It seems rather simple – turn 65 … go on Medicare … problem solved. But the reality is sometimes different. Failing to understand how your health insurance coverage works can be costly.
Drew Grider, President of the Retirement Network, learned this lesson just in time when a 67-year-old client of his scheduled surgery just days after his planned retirement. Before his client stopped working, Grider checked to make sure there was no lapse in health insurance coverage.
It turned out that the client had received incorrect information from his employer’s insurer. An insurance company representative told the client that, although he was over 65, he did not need to sign up for Medicare immediately. Instead, the rep said, he could extend his employer-provided health insurance for up to 18 months under the Consolidated Omnibus Budget Resolution Act, or COBRA, to ensure his spouse and children would continue to be covered.
But that was only part of the picture. A closer review of the client’s health insurance policy uncovered a provision that specified that Medicare would automatically become the primary insurer for anyone who retired and was at least 65 years old. Translation: Without Medicare coverage, the client would have been on the hook for paying 80 percent of the surgery and related medical expenses, and his secondary insurer would only have to pay the remaining 20 percent of the costs.
The solution in that case was to extend the client’s employment by one month to ensure the employer-provided insurance plan covered the surgery and related costs. Had this individual actually stopped working and gone on COBRA he could have medical bills that would significantly deplete his retirement funds.
The stakes for making the right decisions around health care coverage are high. As people approach age 65, they may need to take the time to review and understand the insurance options, the coverage and the cost.
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