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Should I keep my company’s retirement health plan?

I retired from a large company at age 62 and have had its retirement health plan, a preferred provider organization (PPO), since then. I turn 65 in a few months. The company notified me that I must enroll in Medicare and my PPO coverage will now be secondary. Should I keep this plan? I would like to. Also if I keep it, do I need to get a Medicare prescription drug plan?

Trying to figure out how a retiree healthcare policy fits with Medicare can present challenges. Because it is the second payer, you must enroll in Medicare. (Learn more about secondary payers.) Then talk with someone who knows about the plan’s benefits. Will there be changes in coverage, premiums, or costs? Determine whether the benefits are worth the premium you're paying.  

As for a drug plan, ask the benefits specialist whether the plan offers creditable coverage (that being, it pays at least as much as a standard Part D prescription drug plan). If the coverage is creditable, there is no need to get another drug plan.  If the coverage is not creditable, then enrolling in a Part D plan will provide the coverage you need and avoid a late enrollment penalty.  

Also know two things about retiree coverage. First, the retiree plan is in charge. In future years, it can change the type of coverage, your costs, and more. For example, it could switch from working as supplemental coverage to a Medicare Advantage plan. It may not be easy to switch plans then. 

Second, in most states, once you are both 65 and enrolled in Part B for six months, you lose the guaranteed issue right to a Medigap policy. That means, if you want to change to a Medigap policy down the road, you may be subject to medical underwriting. Depending on where you live, you may not be able to get a policy or you may pay more.

Last updated: 10-30-2020