Midyear switches

Mike S in comments earlier this week raises a very important decision problem:

Halfway through next year I’ll make the switch to Medicare (I’ve already started to recieve the informational mailings from insurers) so I’m not sure what the best deal will be at all.

This is a damn good problem that my mother had last year. She had employer sponsored insurance through late spring and then became Medicare eligible in early summer. Choosing the right initial insurance when you know you’re switching mid-year to either Medicare or a new job or anything else is a challenging task. The biggest factor to consider is you’re going to face two out of pocket limits that don’t interact with each other. This may matter a lot depending on your health status and how long you need to have your first coverage.

We’ve looked at scenarios where individuals who know that they are going to be very high cost should choose a low premium high deductible/high out of pocket maximum plan (subject to network availability). These plans, in some counties and for some age groups, are on net, less expensive than high premium, low out of pocket maximum plans. However, this only works when the person is on the plan for most if not the entire year. It may make sense for someone who knows that they have $20,000 months every month to go Bronze if they are going to pay the $7,500 deductible in January and then nothing else while they bank the difference in premium between the Bronze plan and the Gold plan. The break-even between Gold and Bronze may be September. This decision is different if that person knows they get a new insurer in March; then the higher monthly premium for the lower out of pocket maximum might be a better decision.

This is an extreme example.

Conversely, if someone knows that they are primarily insuring against meteorites for several months and they have the ability to pay off a meteorite event, then a low premium plan to bridge them to the new insurer makes sense. The gamble is that they will stay healthy and barely use any services. If they use services, it will be very little so that the cost sharing between a low premium plan and a high premium plan will be the same. For instance a $1,000 deductible plan and a $5,000 deductible plan will each have the same out of pocket payment of $180 for an urgent care visit.

These are not easy choices. It is a calculation based on your risk tolerance, ability to handle an unexpected shock, and current health status.

13 replies
  1. 1
    raven says:

    UGH, we are in a system where we get a yearly amount for insurance when we retire. Weirdly, my wife who already retired at 60, will stay on the regular system plan until she turns 65 even though I go off of it when I retire next year.

  2. 2
    Miss Bianca says:

    What is the age for Medicare eligibility?

  3. 3
    Mike S says:

    @Miss Bianca: Medicare eligability is 65. It’s earlier the Social Security now.

  4. 4
    Esc says:

    My mom is in a similar scenario. She still works and has employer sponsored health insurance. She had a bowel resection in August and is now off of work on disability until after they remove her temporary ileostomy and reconnect what’s left of her bowel to her digestive tract.

    She’s going to likely have to choose between staying on her work plan through COBRA or going on Medicare Part B before the next surgery. Keeping her insurance will be expensive, but she only pays 10% of her costs, since she’s met her deductible, and her hospital stay is covered by Medicare Part A. I think she should probably keep her insurance since she plans to go back to work and I don’t think you can get off Medicare once you’re in, but she has a history of doing whatever is cheapest in the moment.

  5. 5
    J R in WV says:

    Lucky, my birthday was 3 days from year’s end. So not a big deal at all for me, unless I was very unfortunate to have an “event” right after my birthday. There was not a vast party, kind of gave those up…

  6. 6
    PST says:

    I’m going on Medicare October 1 and wondering, belatedly, about pitfalls I need to avoid. I’ve been getting my care for years through an expensive, Duke-like system, and I travel quite a bit. So it seems pretty clear to me that I belong in traditional Medicare with its broader than broad network, not Medicare Advantage, where I can’t know what that kind of choice might cost me in the future. I’ll get a supplemental policy too. I have no idea how to pick a drug plan.

  7. 7
    wmd says:

    I’m switching employer October 1.have been on a high deductible, HSA eligible plan. Thinking about what to choose for 3 months; January I’ll be on high deductible again.

    I’ll work through what I have in follow up claims for remaining part of year – definitely have at least 2 specialist visits at 15 months post treatment.

  8. 8
    susanna says:

    @Mike S: And if possible, put off signing up for Social Security til the latest(age 70?), as your increased monthly payout will be worth the wait. Think it through, considering what your health expectations look like.

  9. 9
    susanna says:

    @PST: If you live in CA, we have a very helpful agency, called HICAP that provides excellent information on these choices and are physically located in most counties or by phone.

  10. 10
    Tom DeVries says:

    Or, the lazy person’s choice (ie, mine): just join Kaiser Medicare Advantage and forget it.

  11. 11
    low-tech cyclist says:

    I’m eligible for Medicare in ~6 months, and plan on continuing to work full-time another couple of years. My wife and I have got good insurance at work (same employer), and the default, per the Medicare website, is that I just stay on their insurance until I retire.

    I’ve been wondering if there are any good resources for determining whether it’s the better deal to stay where I am, or go ahead and sign up for Medicare parts A and B, and buy a Medigap policy.

  12. 12
    coloradoblue says:

    I went on Medicare in 2014. I read, reread and reread again the book on choosing a plan that Medicare sends out. After the third time I had no freaking idea of what to do or how. The book was basically worthless to me.

    Finally I asked my primary care physician. I had been with him more than 30 years, fully trusted his advice and took his recommendation for the Medicare Advantage plan he was on. I’ve been very happy with my choice.

    Don’t bother with the book, ask someone you trust.

  13. 13
    Gindy15 says:

    If you are lucky and retired military on Tricare, you don’t have to do anything but get a new ID card from the military stating you are on Medicare. Hubby did that and paid nothing for his knee replacement this year. He goes in for the second one in Nov. We asked about all the stuff we were getting from various insurance agencies and help organization, we were told to recycle it by both the Tricare and Medicare folks.

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