1. Tom is 70 years of age. His wife passed away just under a year ago. She worked for a large company and her health insurance covered him. The company allowed him to go onto COBRA and they paid for it but it terminates in November. He has never enrolled in Medicare A or B (shouldn’t they have advised him to enroll in Medicare?). Is he subject to a penalty since he was eligible for Medicare and that he actually may not be able to enroll in Medicare until the next Open Enrollment Period (January 1st)? If so will he also be eligible to buy a Supplement without medical underwriting or is his only option an Advantage Plan?
A: According to the rules, Tom should have signed up for Medicare instead of transitioning on his wife’s plan to COBRA because COBRA pays secondary to Medicare. If his COBRA insurer has been paying first without deferring to Medicare, that was their choice. Another rule he is bumping up against is the enrollment rules. Coming off the COBRA in November, he is well past his special enrollment period, which ended 8 months after the employer plan terminated. This means he can’t enroll in Medicare until Jan. 1, with a Feb. 1 start date. And since it is more than 12 months since he should have enrolled in Medicare, his Part B premium will carry a 10% penalty. He may be okay on the Medigap underwriting since the guaranteed issue period is tied to his enrollment in Part B. He should be able to get a Medigap policy at the same time he enrolls in Part B. The real problem is what he will do for health insurance from November to February. I would first call Medicare and try to enroll now with a November 1 start date. You never know; maybe they’ll bend the rules and let him enroll. If that doesn’t work, I’d call the COBRA insurer and insist on continued coverage through the end of January. They should have told him to enroll in Medicare and now it’s their fault that he doesn’t have coverage because of Medicare’s enrollment rules. If none of those things work, have him call the Medicare Rights Center and see if they will advocate for him. This whole situation could so easily have been avoided if someone had told him at the time his wife’s employer insurance ended that he needed to enroll in Medicare for COBRA to work. Furthermore, he would need to get a Medigap policy no later than six months after that in order to avoid underwriting. Human Resources directors are really falling down on the job here. The COBRA insurers are also to blame. They often pay in the absence of Medicare (because they want to keep the insured’s business) and this leads to coverage gaps and late enrollment penalties when the COBRA ends.
2. George and Mary, both in their early 80’s, have been covered by a “retiree benefit” which was being paid for by the wife’s former employer. The 5-year paid benefit is terminating. They are both on Medicare A & B. Are they eligible to purchase a Supplement without underwriting?
A: George & Mary are victims of the general lack of communication around Medicare and Medigap. Technically, because they are well past their Medigap open enrollment period (which ended six months after they enrolled in Part B), they would be subject to underwriting. But insurers’ policies differ; some are more lenient than others. I would suggest shopping for Medigap insurer or contacting Joseph Financial, LLC who can help.
Employer Medicare Advantage Plan Concerns
3: Maria and Felipe were enrolled into a Medicare Advantage plan by Felipe’s employer when he retired in October 2024. (they thought it was a continuation of his employer group coverage but it’s not). They want to transition to Original Medicare and purchase a supplement. How long do they have to do that with guaranteed-issue rights? Do they need to wait until AEP or can they transition to Original Medicare now? What is the time limit?
A: They do not need to wait until the annual open enrollment period to switch to Original Medicare. Because they are still in the first year of having the Medicare Advantage plan, they have a guaranteed right to buy a Medigap policy until October 2025. All they need to do is contact Joseph Financial, LLC and submit an application, then drop the Medicare Advantage plan. They’ll also need a separate drug plan, which the pros at Joseph Financial, LLC will help them get.
As more employers surreptitiously enroll retirees into a Medicare Advantage plan, implying it’s the “same plan” and without giving them the option to have Original Medicare with a Medigap policy and drug plan, this is seemingly an increasing problem. Maria and Felipe were lucky that they decided to make this switch within the first year, but others will likely wait several years and then possibly be stuck with Medicare Advantage for the rest of their lives because they are unable to get a Medigap policy due to health reasons.
COBRA for wife after husband’s Medicare eligibility
4: Steve and Charlotte are on a group health insurance plan. Steve just turned 65 and will turn part-time and lose his company benefits. He is going on Medicare, but Charlotte is not yet 65. Will Charlotte be independently eligible for COBRA if she wants to stay on the same group health plan? If she is eligible for the group plan via COBRA, will she be able to use her HSA to pay the health insurance premium?
