If you’ve read many of my articles, you already know that I’m a retired financial advisor. My specialty was working with pre-retirees who I’d meet through their employer.
It was a great way to meet a lot of people who had some similarities in their finances. After all, if I worked with their company retirement plan at least they had that in common. I would start by helping the employee figure out their goals, and decide how the 401(k), 403(b), 457, or pension plan could help them meet their needs.
Now that I specialize in Medicare planning, I’m getting different questions. For example, “Do I need Medicare if I have Retiree Insurance?”
In general, the answer to this question is “yes”, and you can read more at https://medicarequick.com/medicare-and-employer-coverage/
Although not as popular as it once was, some companies still offer retiree medical benefits, and these plans vary widely in what they offer. I’ve seen plans that were so good that I’ve joked about going to work for that company just to have the ability to join. Other plans are not great at all. I could easily save the retiree money by helping them join a plan in their area open to everyone on Medicare.
How do I help the retiree decide? It’s simple but a bit time-consuming. Because I’m no longer a financial advisor (happily retired after 30 years) I cannot charge a fee to review a retiree’s plan.
I’ve developed a list of questions that anyone can use to help determine whether they should sign up for their company’s retiree plan or just go on original Medicare, along with a Medigap (Medicare Supplement Insurance) or a Medicare Advantage Plan (Part C).
Be sure and ask these questions prior to signing up for Medicare Advantage or Medigap outside of your retiree plan:
Is the retiree medical plan primary or secondary to Medicare?
For most plans, it will always be secondary to Medicare. This means that you MUST sign up for Medicare Parts A and B or the Plan won’t work. https://medicarequick.com/medicare-and-employer-coverage/
Is your retiree medical insurance “creditable”?
Creditable coverage, in general, indicates whether it is as good as Medicare. But not always. For example, COBRA. Although COBRA coverage normally includes the exact same coverage you had while you were working, it is not creditable according to the Medicare rules. Because of this, be very careful when selecting COBRA if you are eligible for Medicare.
What will the retiree plan cost for the employee and spouse, if applicable?
Is there a monthly premium for the retiree health plan? If so, what is it? What is the monthly cost for the spouse? You’ll need this information when comparing the retiree plan with plans such as Medicare Advantage or Medicare Supplement insurance.
Does the plan cover any part of my Part B costs, or is there a stipend I might miss out on?
Some retiree plans give a stipend that covers some or all of your Part B premium. Some even give an annual amount to spend toward purchasing a plan on your own. These stipends usually come with rules, such as using a particular agency to handle your enrollment so be sure to find out what the rules are prior to signing up with a local insurance broker. Sometimes it’s allowed, and sometimes it isn’t. We’d hate to see you lose thousands of dollars because you didn’t know.
How do I determine what my drugs will cost?
Your enrollment guide will tell you how much drugs cost based on the tier level your drug is on. But drug tiers aren’t standardized. This means that each insurance company’s plan gets to decide what tier level your drug is on. Just because your neighbor has a plan with Aetna that covers the drug as a tier 1 doesn’t mean your plan with Aetna will cover the same drug at the same level. Be sure and ask if there is an online lookup tool so that you can look up the cost of your exact drugs. And don’t forget to look them up.
Also, plans are allowed to change the tier level of the drugs they cover. You’ll need to verify how those changes affect you every year.
Is the retiree plan subject to the “donut hole”? In other words, once the insurance company and I spend a certain amount, will my costs go UP to 25% of the cost of the drug?
The “donut hole” is actually a nickname for the “coverage gap”. The coverage gap has come down quite a bit, but it still exists. Basically, what happens is that when you and the insurance company spend a certain amount (which changes every year) then your copays go up to 25% of the cost of the drug.
Some, but not all, retiree health plans do not have a donut hole. This is a very important feature for you to think about, not only for what’s happening in your life now but for the future as well. I wrote an article for financial advisors that explains how the donut hole works. You can read that article at MedicareQuick.com/advisorhub
You don’t have to be a financial advisor to understand that if your costs go up to 25% and you are on an expensive drug, you could be in trouble. The drugs you usually see on TV commercials are often in this category.
