PLANNING AHEAD: Plan your health insurance for retirement [Column]

One of many decisions to be made by average Americans in planning for retirement is the decision on what health insurance will follow them after. For those who have been covered by an employee plan that will follow them into retirement, the decision may not be as critical. However, as employers look to reduce overhead, those retiree plans are becoming less available and, even when they continue, often less generous. A further complication arises when your spouse also receives coverage under your plan.

Questions when to take coverage and the effect for both of you need to be resolved. As you approach the date for your retirement this may be a good time to consult directly with your HR department or benefits manager. It may be wise to start at least a few months early.

Age makes a difference. If your projected retirement date comes at age 65 or older, the decision-making process is different from those who retire at a younger age, since Medicare for younger persons, unless you are disabled, is not involved. If you are a younger retiree under age 65 you might be looking either toward obtaining health insurance through your spouse's plan or through private insurance generally. COBRA, a government mandated option, is available but expensive. Coverage under the Affordable Care Act Marketplace is also a possibility.

If your projected retirement date will place you at age 65 or over you will likely need to consider Medicare as part of the planning process. It can be complicated and timing is important.

How to Sign Up For Medicare. One of the more straightforward descriptions of what happens with entry into the Medicare system is actually contained on the Social Security website and is worth consulting even if you do not yet intend to claim Social Security. See https://www.ssa.gov/benefits/medicare/.

The description in the Social Security website is helpful since the Social Security Administration may also become involved. If you begin collecting Social Security retirement benefits, the Social Security Administration may automatically enroll you in Medicare A (the portion of Medicare that covers hospitalization and rehab following hospitalization) and Medicare B (doctors, health care providers, outpatient care and durable medical equipment) at that time and deduct the Medicare B premium from your monthly Social Security check. If you decide to delay collecting Social Security you can still sign up for Medicare only. See "How to Apply Online for Just Medicare," at https://www.ssa.gov/benefits/medicare. You do not need to claim Social Security when you begin coverage under Medicare.

As for timing, when to sign up for Medicare B (doctors, outpatient care, durable medical equipment as described above) and/or Medicare D (prescription drugs) has been the subject of several commentaries. The bottom line is that there are penalties for late filing that continue on after the delayed signing date.

Also signing up for a Medicare Supplement (also known as Medigap) is time sensitive. There is what is known as the IEP or Initial Enrollment Period. This begins three months before you turn age 65 and ends three months after you turn 65. During this period you may sign up for a Medicare Supplement without medical underwriting.

If your employer has creditable health insurance coverage that continues after age 65 and you continue to work after age 65 you can still have a Special Enrollment Period that extends after you leave employment for another eight months. Obviously this is complicated.

Medicare.gov, the official website, describes "5 things to do before signing up for Medicare, as follows:

"1. Ask the employer or benefits administrator how its retiree coverage works with Medicare…

2. Check when your current coverage ends and sign up for Medicare about a month earlier…

3. Ask the employer to fill out the employment form…

4. Find Medicare plans in your area…

5. To avoid a tax penalty, you and your employer should stop contributing to your Health Savings Accounts (HSA) if you have one 6 months before you retire…"

All of this relates when to sign for coverage and how. A follow-up question is what coverage — Medicare Supplement or a Medicare Advantage plan — is best for you. This has been discussed in prior columns and requires more detailed discussion than available in this column.

Janet Colliton, Esq. is a Certified Elder Law Attorney recognized by the American Bar Association and Pennsylvania Supreme Court and limits her practice to elder law, retirement, special needs, estate planning and estate administration with offices at 790 East Market St., Suite 250, West Chester, 610-436-6674, [email protected]. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones CSA, co-founder of Life Transition Services LLC, a service for families with long term care needs.