Medicare and Retirement: Planning for Your Healthcare Coverage and Costs

April 12, 2024
Medicare and Retirement: Planning for Your Healthcare Coverage and Costs

After punching a timeclock for 40+ years, you’re looking forward to the golden years of retirement—and you’ve earned them! As you prepare for this next chapter in your life, it’s easy to get excited about the freedom of no boss and no job, but don’t overlook the things you may be losing with that job—like your healthcare coverage.

Will your employer continue to offer you healthcare coverage as a retiree? How does this retiree coverage work with Medicare? Will your retiree coverage end when you become eligible for Medicare?

The Wandacare Team has the answers to these questions and more, with crucial insights to planning for your healthcare coverage and costs in your retirement years.

Which Comes First: Retirement or Medicare Eligibility?

You may already have your retirement date circled on the calendar. If you do, where does that date fall in relationship to your Medicare eligibility date? In short, which comes first—your retirement date or your 65th birthday and Medicare eligibility?

This may sound like a “which came first—the chicken or the egg” scenario, but it’s important to know for understanding what healthcare coverage and benefits you have, when (or if) they may change, and what enrollment forms and dates you need to be aware of. If you are the primary breadwinner with a stay-at-home spouse, also keep in mind that your retirement date and Medicare eligibility date can affect their healthcare coverage.

If you’re retiring before you reach age 65 and Medicare eligibility, you have a couple of options for your healthcare coverage:

  • Retiree Health Insurance: Some employers offer this coverage to retiring employees and their spouses. It may be an extension or continuation of your current employer health plan, or it may be a different plan altogether. As you move from an employee plan to a retiree plan, the benefits covered and your share of costs (e.g. premiums, copays, coinsurance, deductibles) may change.

If you’re employer does not offer retiree coverage, you’re left with these options:

  • COBRA: You can continue to be covered by employer insurance by going COBRA. However, as the employer will no longer be paying a portion of the premium, this can be an expensive option. COBRA is not a good option if you are 65 years of age or more.
  • Individual Health Insurance: You can buy insurance plan coverage through the Health Insurance Marketplace until you become eligible for Medicare coverage.

If you’re retiring at or after age 65, you’ll have your employer-provided health coverage (as an employee and/retiree) and then Medicare coverage. In many cases, the two work together in a complementary way to provide you with comprehensive healthcare coverage. You’ll want to review your employer plan to understand your specific benefits and coverage as a retiree, but let’s look at some typical ways employer coverage and Medicare coverage fit together.

Medicare Coverage and Eligibility

Regardless of your retirement date or continuing employer coverage, you still want to complete your Medicare enrollment. For Medicare Part A, if your employer coverage is good, you may want to enroll for Medicare Part B upon retiring. This is during your Initial Enrollment Period (IEP), which begins three months before your 65th birthday month, includes your birthday month, and continues for three months after your birthday month. You’ll complete your initial enrollment for Medicare through the Social Security Administration (SSA) to verify your eligibility.

If you plan on working past age 65 and are covered by your employer’s healthcare plan, you can defer your Medicare coverage and be eligible for a Special Enrollment Period (SEP) later when that plan coverage ends. The SEP typically gives you 60 days from the time your other coverage ends to enroll in Medicare without facing late enrollment penalties.

If you are eligible for Medicare and do not have other acceptable coverage, but fail to enroll within the appropriate Medicare enrollment periods, you could be facing a late enrollment premium penalty for the life of your Medicare coverage.

Retiree Health Insurance with Medicare

Retiree health insurance serves to extend or continue your employer health coverage, especially if you retire before reaching age 65 and Medicare eligibility. Retiree health insurance coverage then often works with Medicare, complementing or supplementing those benefits.

Once you turn 65, your retiree health insurance plan may require you to enroll in Medicare Part A (hospitalization) and Part B (medical) as a condition of maintaining coverage. If an employer’s plan has more than 20 employees, the employer’s plan is the primary payer and Medicare is the secondary payer.

How to Save on Healthcare Costs in Retirement

While you have several options for your healthcare coverage in retirement, understanding how to manage healthcare costs throughout your retirement is essential. Here are some tips on how to plan for (and save on) your healthcare costs:

Understand Cost Sharing

Retiree health insurance plans often involve cost-sharing arrangements, where retirees are responsible for paying premiums, deductibles, copayments, and coinsurance. The amount of cost-sharing can vary depending on the plan type and coverage options. You’ll want to look at these costs to understand what your retiree coverage pays, what Medicare pays, and what you may then have to pay out of pocket toward covering your overall healthcare expenses in retirement.

Look at Medicare Supplement Plans

While Medicare provides essential coverage, it may not cover all your healthcare needs. If you have retiree coverage from your employer, it can serve to supplement your Medicare coverage. But if you have no employer offered coverage once you turn 65, you may want to consider buying a Medicare Supplement plan, or Medigap. These plans from private insurance companies are designed to fill in the “gaps” or costs that Medicare Parts A and B do not cover, such as deductibles, copayments, and coinsurance.

Avoid Late Enrollment Penalties

Medicare late enrollment penalties are not one-time late fees. They are added to your monthly premium, assessed based on how long you went without coverage, and you’ll pay them for as long as you have that coverage, which could be for the rest of your life! Again, this is why it’s so important to complete your Medicare enrollment as soon as you become eligible.

Budget for Long-Term Care

Long-term care in a nursing home or through assisted living can be a significant expense in retirement. And it is an expense not covered by Medicare. This “custodial care”—the long-term care provided by assisted living homes for individuals who can no longer live on their own—is not covered by Medicare Part A hospitalization. You may want to consider purchasing a long-term care insurance policy or start setting aside funds now to cover your future long-term care needs.

Evaluate Your Healthcare Plans and Needs Annually

Healthcare costs, plan coverage options, and your own health can (and most likely will) change as the years go by. That’s why it’s important to regularly review your coverage costs and benefits and evaluate your current and changing health to ensure your plan is still the best fit and the best price. Retiree health insurance plans can change year to year due to employer decisions and contributions, so watch for any notifications on updates to benefits, coverage, premiums, and provider networks. You can opt to make plan changes and new selections every year during open enrollment, with the Medicare Annual Enrollment Period running from October 15 to December 7.

When you work with an experienced Medicare Advisor you can be confident that you’ll always have the healthcare coverage that meets your care needs and budget for the entirety of your retirement. The Wandacare Team’s licensed Florida agents are here to help you with personalized healthcare guidance for this exciting new chapter in your life.


Part 3: Embracing Life Transitions

Part 3: Embracing Life Transitions

This marks the final chapter in our 3-part series on navigating Medicare after 65. We’ve covered securing healthcare...