Dear Tom and Alan:
Well, it’s finally time for me to retire. I am 85 years young and have loved my job for many years, but my wife says it’s time to enjoy life and travel.
I will need to get off my group plan, of course, but the cost of COBRA would be close to $3,000 for my wife and me.
Looking at my Medicare card, I have been on Part A since Oct. 1, 1999, and Part B since July 1, 2005. I don’t recall doing anything to enroll in either one. Oh, well.
My question is … what’s out there for me?
Tom: Congratulations, Harold, and thanks for the great question. I can’t blame you for wanting to avoid COBRA. Paying $1,500 every month for the next 18 or so months would not be fun.
Fortunately, you’re in a great position to add to your current Medicare A and B.
With a letter from your employer, on company letterhead, stating that you and your wife (by name) will be losing your group health insurance coverage and the exact end date, you can maximize your health plan.
Al: Medicare A & B all by itself is pretty good. Basically, you’re getting 80 percent medical coverage for the price of Medicare Part B (that’s $135.50 for most people this year).
Our default recommendation, for those who can afford it, is a Medicare Supplement. Filling in the “gaps” of Medicare, your plan becomes 100 percent medical coverage.
Tom: And, even at the young age of 85, the supplement is only $222 per month at today’s rates.
Because of the above-mentioned employer letter you will be accepted by the Medigap plan of your choice with no preexisting conditions restrictions.
Along with this Medicare supplement, which covers doctors, hospitals and labs, you will then need to add a prescription drug plan known as Medicare Part D.
Al: Part D is a bit more complicated than just adding a supplement to your Medicare A & B.
The program is overseen by the Centers for Medicare & Medicaid Services (CMS) and has some strict regulations and penalties.
For example, unless the drug benefit in your group plan was deemed “creditable” you would be subject to penalties going back to 2006 for not having sufficient coverage.
Assuming your previous Rx benefit was “creditable” you would still need the letter from your employer ending your coverage.
Tom: Here come the federal terms. The open enrollment period for drug plans (AEP) is Oct. 15 to Dec. 7 each year.
Outside of that time frame you would have to have a Special Enrollment Period (SEP) to sign up.
Harold’s SEP is “Loss of Employer Group Health Plan,” so he will be accepted (unless somebody messes up the paperwork).
For each month you could have had drug coverage, and didn’t take it, the penalty is approximately $.36 per month added on to the premium for as long as you live.
So, skip the COBRA and take the plans.