Some people qualify for Medicare under 65 due to a disability. Most people who qualify for Social Security disability get Medicare coverage after 24 months.
If they have employer coverage, perhaps through a working spouse, then that coverage can coordinate with Medicare.
If not, then they can look into Medigap or Medicare Advantage options in their state. (Note: this post was updated in 2019)
Medicare for Disabled Under 65
How your coverage works will often depend on whether you still have access to employer coverage or not. Read on for details.
People Under 65 with Employer Coverage
If the employer has more than 100 employees, Medicare pays secondary to your group coverage. You can enroll in Part A to reduce hospital expenses, and most people do. Part A doesn’t cost anything for people who have worked at least 10 years in the U.S. Many people in this situation choose to delay Parts B & D, however, since their employer coverage already likely includes outpatient and drug coverage. It’s up to you.
Read more about Medicare and Employer coverage here.
If your employer has less than 100 employees, Medicare is primary. You should enroll in Parts A and B for certain as they are critical components of your primary coverage. Both parts can coordinate with your employer insurance to reduce your costs. Some people will delay enrollment into Part D because employer coverage usually includes drug coverage already.
There are special circumstances for employees who have Health Savings Accounts. The rules for these can be different, so if that’s your situation, be sure to read this post about HSA and Medicare.
People Under 65 with NO Employer Coverage
People on Medicare due to Social Security disability under 65 usually have different choices for supplemental coverage than people 65 and older. This is because federal law does not require insurance carriers to sell a Medigap policy to you under 65. You may not be able to buy the Medigap policy that you really want until you reach age 65. It depends on the laws in your state.
Some states require insurance companies to make at least one Medigap policy available to people under 65. We’ll use Texas as an example in the next section.
Example: Medicare under Age 65 in Texas
In Texas, state law requires that insurance companies offering Medigap plans must offer at least Medigap Plan A to people under 65. They are not required to offer any other plans, such as Plan F.
Since there is no requirement, none of the carriers offer it because of the high claims costs associated with Medicare disability under 65.
Plan A still covers the 20% of your outpatient expenses that Medicare does not. However, Plan A does not cover your hospital or outpatient deductible or excess charge. It also does not cover your coinsurance if you have a stay in a Skilled Nursing facility.
You can see this in the chart below:
Even though the coverage is less than what Plan F would offer, a Plan A Medicare supplement for someone disabled under age 65 can be cost prohibitive in some states.
Why? Because insurance companies know that a disability qualified them for Medicare early. and may have higher medical expenses than someone who would normally age in at 65. The insurance company has to take in enough money to offset the higher claims ratios for people on disability, so the rates for under 65 can be high.
Rates are Often High for Medigap Policies Under 65
How much more expensive is Plan A for someone under 65? It depends on the state, but it can be quite a bit. At Boomer Benefits we have a quote engine that can quickly and easily compare rates for companies offering Medigap plans.
Here’s what the engine is pulling this morning on a quick quote for a local zip code here in the Dallas/Fort Worth area in 2019:
- Lowest Plan A for male under 65: $462.07/month
Now, by comparison, that same Plan A for someone 65 or older would cost $116.25/month. See how those rates are cost-prohibitive?
Now let’s look at rates in a few other areas:
In Florida, people under 65 can apply for any plan. Plan G is quoting today in a Miami zip code at $872.88/month.
In California, people under 65 can apply for some plans. Plan F is quoting around $357.
High Annual Rate Increases for under 65 Medigap Policyholders
Another factor to consider is that the annual rate increases for Medicare supplements under 65 are usually very high, even in those few states where starting rates are manageable.
This again is due to the high claims costs. Even if you could afford the $400+/monthly premium to start, you probably won’t be able to sustain the policy long term. If you bought a policy at age 52, and the policy had a 20% rate increase each year, the policy would quickly become un-affordable.
Even if we could find another carrier offering Plan A for less money, people on Medicare disability have health conditions that got them on Medicare early in the first place. You only get one six-month Medigap open enrollment period. After that you have to answer health questions to change carriers.
People on Medicare disabled under 65 usually can’t pass the underwriting questions to change. Now they find themselves stuck on a Medigap policy that encounters rate increases each year that are too high for the policyholder to maintain.
States vary, so rules in other states may differ, but the high annual rate increases affect people under age 65 on Medigap nearly everywhere.
So What’s the Solution?
Medicare Advantage plans are, in my personal experience, often a good solution for people in this situation. There are several reasons for this.
First, Medicare Advantage plans for disabled under 65 make sense because these plans charge the same rate to everyone on the plan, regardless of age or gender. Many Advantage plans also have very low premiums and rarely have big rate increases.
Most importantly, there is only one health question on applications for Medicare Advantage plans. That question is: Do you have End Stage Renal Failure? If your kidneys are not failing, you can qualify for the coverage, even if you have other serious health conditions.
While there is no question that Medigap plans are more comprehensive than Medicare Advantage plans, that doesn’t mean that Medicare Advantage plans are bad. They work quite well for many people, and we have thousands of policyholders who are on them happily.
They make a good solution solution for people under 65 that would prefer Medigap but can’t afford the annual rate increases that they get socked with.
The Upside for Medicare Disabled Under 65
Does Social Security disability include Medicare? Yes, after 24 months. But can you get a Medicare supplement if you are under 65? Maybe, it depends on the state. It’s like to be pricey. We generally will not write Medicare supplements for people under 65 here at Boomer Benefits because the next year when rate increases happen, they can’t afford them.
The Silver Lining:
Fortunately, in a few years when you turn 65, you will get a SECOND Medicare supplement open enrollment period to allow you to switch into a Medigap plan without health questions. At that time you can enroll in any Medigap plan you like, such as the ever popular Plan F. Rates will be far more stable long-term because now you are lumped in with everyone else over 65. This is better than being in the under-65 group, which insurance companies view as high risk of losses.
Do you need a Medicare supplement under 65? Or have you been struggling to find affordable Medicare coverage for under 65 individuals? Give us a call to discuss whether a Medicare supplement or a Medicare Advantage plan might be a more cost-effective solution for you.