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Severance packages can affect Medicare choices, timelines

I’m part of a big layoff with a Jan. 15 termination date. My severance package includes one year of health coverage. I’m 68 years old. I took Medicare Part A at 65, but not Part B or Part D because I continued working. Is it true that health coverage that’s part of a severance package will remain primary to Medicare, and therefore I don’t need to sign up for Part B or Part D?

You’re smart to ask. Health insurance in severance packages can be a trap for anyone who is 65 or older during the life of the package.

If your severance includes 12 months of primary coverage for people over 65 (a point worth double-checking with your employer’s insurer) you can postpone Medicare Part D, says Maura Carley, president of Healthcare Navigation, a health insurance adviser.

But Part B has different rules.

You didn’t have to enroll in Part B at age 65 because your health insurance was provided by an employer with 20 or more employees for whom you actively worked. People in that situation don’t have to sign up for Part B until eight months after the job ends or the coverage ends, whichever comes first. That’s when their workplace plan becomes secondary to Medicare — i.e., stops paying for anything Part B covers.

In your case, the job ends first. Even if you have 12 more months of primary coverage, your Part B enrollment deadline is eight months after your termination date, Carley says. If you miss it, your Part B premium will be permanently higher. Also, you might be temporarily uninsured, since you’ll have to wait for general enrollment, between Jan. 1 and March 31, to sign up for Part B coverage starting July 1.

THE BOTTOM LINE Medicare isn’t a party to your severance agreement.


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