Do not fall into the Medicare coverage trap!
Let’s look at a hypothetical situation. You find yourself retiring and your employer has a very good medical plan. Rather than signing up for Medicare (Part B) which covers the cost of healthcare services like regular physician visits, outpatient surgeries and diagnostic procedures, you decide to go on COBRA to keep your employer’s great health care benefits.
Eventually you notice that your employer’s plan has begun to reject your medical claims. Since you have religiously been paying your COBRA premiums in full and on time each month, you call the employer’s health care provider to inquiry why it is not paying your medical claims. You learn that the provider considers its plan to be a secondary plan and you are told that Medicare is your primary provider. These claims must first be submitted to Medicare for payment and that the employer’s plan will only pay for claims not covered by Part B. But you say that you never enrolled in Medicare but elected to be covered by your former employer’s plan. Then you learn that once you leave your employer’s job, you must enroll in Medicare Part B within 8 months after the month you retire, even if you decide to continue to be covered by your employer’s plan. This 8-month period is known as the “special enrollment period”. Although you do not have Medicare coverage, since you are eligible for such coverage, Medicare and not your employer’s health provider is your primary health care provider. So the hefty COBRA monthly premium you have been paying is money wasted.
To add injury to insult, if the employer’s insurance provider discovers that it has been paying your medical claims in error, it may seek reimbursement from you.
Mad as can be, you request an application to apply for Medicare. Now you hear more bad news. There is a Medicare enrollment period that begins 3 months before the month you reach age 65 and ends 3 months after the month you reach age 65. What happens in your case since you missed this enrollment period? You will need to wait until the next general open enrollment period which could be several months later.
Can it get any worse? Yes it can. You will also be hit with a lifetime penalty for missing the Medicare enrollment period. For each 12-month period you were not covered when eligible, you’ll pay a penalty of 10% of your Part B premium. “Lifetime” means that you will be paying this 10% penalty forever.
Planning Tip: If you plan on retiring in the next 6 months, we recommend that you consult with a health care specialist to understand your health care options and responsibilities. That person has the necessary training and experience to explore your options and the health care coverage rules to avoid a lapse of coverage.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.