Transitioning from Private Health Insurance Plans to Medicare
As you approach retirement age, you may be anticipating transitioning from your private insurance to Medicare, which is a federal health insurance program that provides coverage to individuals who are 65 years or older. It’s important to consider a wide range of factors involved in making the transition to help ensure that you are getting the most appropriate coverage for your needs.
Here are some of the critical factors to consider:
Medicare eligibility begins at 65 years of age. This is called your Initial Enrollment Period (IEP). It lasts for seven months, starting three months before you turn 65 and ending three months after the month you turn 65. For example, if your birthday falls on a date in May (outside of May 1st), your Medicare eligibility would be from February to August that year.
If your birthday falls on the first day of a month, then your enrollment window is one month earlier. Using our example above, if your birthday were May 1st, your window would be from January to July.
You may want to maintain an alternative health insurance plan until you’re sure your Medicare coverage has begun.
Essential items to keep in mind when preparing to transition to Medicare include the following:1
- There are deadlines for signing up for Medicare each year. If you did not sign up initially around your 65th birthday, you can sign up between Jan 1st and March 31st every year.
- You can adjust your Medicare plan annually during open enrollment from October 15th to December 7th. You can make adjustments, depending on your lifestyle.
- Avoid the penalty: It is crucial to not miss your 7-month Initial Enrollment Period. If you do, you may have to wait to sign up and pay a monthly late enrollment penalty for as long as you have Part B coverage. The penalty goes up the longer you wait.
When Does Coverage Begin?
If you enroll in the first three months before your 65th birthday month, your Medicare coverage will begin the month of your 65th birthday. Coverage will begin the month following your enrollment if you enroll at any time after that.
Canceling Your Marketplace or Private Plan
Like any membership or subscription plan, canceling your current private or marketplace plan can be a process, either because of an insurance agency’s policies or personal precautions.
Healthcare.gov provides a guide to canceling current health insurance plans when transitioning to Medicare. This guide is fully interactive and will tailor itself to your unique circumstances using a variety of questions, such as the following:2
- Do you qualify for Medicare?
- Will you be getting benefits from Social Security or the Railroad Retirement Board (RRB) at least four months before you turn 65?
- For whom is the marketplace coverage ending?
Along with the other inquiries, this guide can help you navigate the intricacies of Medicare setup.
Retiring Before 65
If you're prepared to retire before 65, you will likely need an alternative form of insurance until you’re eligible for Medicare. There are a few choices for you to consider:
- Your spouse's plan: If available, your spouse's plan could serve as an insurance alternative until you're eligible for Medicare. Availability will depend on their employer.
- COBRA: Health benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA) provides rights to temporary continuation of group health coverage for certain employees, retirees, and family members. COBRA can be expensive, but it might be helpful for a person who will soon turn 65 years old.
- Purchase an insurance plan from the market: A market-based plan could be a solution and offer a wide range of coverage choices and costs.
Working Past 65 with Medicare
Although Medicare is often associated with retirement, many individuals may want or need to continue working after the age of 65.
If you wish to continue working past the age of 65, you're still eligible for Medicare. You may qualify for employer health care and Medicare, depending on your situation. In cases like these, one will act as your primary source of coverage and the other as a secondary source.3
Some things to keep in mind when working past 65 are:
- If an employer has 20 or more employees: You can either delay Medicare coverage, drop employer coverage for Medicare, or have both.
- If an employer has fewer than 20 employees: You should enroll in Medicare during your IEP.
- If you have coverage through a spouse’s employer: Your choices are affected by that employer's rules.
With many different choices available, see what works best for you. Medicare gives you the option to do both without punishing you based on your choice.
Some additional details you'll want to consider when transitioning from private insurance to Medicare include the following:
- The cost of coverage
- The types of services covered
- The providers that accept Medicare
You’ll also want to consider how your current coverage will change when you switch to Medicare, as well as any additional benefits or limitations you may encounter.
Supporting Your Transition
Transitioning from your current healthcare plan to Medicare can seem daunting, but you're not alone. Independent insurance agents specialize in Medicare enrollment, and insurance carriers provide a Medicare Advantage Plan. There are also government-curated guides available on the Healthcare.gov and Medicare.gov websites.4
Don't hesitate to get in touch with our offices if you or someone you know has questions about health coverage during retirement. We may have some resources that provide some insights.
1 Fidelity.com, October 6, 2022
2 Healthcare.gov, December 20, 2022
3 Uhc.com, December, 20, 2022
4 Medicare.gov, December 20, 2022