Turning 65: Medicare and the other insurance transitions

Turning sixty-five is the one birthday with a federal program attached to it, and the paperwork is not confined to Medicare. Employer health coverage may end or change; a health savings account has to stop receiving deposits; group life insurance from work is often about to disappear; the auto policy is rated differently; and the last realistic window for long-term care underwriting is closing. Each of these has its own timing, and a few of the deadlines carry penalties that last for life.

This article is a sequence rather than a plan recommendation. We are an independent agency and we do not represent every plan available in your area, so nothing here says which plan to choose or promises that a particular plan exists where you live. It explains the mechanics so that the choices are made on time and in the right order.

Medicare: the parts and the first window

Original Medicare has two halves. Part A covers hospital stays and is premium-free for people who paid into the system through work for long enough. Part B covers doctors, outpatient care and equipment, and carries a monthly premium that is deducted from Social Security once benefits start. Part D is prescription drug coverage bought from a private insurer. Medicare Advantage, sometimes called Part C, is a private plan that replaces the Original Medicare benefit delivery and usually folds in drug coverage; Medigap, or Medicare supplement, is a private policy that sits alongside Original Medicare and pays the deductibles and coinsurance it leaves behind.

The initial enrolment window is measured around the month of the sixty-fifth birthday: it opens some months before and closes some months after. Enrolling in the months before the birthday means coverage starts the first of the birthday month; enrolling later inside the window can delay the start. Someone already drawing Social Security is usually enrolled in Parts A and B automatically and receives a card in the mail; someone who has not started benefits must apply. The federal Medicare site and the Social Security Administration are the authorities on the exact dates for your birthday, and they are the sources to confirm them against.

Still working at 65: the creditable coverage question

If you or your spouse are still working and have health coverage through that employment, you may be able to delay Part B without penalty. The rule turns on whether the employer coverage counts as creditable in Medicare's terms, which depends on the size of the employer, and on whether the coverage is from current employment rather than retiree coverage. Coverage from a larger employer generally lets you delay; coverage from a small employer generally does not, because Medicare becomes the primary payer and the group plan may pay as though you had enrolled even if you did not.

Two arrangements that people assume are creditable usually are not. COBRA continuation after leaving a job does not count as current employment coverage for Part B purposes, and neither does a retiree health plan. When the employment or the coverage ends, a special enrolment window opens for Part B, and the employer must complete a form confirming the dates of coverage. Miss that window and the next chance is the general enrolment period each year, with a late enrolment penalty added to the Part B premium for as long as you have Part B. Drug coverage has its own creditable test and its own penalty, calculated on the months you went without it.

The Medigap window is a different window

A Medigap policy has one open enrolment period, and it is tied to the Part B effective date, not to the birthday. During that stretch a carrier must sell you any Medigap plan it offers in your state at the standard rate without asking health questions. Once the window closes, most carriers can underwrite: they can ask about health, charge more, or decline. There are guaranteed issue rights that reopen the door in specific situations, such as an employer plan ending or a Medicare Advantage plan leaving your area, but they are narrower than the initial window and they do not cover a simple change of mind.

The practical consequence is that the Advantage-or-Medigap decision is more one-way than it looks. Choosing Advantage at sixty-five and moving to Medigap at seventy usually means underwriting. A few states have added an annual window around the birthday that lets an existing Medigap holder switch to a plan of equal or lesser benefit without underwriting; whether that applies where you live in Arizona, Nevada, Utah or Idaho is a question with a state-specific answer, and the state's insurance department is where to confirm it.

The health savings account has to stop

A health savings account can only receive contributions while you are covered by a qualifying high-deductible plan and by no other health coverage, and Medicare counts as other coverage. Once Part A is in force, contributions must stop, and because Part A enrolment can be backdated when you apply after sixty-five, contributions made in the months before the application can turn out to have been made after the effective date. The account itself stays yours; the balance can still be spent on qualified medical costs, including Medicare premiums other than Medigap.

Suppose a person turns sixty-five in March, keeps working with a high-deductible plan, contributes to the account through December, and then applies for Medicare in January with Part A backdated by several months. The contributions inside the backdated stretch are excess contributions and have to be withdrawn, with any earnings, before the tax filing deadline to avoid a penalty. The example uses no dollar figures because the rule is about months, not amounts: stop contributing ahead of the Part A effective date, including any backdating.

The other policies that move in the same year

Medicare is the loudest change and not the only one.

• Group life insurance. Employer term coverage usually ends at retirement, sometimes reduces at sixty-five even for those still working. Check the certificate for conversion or portability rights and the deadline to use them, and decide whether an individual policy is needed at all now that fewer people depend on the income.
• Long-term care. If it is going to be bought, underwriting is easier before health history accumulates. A traditional policy, a hybrid life policy with a care rider, or a plan to self-fund are the three options, and the decision does not have to be insurance.
• Auto. Mileage falls when the commute ends, which usually lowers the premium, and some carriers offer mature-driver course credits. The liability limits should stay where they are; retirement does not reduce what a judgement can take.
• Home and umbrella. Nothing changes because of the birthday, but the annual review that this year forces is a good moment to check dwelling limits against rebuild cost and to confirm the umbrella still fits.
• Beneficiaries and ownership. Retirement accounts, annuities and life policies should show the people you currently intend, with contingents named.
• Dental and vision. Original Medicare does not cover routine dental or vision, so stand-alone policies or an Advantage plan's extras are where that coverage comes from, and the choice affects the Advantage-or-Medigap decision above.

A sequence for the year

Nine months out, read your employer plan documents and find out whether the coverage is creditable and whether it changes at sixty-five. Six months out, decide whether to delay Part B and stop HSA contributions ahead of the Part A date. Four months out, apply for Medicare if you are enrolling, and compare Medigap and Advantage with the drug plan built in. In the birthday month, confirm Part B is in force and use the Medigap window before it closes. In the same quarter, handle the group life conversion and the long-term care decision, and hand the auto carrier the new mileage. The dates are approximate on purpose; the federal and state sites carry the exact ones for your birthday.

How to use this

Tell us the birthday, whether you or a spouse will keep working and for whom, whether you hold a health savings account, and what group life and long-term care coverage exist today. We will lay out the windows in date order, compare the Medigap and Advantage routes without promising that a particular plan is available where you live, and put the life and auto changes against the carriers we represent. If the employer coverage is creditable and the right move is to delay everything a year, that is what the analysis will say.