A: Yes, Steve qualifying for Medicare is a COBRA qualifying event for Charlotte. She may use HSA money for the COBRA premiums.
Turning 65, still working, covered by employer plan: what about Medicare?
5: I’m looking for your discussion on best practices for enrolling in Medicare while still working and covered by a plan with more than 20 employees.
A: For a person still working and covered by an over-20 employer plan, the decision boils down to which is the better insurance value, the employer plan or Medicare? Compare costs and benefits in light of your expected health care usage. It’s not an easy task. Their health insurance will be subsidized either by the employer or by the federal government. A generous employer plan will beat Medicare, a stingy one the opposite. Be sure to take the IRMAA into consideration. Don’t forget the spouse. One thing to watch out for is your natural unwillingness to change. You may like the employer plan because you’re familiar with it, while Medicare seems strange and probably not as good. But if you go with original Medicare with a Medicare Supplement, you can probably see your same doctors and may even have more of your costs covered. Employer plans usually cover dental, vision, and hearing, while Medicare does not. (Medicare Advantage plans usually do, but they have their own set of considerations.)
Over 65, staying on employer plan until spouse turns 65, when can he enroll in Medicare?
6: Kevin is currently 66.7. He is part of a large group health plan. He applied for Medicare Part A when he turned 65, however, he remains covered under his plan at work. His wife Sandy, currently age 63, is covered under his plan also. She has health issues. For this reason, Kevin plans on continuing to work until she turns 65 and can get on Medicare. Sandy will be age 65 on March 3, 2027. She will be able to enroll 3 mos. prior to turning 65 with her benefits effective March 1, 2027. My question is regarding Kevin. He is going to continue to work until May of 2027. Can he hop on Medicare part B the same time as Sandy? In other words, does there need to be some sort of qualifying event before he can get on? I noticed that “general enrollment” is from January 1 thru March 31st of each year. Because of that, would it be necessary for Kevin to have a qualifying event? In case you are wondering why Kevin wouldn’t stay covered under his own plan until May, he has to deal with a high deductible and it costs more for him to stay under his plan at work than Medicare Part B and a Medicare Supplement would cost.
A: Kevin’s qualifying event was turning 65. This marked the start of his special enrollment period, which continues until 8 months after he leaves employment. He doesn’t have to wait until he stops working to enroll in Part B; he can enroll any time during his special enrollment period. He could enroll now if he wanted. But given that he wants to stay on the employer plan until Sandy turns 65, he can do that and then drop the plan and get Part B for himself as soon as she has her Medicare. He also has the option of dropping his employer plan coverage and allowing Sandy to be covered by COBRA until she reaches Medicare age.
When must HSA contributions stop?
7: Pat is turning 65 in December who got some “advice” in relation to HSAs and Part A. They said she doesn’t need to stop HSA contributions until she is eligible for Medicare. And, if she were to go on Medicare right away, she would not have a penalty. I’ve always understood you must stop HSA contributions 6 months prior to going on Medicare, whether that is right at 65, or on a later date due to staying on group coverage past 65. Which is correct?
A: Here’s where the six-month confusion comes in: When you apply for Social Security and/or Medicare more than six months after you turn 65, SSA will backdate the Part A application by six months. They will never backdate it to a period before age 65. So, if you apply for Social Security/Medicare at age 65, your Medicare will start on the first of the month you turn 65, and HSA contributions may be made up to the month preceding that month. If you apply sometime after age 65, you must be prepared to have the application backdated up to six months (or to age 65 if that period is shorter) and either stop the HSA contributions in time or back them out sometime before your tax filing deadline. The reason you will have to back out the HSA contributions is because in order to both make a contribution and deduct it on your tax return, you can only have the HSA-compatible, High Deductible Plan in place. Any other plan in place makes those HSA contributions non-deductible.
No penalty even if employer plan has less than 20 employees
8: Joe turned 65 on 10/16/24 and filed for Part A but not Part B. He and his wife’s coverage is with an employer with less than 20 employees. Am I correct that the Part B and D penalty begins after the first full 12-month period that he failed to file?
