Planning for a possible health insurance coverage gap is essential, especially when one spouse retires at 65, and the other depends on employer-sponsored health insurance.
In this situation, you might ask, “What has happened to my health insurance now?”
Vincent J. Russo of the Russo Law Group shares some practical insights on this scenario, mainly focusing on Medicare Parts A, B, C, and D and the need to weigh options carefully.
Understanding Medicare, Parts A, B, C, and D
Before exploring your options, a quick refresher on Medicare can help clear the path forward.
- Part A (Hospital Insurance): Covers inpatient hospital stays, skilled nursing care, and some home health services. Most people don’t pay a monthly premium for Part A if they’ve worked and paid Medicare taxes for at least 10 years.
- Part B (Medical Insurance): Covers outpatient care, including doctor visits, preventive services, and some medical equipment. You’ll pay a standard monthly premium (adjusted based on income) and meet an annual deductible.
- Part C (Medicare Advantage): An alternative to traditional Medicare, private insurers offer these plans and bundle Parts A and B, often including extras like vision or dental. Costs vary depending on the plan you select.
- Part D (Prescription Drug Coverage): This helps cover the cost of prescription medications. Like Part C, it’s provided by private insurers, and premiums depend on the chosen plan.
The Spouse’s Insurance Dilemma
If one spouse retires at 65 and enrolls in Medicare, what happens to the other spouse covered under the employer-provided insurance of the now retired spouse?
Unfortunately, employer coverage for the dependent spouse ends. The remaining spouse has a few options:
- Enroll in their own Medicare plan – available only if they are 65 or older. COBRA insurance is available and if elected, then COBRA is designed to be secondary to Medicare.
- Purchase individual insurance through the Health Insurance Marketplace – commonly the go-to choice for those not yet eligible for Medicare.
Marketplace Insurance: The Cost and Considerations
For the spouse transitioning to Marketplace insurance, careful evaluation is essential. Here are three key factors to weigh:
Cost of Plans
Marketplace plans differ widely in monthly premiums and out-of-pocket expenses, depending on the level of coverage (Bronze, Silver, Gold, or Platinum). If your household income qualifies for subsidies, you can minimize premium costs. However, higher-income households will receive less financial assistance, which could stretch the budget.
Household Income
The cost of Marketplace insurance heavily depends on your Modified Adjusted Gross Income (MAGI). If your working spouse is retiring and switching to Medicare, it is essential to estimate how this will affect your household finances. Accurate income projections are also required to apply for subsidies through the Marketplace.
Avoiding Coverage Gaps and Penalties
The timing of this transition is critical. Gaps in coverage can result in penalties, especially with prescriptions under Medicare Part D. For instance, if the retiring spouse enters Medicare and the dependent spouse delays securing their coverage through the Marketplace, you might face late-enrollment penalties. Planning is a must to avoid these added costs.
The Importance of Seeking Expert Guidance
This can feel overwhelming, especially when balancing shifting incomes, various costs, and unfamiliar timelines. That’s why consulting with professionals is invaluable. As Vincent J. Russo emphasizes: “Understanding the nuances of Medicare and Marketplace enrollment can save your family future headaches and unnecessary expenses.”
Resources like the Russo Law Group are tailored to help families and individuals make informed decisions. Their “In the Legal Know” series offers insights on elder law, Medicare, and other areas impacting retirement planning. Visit their website at http://www.vjrusso.com to explore videos, tools, and guides to better prepare for the transition.
Retirement brings exciting new chapters but also requires strategic planning—especially regarding health insurance. If one spouse is retiring while the other still needs coverage, take the time to review all options, including Medicare and the Marketplace. Be sure to weigh costs, income levels, and potential penalties to decide what works best for your family.
It’s a complex process, but with the proper guidance and planning, you can ensure both you and your spouse are well-covered for the future.
