you is 100% accurate. No penalty
for late enrollment if covered by employer health insurance,
as long as your employer has more than 20 employees.

[quote]Medicare seems to be in flux right now and no one seems confident the dust has settled yet, which scares me enough to want to stay put[/quote]

The recent act called Patient Protection and Affordability Care Act
added some additional benefits but it did not change Medicare.
By the by, Medicare changes happen all the time.


Part A is free and as such no penalty is not applicable.


[/b][quote][/quote]
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