A: As long as he’s been continuously covered, there will be no penalty, even if his insurance was with a <20 plan. The issue with <20 plans is coverage. These plans are not required to pay primary to Medicare for anyone age 65 or older. His plan is probably volunteering to pay in the absence of Medicare (many do). If he likes the plan and it’s not costing him too much, he should check with the plan to verify that they will continue to pay in the absence of Medicare—look at the evidence of coverage booklet. If there’s no mention of it, it might be a good idea for him to go off the plan, enroll in Medicare, and get a supplement and Part D plan.
Medigap guaranteed-issue following retiree plan
9: Tom and Debbie are two 84-year-olds that have been grandfathered to stay on their small (6 employees) group plan by their insurance company. Both have Medicare A and B. The employer would like to take them off and have them enroll in a Medigap plan. I’ve never heard of the grandfathered rule. (Have you?) Is there a certain time when they can come off the employer plan or just whenever they’d like?
A: The thing they were “grandfathered” into is a plan provision, not a Medicare rule or law. Individual and group plans were allowed to keep the benefits in existence before the Affordable Care Act (Obamacare) became effective. These continuing plans were granted “grandfather” status. Now they need to find a Medigap policy. Fortunately, coming off a plan that pays secondary to Medicare (as retiree plans do) is one of the Medigap guaranteed-issue provisions that allows them to get a Medigap policy without underwriting. They can do this anytime.
Pay Medicare premiums through the business?
10: Hello, I have a client who is a business owner and wants to know if he can pay his part B premiums through his business? Is this allowed?
A: Yes. Self-employed people (who earn a profit from their self-employment) are allowed to deduct their health insurance premiums, including Medicare premiums, on Schedule 1 of the 1040. This is an “above the line” deduction, which means it lowers their AGI.
Americans 65 and over are self-employed more than any other demographic and with changes in retirement norms, the chances you could find yourself self-employed and enrolled in Medicare are greater than ever before. But did you know that if you are profitably self-employed – anything from a consultant to a cupcake shop owner – you can deduct your Medicare premiums and potentially save yourself some money?
Since 2012, the IRS has allowed self-employed individuals to deduct all Medicare premiums (including premiums for Medicare Part B – and Part A, for people who have to pay a premium for it – Medigap, Medicare Advantage plans, and Part D) from their federal taxes, and this includes Medicare premiums for their spouse.
The IRS considers you self-employed if you own a business as either a sole proprietor (Schedule C), partner (Schedule E), limited liability company member, or S corporation shareholder with at least 2% of the company stock.
Planning ahead for the IRMAA
11: Regarding Income-Related Monthly Adjustment Amounts (IRMAA) brackets, Nick retired this year and received approval for reduced IRMAA premiums based on income going forward. In planning for IRMAA, he is trying not to exceed the first tier of surcharges for 2025. My question is what brackets should we be using? Should I be using the 2025 table that says $212,000–$266,000 (Joint Tax Return) is the first surcharge tier?
A: In planning 2025 income—which will affect 2027 premiums—you’ll want to keep income under the 2027 thresholds—which we don’t have yet. But they are inflation-adjusted, so they should be higher than they are now. The first threshold for 2024 premiums for married couples is $206,000. If MAGI for 2023 is under $206,000 (or even a few dollars more than that) there should be no IRMAA in 2025.
If the client is charged the IRMAA for 2024 you may need to appeal again, if the client’s income in 2022 was higher than it is now. It is typical for retirees to appeal two or three times, until their tax returns catch up with their current income levels.
Penalty for late enrollment in Part A?
12: An attorney told Christi that she was supposed to sign up for Part A at age 65 even though she is working for a very large employer. Now she’s frantic because she turned 65 last February and thinks she’ll have a lifetime penalty. Does she? Is she late? Can she enroll for Part A at any time since she is still working or does she have to wait until she leaves employment. Thanks.
A: There is never a penalty attached to Part A. It’s the free portion of Medicare. Christi’s special enrollment period (for Parts A and B) started when she turned 65 and extends until 8 months after she leaves employment. She can enroll in Medicare (Part A only or Parts A and B) anytime during her special enrollment period; she does not have to wait until she leaves employment. If her employer plan is not an HSA there is no reason not to go ahead and enroll in Part A. If she likes the employer plan, she can defer Part B until she leaves employment.
