Healthcare, Social Security: Going to the Q&A
Posted on 20 February 2008
Permanent URL of this article: http://retirementrevised.com/column/healthcare-social-security-lets-go-to-the-qa
My recent columns on retiree health care and the timing of taking Social Security benefits prompted a number of questions from readers worried about insurance options for the pre-Medicare crowd, and the mechanics of Social Security. I went back to the experts on both of these topics to get the answers.
Q: You wrote that pre-existing conditions may make it tough for pre-Medicare retirees to buy individual health insurance policies, but I don’t think that’s completely accurate. If you have health insurance, lose it, and try to get other insurance within 12 months, doesn’t current federal law prevent the insurance companies from denying you coverage for pre-existing conditions? - D.B., via RetirementRevised.com
A: The Health Insurance Portability and Accountability Act (HIPAA) of 1996 does limit an insurer’s ability to exclude coverage for pre-existing conditions. Says Richard Johnson, of the Urban Institute: “If you’ve had employer coverage for at least 18 months and haven’t had a break in coverage that lasted more than 63 days, you can purchase an individual policy without any existing-condition exclusions. In many states, however, the insurer can charge whatever amount it wishes for an individual plan. Premiums skyrocket for people with health problems. An insurer doesn’t have to charge premiums you can afford, even though it does have to offer a plan that covers all of your pre-existing conditions.”
Q: You mentioned that COBRA can be used in some situations as a health care insurance bridge to Medicare at age 65. Is there any length of time you need to be enrolled in a group insurance plan before you go to a COBRA plan? Is six months enough? My husband is uninsurable due to his medical history. If I go back to work full time, I can put him on my insurance. But I don’t want to work for two years. - J.S., via RetirementRevised.com
A: There’s nothing specific in the federal rules on how long you must be on the job to qualify for COBRA. However, an employer may have restrictions on how long a person must be employed before they even become eligible for health care benefits. Sara Taylor, an expert on employee health plans at benefits consultant Hewitt Associates, advises that many states offer special health insurance programs for people who are unable to get insurance due to their medical history. You may want to explore that as an option.
Q: I was under the impression that a wife can sign up for Social Security at age 62 at her lower reduced rate; then, when the husband signs up, the wife can switch to half of (the husband’s) potentially higher rate. In this circumstance, would it not make sense for the wife to take the payments for a few years? It doesn’t appear that there’s anything to lose. - J.S., Collegeville, Penn.
A: You are correct. Dependent spouses (usually wives) should take their benefits early-unless they think that both husband and wife will live beyond age 80. In that case, it would be better to delay commencing benefits until both reach full retirement age, so that they get the higher amount.
Q: Why are my Medicare Part B premiums shown as net benefits (income) on my SSA-1099-SM? It seems to me that the Medicare premiums should be an expense and not taxable. I’ve also been told by a couple of family members that once you reach age 70, you don’t have to pay any more income tax. Are they just dreaming, or what? - R.P., Tampa, Fla.
A: Sorry, but they are indeed dreaming! Your income is always subject to income taxes, even if you are over age 70. The only way to avoid this is to have so little income that it’s less than your deductions and exemptions. Regarding the Medicare Part B premium, it is deducted from your Social Security check but it is still income to you, so it’s added to the amount you receive in your checks. According to Ron Gebhardtsbauer, senior pension fellow at the American Academy of Actuaries, “It may help you to include (the premium) as an item in the top section of your itemized deductions, but it-along with all your other health expenses-must exceed 7.5 percent of your adjusted gross income in order to create a deduction.”
February 24th, 2008 at 11:52 am
I believe Your answer to J.S. is not quite complete. My wife retired at 62 and drew Social Security payments about 75% of what she would have received had she waited until she was 65. When her benefits were adjusted, she began getting 1/2 of what I get MINUS the 25% of her own entitlement that she lost by retiring early. The rule, as it was explained to us, is that the spouse’s payment is made up of two components, one based on his or her own wages and one based based on the wages of the other earner. The second is the amount it would take to bring the payment up to 1/2 of the primary earner’s benefit IF the spouse retires at 65 (now 65+ a month or two).
Your advice is correct, but people should know that the reduction in benefits continues after the switch to “1/2 primary earner’s benefit.” I don’t know (and cannot find out by experience) whether this remains true after the death of the primary earner.
June 14th, 2008 at 10:43 am
My cobra runs out 6/30/08.I need health coverage for a year and a half till I reach 65 and get medicare. I have been turned down coverage because of pre-existing health problems. Can you help me find coverage for my year and a half?
Thank you,
Kathy Grieszmer