If your plan has a $30 copay for a drug that costs $1500 and there is no donut hole, that is a better plan than one that has a donut hole. In this situation, if you hit the donut hole then your cost would go from $30 to $375. The plan without the donut hole could wind up saving you a lot more money if you wind up on expensive medications in the future.
Not taking any expensive medications right now? Be sure to take into consideration your family history and your lifestyle when trying to determine whether you might be on expensive medications in the future.
Of course, none of us have a crystal ball that tells us the future, but we can give our best guess based on what we already know.
Is your retiree medical plan a Medicare Advantage Type Plan (i.e., HMO or PPO)?
Retiree Medicare Advantage Plans often look different from a plan that any Medicare recipient can get in your area. These plans can be negotiated by a union or a benevolent employer. If it is a Medicare Advantage type program, here are some additional questions to ask:
- What type of plan is it (i.e., HMO or PPO)? HMO plans (Health Maintenance Organizations) generally require that you go to your Primary Care Physician before seeing a specialist. This is called getting a referral. Sometimes they’ll allow you to see certain specialists without one, so be sure you understand your plan. If you go out of network on an HMO your visit will normally NOT be covered, and you’ll have to pay 100% of the cost for that visit. PPO plans (Preferred Provider Organizations) allow you to see any doctor in-network without a referral. If you go out of network there is normally a higher cost, but I have seen plans that have the same co-pay or co-insurance amount for in and out of network providers. Be sure and check the details.
- What is the Maximum out of Pocket (MOOP)? The maximum out of pocket is the most you’ll have to pay for medical care in the year. The MOOP is very important if you wind up in the hospital, skilled nursing, or need expensive treatment such as chemotherapy. Some plans, but not all, include medications in this MOOP. A plan that includes medication in the MOOP could be more beneficial than one that doesn’t.
- If PPO, and I go out of network what could my costs go up to? If you have the ability to sign up for a PPO type plan (different from a Medigap type plan) then be sure to find out what happens if you go out of network. What will the MOOP go up to? What will the copays or co-insurance be? And what happens if the provider I see doesn’t agree to accept the plan?
- Does the plan have “pre-authorization” for procedures? Unlike Medigap plans, most Medicare Advantage plans require pre-authorization. When pre-authorization is required, and your doctor thinks you need a procedure, therapy, or surgery, the insurance company must approve it. This is a cost-savings measure that original Medicare and a Medigap plan generally doesn’t require.
- If you haven’t asked if the plan is subject to the donut hole (coverage gap) be sure to do so.
Do you offer a Medicare Supplement Type Plan?
If your retiree plan includes Medicare Supplement Insurance, you’ll want to ask which plans are offered, and what are the premiums for Plan G, if offered for (my sex, my age, my zip)?
Ask if it’s a special plan designed for your company or if it’s a standardized plan that anyone could get on their own.
Standardized plans are known by their letter. For example, as of the writing of this article, Medicare beneficiaries whose effective dates are after 12/31/2020 have Plan G as the highest-level plan they can purchase. Plan G covers all the copays, coinsurance, and deductibles of Medicare except for the Part B deductible. In 2021 the annual Part B deductible was $203.
Can I join at any enrollment period, for example, if I opt out now can I join later?
One of the most important questions you can ask is whether you can come into the plan later in life. If you can do this, then your options just became much better. For example, if you currently don’t have any medical conditions and do not take any medications but you have a family history of cancer, then you could opt to take a less expensive option that you can purchase in your area.
Later in life when you start taking medications or start getting diagnosed with chronic disease, then you can switch to your retiree health plan that covers your condition at a lower cost.
Of course, things can change in the future so be sure to keep on on company policy regarding re-entry.
If the employee passes away, does the spouse get to keep the plan?
None of us like to think about dying, but it’s another very important question. What happens when you die? If you have a spouse on your plan, be sure and find out whether the spouse can keep it. Some companies will allow the spouse to keep the plan and others won’t. You’ll want to have a backup plan if your company doesn’t allow your spouse to stay on the plan after you’re gone.
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