What small business owners need to know about Medicare now
In fact, according to the US Census Bureau, over half of small business owners are over 55 years of age. That means that right now millions of them are being bombarded with ads and mail about Medicare plans because we are smack dab in the middle of the annual period to enroll in Medicare or change your plan between Oct.15 to Dec. 7.
So listen up: If you’re a small business owner, whether you’re approaching the age you can sign up for Medicare – 65 – or already on Medicare, now’s the time to think about your choice of Medicare plans and think carefully.
This choice can cost you or save you thousands, maybe tens of thousands, of dollars.
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For context, it helps to understand that health insurance for small business owners – and their staff – is jaw-droppingly expensive. Before the Affordable Health Care Act was passed (Obamacare), small business owners over the ages of 50, even 40, were charged such high premiums that it was clear the insurance companies didn’t want us.
Personally, I went without health insurance until my mid-forties. Yes, I know it was stupid, but running a business was expensive. Once I hit 50, the premiums were always over a thousand dollars a month and then over $1,500 a month for lousy coverage.
The ACA changed that. Somewhat. Now, a 55-year-old in California making $50,000 a year can get a “Silver” plan for only $321 a month, and someone making $150,000 a year would pay only $856 for that plan.
If you think the word “only” shouldn’t apply for a monthly premium that high, believe me many older small business owners consider that a bargain.
That’s why many small business owners are thrilled when they qualify for Medicare. It’s about the only benefit of getting older. But it’s a big one.
Yet it can also be confusing. There’s all kinds of terms that sound the same – Medicare, Medigap, Medicare Advantage, Supplemental plans, and on and on.
Let’s start with the basics.
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The government program that provides coverage for basic health care. There are different parts to this Original Medicare:
Part A covers the really expensive stuff: hospitals, skilled nursing, surgery
Part B covers preventative care, doctor visits, lab tests and so on.
Part D covers prescription costs.
But Medicare doesn’t cover all the costs – you’ll still pay around 20% of your health care costs, which can be substantial. You’ll also pay the government a premium for Part B. You can choose whether to buy Part D for additional cost.
Medigap or Supplement Insurance
Original Medicare still leaves significant costs and gaps in your coverage, so you can purchase a supplemental plan to lower your out-of-pocket expenses.
There are a number of different plans to choose from, some that cover virtually all of your expenses. Of course, the cost of your premiums increase as your coverage increases. There’s a good chart on the government’s website that compares the features of the different Supplement plans.
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What is a Medicare Advantage
Offered by private insurance companies, Medicare Advantage plans wrap basic Medicare benefits into one package. They have much lower premiums than Medigap/Supplement plans – some actually have no monthly premiums at all. But you are likely to have co-pays and a yearly deductible.
However, many of these plans offer a number of benefits not included in Supplement offerings, including dental and vision coverage, even gym membership.
What’s the big difference between Medigap and Medicare Advantage?
Advantage plans are cheaper than Medigap/Supplement plans – often a lot cheaper or even ‘free.’ But, of course, there’s a catch – and it’s a big one!
With a Medigap/Supplement plan, you can go to any doctor or hospital that accepts Medicare – anywhere in the US. And you don’t need a doctors’ referral to go to a specialist.
You want to go see a dermatologist or a podiatrist? Just make an appointment; no need to get the approval of your primary physician. And if you want to see a specialist in another state, you can. With some plans – including the most popular Plans F and G – you’ll have virtually no out-of-pocket co-pays or deductibles.
That’s not the case with Advantage programs. They act as HMO’s (Health Maintenance Organizations) or PPO’s (Preferred Provider Organizations). You must go to a doctor or hospital that is in your insurers’ specific “network,” and you must get a referral before going to a specialist.
Any services out-of-network or out of your local area are likely not to be covered. If you move, you may not be covered. You’ll have co-pays and out-of-pocket expenses for most services. Those costs can be huge.
Here's the most important thing to remember: The first year you qualify for Medicare, you can choose any plan you want without health considerations affecting your acceptance or pricing. Insurers can’t reject you because of pre-existing conditions.
Even better, you can keep that plan as long as you keep paying for it. If you choose a less expensive Advantage plan now, you can be rejected from a more comprehensive Supplement plan in the future.
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For example, let’s say Sam, who owns a graphic design firm, has just turned 65, and she’s signing up for Medicare. She’s had breast cancer. Thank goodness it’s in remission, but she wants to make sure she can see her own oncologist or go for treatment in another state if the cancer comes back.
She can afford the monthly premiums, so she chooses a Supplement plan – in her case, Plan “G,” that will cover all those costs. If she signs up now, when she’s first eligible, she can’t be rejected because of her cancer, and the insurance company can’t kick her off or raise her premiums in the future more than the standard amount set by the government.
However, another Sam, who owns a small car repair shop, has a few health issues and heart disease runs in his family. He’s struggled to pay for health care. He’s thrilled to sign up for an Advantage plan that has no monthly premiums. He also gets dental and vision coverage, and now can join that gym and work out.
But he has to choose a doctor in network, and if his doctor or hospital drops off his plan, he’ll have to find another doctor. More importantly, if he has heart problems in the future, he may face some high hospital bills, won’t be able to go to a specialist that is out-of-network, and is likely not to be able to switch to a more comprehensive Medigap/supplement plan.
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Here’s the other thing to keep in mind: Insurance brokers get paid more for signing you up for an advantage plan than for a Medigap/Supplement plan.
For 2022, for example, an agent could get up a commission up to $573 for a first-time Advantage enrollment (higher in some states, such as $715 in California) while the average commission for enrolling someone in a Supplement plan was $322. So when an insurance broker is urging you to sign up for an Advantage plan, keep in mind they’re going to make more money if you do.
What do I recommend?
The year you qualify for Medicare, sign up for the best plan you can afford. Insurers can’t reject you because of pre-existing conditions.
If you can afford one of the best and most popular Medigap/Supplement plans – Plan G or Plan F (Plan F is only available if you qualified for Medicare before 2020) – you’ll have the best coverage.
If monthly health care premiums are your biggest concern, choose an Advantage plan. Just be aware of the limitations.
Sign up for something! It’s better to have any plan rather than no plan.
If you have a pre-existing condition or any condition that might require specialists or out-of-area doctors or hospitals, seriously consider a Supplement plan.
Don’t wait to sign up. Even if you can get health insurance from a spouse’s employer, sign up. Your costs may go up if you wait.
Also, some Republican legislators have expressed an intent to reduce Medicare benefits. If they control Congress and the White House after the 2024 election, I’d expect the age to sign up for Medicare to be increased, possibly to age 70. Those already on Medicare would likely be ‘grandfathered’ in.
I know it’s all a bit confusing, but Medicare is a great boon to small business owners who face some of the highest prices for health insurance. Don’t wait