What you need to know before you retire
Congratulations, you’re about to turn 65 and become eligible for Medicare! Now what?
Perhaps you want to keep on working or maybe you’re thinking about retiring. Whatever the situation, you’ll need to continue your prescription drug coverage. If you decide to work, you can remain with your employer coverage, but you may need to sign up for Medicare Part A. Calling Medicare or your benefits department can help you make this decision. However, if you’re considering retirement, and your company offers an Employer Group Waiver Plan (EGWP) for your Medicare Part D coverage, you might want to look closely at this option.
What’s an EGWP?
An EGWP, or “egg-whip,” is Medicare prescription drug coverage that is partially funded by an employer and often provides better coverage than an individual Medicare Part D plan. Your employer typically uses a private insurance company (or prescription drug benefit manager like Express Scripts) that is approved by Medicare to administer the plan for its employees. This type of plan also provides an option for your employer to “group enroll” its employees upon retirement, which means you may not have to fill out an application. It also means you won’t experience an interruption in your prescription drug coverage.
Employer plans can be customized. For example, if you’re fortunate to have an employer that offers retirees both health benefits and a plan for prescription drug coverage, you should receive a letter before you turn 65, informing you of your Medicare Part D options. To enroll in the plan, you must be entitled to Medicare Part A and/or enrolled in Medicare Part B and live within the plan’s service area. If your employer does not offer retiree health coverage, you’ll need to enroll in Original Medicare (Parts A and B) or a Medicare Advantage Plan (Part C). For more information on this topic, please read Planning for Medicare Part D.
Why an Employer-Sponsored Plan Might Be Better for You
Employer-sponsored plans offer more generous coverage than you’d get in an individual Medicare Part D plan, which may mean a lower out-of-pocket cost for you. Certain benefits, not available in a standard Medicare Part D plan, may include:
- A lower Initial Coverage limit (what you need to spend and what your plan spends before you enter the next stage)
- Additional coverage in the Gap (if a Gap applies to your plan)
- Coverage for non–Part D drugs
Here’s an example. Generally, a standard Medicare prescription drug plan is required to have four stages of coverage, with the third stage being the Coverage Gap. This stage is reached when the total cost you and your plan pay in the Initial Coverage stage exceeds a certain amount set by Medicare each year. When you enter the Gap in a standard Part D plan, you may pay more for your medications. An employer-sponsored plan, however, is only required to have a minimum of two stages (Initial Coverage and Catastrophic Coverage), so your employer may agree to eliminate the Coverage Gap stage completely. This means you could generally continue the same copayments you used in the Initial Coverage stage until you reach the Catastrophic Coverage stage. This plan feature could save you money in the long run.
Have a Question?
Here are Some Helpful Phone Numbers:
Social Security Administration:
Express Scripts Medicare:
Know Your Options
When considering an employer-sponsored plan vs. an individual Medicare Part D plan, be sure to look at the overall annual cost of your premiums, deductible (if any) and medications. Looking at the cost of a single medication, the premium amount or the deductible is not the best way to choose a plan. For instance, a plan with lower premiums could have higher copayments, a formulary that covers more medications, or better coverage in the Gap. Try to plan ahead to get the most affordable prescription drug coverage to meet your needs. Research the plans that are available and compare them against what your employer’s plan is able to offer you.
Remember, you always have the option of switching plans during Medicare’s Annual Enrollment Period if you’re not happy with your current plan. Medicare.gov has a couple of links to get you started in that event.