Creditable coverage is health insurance that is as good or better than Medicare coverage.

By Cheri Brown

Understanding Medicare can be like learning a foreign language. When you start it’s confusing and overwhelming, but once you submerge yourself it becomes clear.

About a year before turning 65 your mailbox will be inundated with advertisements; you will start to notice commercials with aging celebrities encouraging you to call 800 numbers and pop-up ads will flash up on your computer.

 

What are your next steps?

If you are receiving Social Security, or Railroad Retirement when you turn 65 you’ll automatically receive your Medicare red, white and blue card in the mail three months before your birthday. Your Medicare will be effective on the first day of your birth month. If your birthday is the first day of the month, your Medicare will be effective the first day of the prior month.

If you are younger than 65 and on permanent disability you will be sent a card and it will be effective on the first day of the 25th month you receive disability benefits.

If you are nearing your 65th birthday and are not on Social Security or Railroad Retirement benefits, you may need to sign up for Medicare by going online to www.socialsecurity.gov/benefits/medicare or calling 1-800-MEDICARE.

People who have employer-based coverage through their employer/union or their spouse’s employer/union may not need to sign up for Part B. Contact your health plan administrator to understand how your benefits coverage works with Medicare.

Signing up for Medicare Part B when you are covered by an employer health plan can lead to unnecessary costs. Conversely, refusing to sign up for Medicare when you do not have employer-based health coverage may lead to fines that will follow you the rest of your life.

People who have paid payroll taxes for 10 years during their lifetime, or are married to someone who did, have paid for Part A (hospitalization) coverage through payroll taxes.

Part B (medical) is subsidized by the Federal government and your monthly premium is based on your income. The more you make the more you pay. Low-income earners may qualify for subsidies that pay the Part B premium. I will review Part B premiums in detail in future columns.

When you sign up for Part B, it is important to purchase a Part D prescription drug plan from a private insurer. Part D is also subsidized by the federal government and your premium is based on your income. Part D coverage is often included in Part C Medicare Advantage plans, otherwise you need to purchase a standalone Part D plan. If you do not sign up for Part D when eligible and do not have creditable coverage you may be fined.

 

What is creditable coverage?

Creditable coverage is health insurance that is as good or better than Medicare coverage. Most employer-based plans qualify as creditable coverage for Part B and Part D. VA benefits are considered creditable coverage only for Part D prescription drug coverage, not Part B.

 

What is not creditable coverage?

COBRA, retiree coverage (you most likely still need Part B), VA coverage and coverage through Covered California. CHAMPVA and TRICARE require Medicare eligible to have Part A and B.

 

I am still working, should I get Medicare Part B?

If you are still working and qualify for Medicare, you do not have to sign up (and pay) for Part B. I recently met with a client who had just turned 65 and was still working at a high paying job. His Part B premium was $386.10 a month due to his income levels in 2019. He thought he had to have Part B and had signed up at 65. He was paying the $386.10 a month in addition to his premium at his company, yet his employer-based health insurance was excellent.

After meeting with me he decided to cancel his Part B, saving himself more than $4,000 a year. When he leaves his job, he will have a special enrollment period allowing him to sign up for Part B and an additional plan to ensure he doesn’t have a fine and has the coverage to protect his assets.

On the other hand, a few years ago I met with an employee of a large national store. His insurance was very expensive with minimal coverage, and his income was quite low. He was better insured at a lower cost by signing up for Part B insurance and a Medicare Advantage plan with low or no copays and premium.

Medicare can be overwhelming and making the wrong decision can cost you thousands of dollars. Prior to signing up for Medicare meet with our local HICAP office (Sourcewise in Santa Clara), or a professional insurance agent specializing in Medicare who will assess your needs and help you make an informed decision.

Cheri Brown is a former executive with a national insurance carrier with decades of experience in Medicare sales and training. Morgan Hill has been her home for more than 40 years. She volunteers for the Morgan Hill Chamber of Commerce Friday Night Music Series and Morgan Hill Freedom Fest. Email her at [email protected].