TRICARE is pretty good health insurance and it is a benefit we would all like to keep. But...you could lose it if you don't pay attention. Right now, most of you are covered by Active Duty/Retiree TRICARE. But when you turn 65, you'll switch to TRICARE For Life(TFL) whether you want to or not.
The rub has to do with how TFL works. If you are eligible for MEDICARE your Retiree TRICARE ends. To receive TFL you must sign up for MEDICARE (Parts A & B). Here is where might get caught.
- You decide to work past age 65. Your HR department tells you that you have qualifying insurance at work and there is no need to sign up for MEDICARE. You can just sign up when you leave with no penalty. Wrong. If you want to keep TRICARE coverage, in the form of TFL, you must sign up for MEDICARE even if you have coverage at work.
- You mix up your MEDICARE coverage age and your Social Security Full Retirement Age (FRA). Most of the readers of this newsletter will reach their FRA at 66 or 67. That has nothing to do with your MEDICARE qualification age. If you mix these two up, you'll end up with no insurance coverage since you won't have MEDICARE and therefore you won't have TFL coverage either. Your MEDICAREqualifying age is 65, regardless. By the way, if you're not signed up Social Security you'll have to pay your MEDICARE insurance via a "check".
- You Qualify for Social Security Disability. Generally speaking, if you receive Social Security Disability Benefits, then you will qualify for MEDICARE 25 months after starting the benefits. When you (or your family member) becomes eligible for MEDICARE you must sign up and pay for MEDICARE Part A & B or you lose TRICARE coverage...regardless of your age.
- You move overseas. MEDICARE generally doesn't cover you overseas (other than emergencies). So, you decide to cancel it. You just lost TRICARE coverage. Even if you live overseas you must take (and pay for) Medicare Parts A & B.
Just to be clear, you are automatically covered by Medicare Part A and you don't pay anything (other than what you paid during your entire working life) for it. Medicare Part B, on the other hand, is not automatic and you must pay for it. Your premium will be based on your Adjusted Gross Income from two years prior (i.e. 2014 for 2016 premiums). Here are the premiums for 2016
- AGI Less than $170,000 / $85,000 (Married/Single): $121.80 per month
- AGI $170,00 - $214,000 / $85,000 - $107,000 (Married/Single): $170.50 per month
- AGI $214,001 - $320,000 / $107,001 - $160,000 (Married/Single): $243.60 per month
- AGI $320,001 - $428,000 / $160,001 - $214,000 (Married/Single): $316.70 per month
- AGI Greater than $428,000 / $214,000 (Married/Single): $389.80 per month
Employment income or large RMDs from Qualified Accounts/Traditional IRAs could rapidly put you into these higher brackets. This may mean that you may want to take money out of these accounts between ages 59 1/2 to 65 or covert them to Roth accounts.
Helping you figure out you financial life including insurance is what C.L. Sheldon does. If you need some help figuring out TFL, MEDICARE and how to plan to mitigate increased MEDICARE premiums give us a call.