MEDIGAP INSURANCE AND WORKING IN RETIREMENT
What happens if you decide to work in retirement? Check out our guide to understanding how your post-retirement activities can impact Medigap plans.
Decades ago, most older adults followed similar plans. They retired, took their pensions, and got Medicare and Medigap insurance to cover their healthcare needs.
These days, people live longer, and healthcare advancements have given older adults many advantages, including more energy, better overall health, and longer lifespans. Many retirees decide that the retiree life doesn’t suit them, so they go back to work.
Some get offers they can’t refuse from previous employers, while others simply start networking again because retirement bores them. They want to remain productive, so they abandon retirement for a working life again.
But what does that mean for your Medigap insurance? And how can you protect yourself?
WHAT IS YOUR MEDIGAP INSURANCE INITIAL ENROLLMENT PERIOD?
Your Medigap insurance initial enrollment period begins when you turn 65 and enroll in Original Medicare Parts A and B. It lasts for six months. During that time, you can apply for Medigap plans without underwriting. In other words, the insurer can’t consider factors like pre-existing conditions.
After your initial enrollment period, the rules get a little murkier. For instance, if you continue working for the same company and retain your group coverage, you can delay your initial enrollment period through guaranteed issue. However, if you retire and get Medicare and Medigap insurance, you don’t have the same protections.
The problem is that many retirees go back to work and have the option to get insurance coverage through a group plan. If they drop Medigap insurance at that point, they might not be able to get it back without subjecting themselves to underwriting.
Underwriting is the process of assessing a beneficiary's risk. For instance, maybe you suffer from a pre-existing condition. Medigap insurance can’t take it into account during your initial enrollment period, but if you decide to drop your Medigap plan, insurers can raise your rates or even deny you coverage.
That’s the last thing you want, especially if you plan to depend on Medigap insurance to protect you from deductibles and copayments as you get older. The entire point of Medicare Supplement insurance is to make sure you spend as little on healthcare as possible when it comes to out-of-pocket expenses.
CAN YOU BENEFIT FROM GUARANTEED ISSUE?
Guaranteed issue is a concept that allows Medicare beneficiaries to sign up for Medigap insurance without penalties, such as underwriting, in unique circumstances. In general, though, if you drop your Medigap insurance outside your initial enrollment period, you can’t get it back without undergoing underwriting.
Most of the guaranteed issue stipulations involve switching from a Medicare Advantage plan or a Medicare SELECT plan within a certain time frame. They don’t address situations in which retirees return to work and can once again avail themselves of group coverage.
WHAT HAPPENS IF YOU’RE OVER-INSURED?
The problem retirees face is becoming over-insured. They have two different types of healthcare coverage: group coverage and Medicare, along with Medigap insurance. One type of insurance might be “better” than the other, but they’re still over-insured.
If you can afford to keep several different healthcare insurance plans going at the same time, you might elect to do that. Being over-insured has no penalty other than a higher cost.
However, many retirees can’t afford to pay for Medigap insurance as well as group coverage. This leaves them in an unenviable conundrum.
SHOULD YOU ROLL THE DICE?
If you find yourself in this situation, you have three options:
- Drop Medigap insurance and run the risk of being denied a Medigap plan in the future
- Drop your group coverage and retain your Medigap insurance
- Keep both and remain over-insured
Dropping your group coverage might offer the best solution in terms of the long haul. Your employer won’t take your healthcare payment out of your paycheck anymore, and you’ll be able to retain your Medigap insurance until you decide to retire a second time and beyond.
Dropping Medigap insurance could have significant consequences on your future healthcare costs. Paying out-of-pocket for high deductibles, coinsurance, and copayments can quickly deplete your savings, and you might find yourself avoiding the doctor’s office because you don’t want the stiff bill at the end of the service.
When it comes to Medigap insurance, you want to think as far ahead as possible. What seems most financially responsible now could put you in an uncomfortable position in the future. Save the money you would be paying for group coverage to sock away more cash for retirement or future healthcare costs that Original Medicare doesn’t cover at all, such as hearing aids or dental visits.
There’s nothing wrong with going back to work after retirement. You might feel like 40 instead of 70, and if you have something to contribute to the world, you should feel free to do so.
However, as you make decisions about your healthcare, don’t forget how Medigap insurance works. If you drop your Medigap plan now, you might not be able to get it back — at least at the current premium.
Medicare has established firm rules about how and when retirees can avail themselves of Medigap plans. If you’re not familiar with them, you could find yourself stuck without good healthcare coverage after you stop working the next time.
Learn as much as you can about Medicare Supplement insurance and consider using it instead of group coverage. You might benefit more handsomely in the long run.