Don’t Get Penalized By Medicare After You Retire

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney

Getting near retirement age and/or contemplating retiring past age 65? While you may decide to remain with your employer’s health plan rather than signing up for Medicare, better understand several risks with doing so like being without insurance for several months, and/or paying an annual penalty for life, if you don’t follow Medicare’s strict enrollment rules.

Here’s why. When you turn 65, you’re eligible to sign up for Medicare Part B. Medicare “B” covers outpatient services. For whatever reason you may decide that it’s easier or cheaper to continue with your employers coverage – either opting to take the retiree medical benefits or going with COBRA (generally not a good option). Under the federal COBRA law, companies with at least 20 employees must allow former workers to buy into the group health plan for up to 18 months after retirement.

That could be a big mistake. When you turn 65, you can forgo Medicare without consequence if you are still working and are covered by your employer’s group health plan. But once you leave the job, you must enroll in Part B within eight months after the month you retire, even if you continue to be covered by your employer’s health plan. This eight-month period is known as the “special enrollment period”.

If you miss this deadline and your employers coverage expires, you could find yourself uninsured for many months. You will not be allowed to enroll in Medicare Part B until the next “general enrollment period,” which runs from January 1 to March 31 and even then your coverage won’t begin until July of that year. Plus, you may be subject to late penalties.

Some retirees only realize they have made a mistake when their group health plan rejects their claims. Some plans state that when you turn 65, they will pay only for medical expenses that Part B won’t cover. Their reason is because the former employer’s plan will consider the government insurer to be the primary payer.

These enrollment rules came as a big surprise to one client. He left his job as a financial adviser at age 69. Because he liked his employers plan, he decided to go on COBRA rather than enroll in Medicare.

Over the next year or so, the plan rejected a couple of his medical claims. Its reason: Because he was eligible for Medicare, the plan considered itself to be the secondary payer. He was paying $1,000 a month in premiums for nothing. He wanted out.

By that time however, he had missed the eight-month enrollment window. When he went to sign up for Medicare in July, he was told he would have to wait until January 1 to apply and that coverage would not begin until July 1st of the following year.

To add insult to injury, he was hit with lifetime penalties for missing an enrollment period. For each 12-month period you delay enrolling when you’re eligible, you’ll pay a penalty of 10% of your Part B premium – FOREVER.

To discuss your NJ Elder Law matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.