I may retire. What to expect for Medicare and Marketplace costs?

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Q. I’m 63 years old and my wife is 65. We both work full time and have our own medical plans through our respective employers. I am considering a move away from the company I work at and getting a medical plan for myself through the Marketplace. My wife is enrolled in Medicare Part A and will be continuing to use her employer provided plan in lieu of Medicare Part B for the very near future. I’m looking to bridge the gap until I go on Medicare. How would my monthly premium be calculated during the time my wife is working full time and until she enrolls in Part B — which means she will have retired, and which is not expected to be long from now? Would her current income be included as part of the calculation into the monthly premium if I went through the Marketplace? And could I get a reduction in my premiums.
— Staying insured

A. Congrats on all these exciting plans and for all your planning.

Medicare enrollment and bridging that gap can be a challenge, for sure.

Let’s talk about Medicare and the New Jersey’s health insurance marketplace exchange, “Get Covered NJ.”

Medicare Part A, which is hospital insurance, is typically premium-free for most people provided they or their spouse have paid Medicare taxes while working for at least 10 years or 40 quarters, said Vernon Cole, a certified financial planner with Peapack Private Wealth Management in Summit.

If you or your spouse have met this requirement, you generally won’t have to pay a premium for Medicare Part A, he said.

Medicare Part B, which is medical insurance, does have a monthly premium, he said.

“The standard Part B premium amount can change each year and is based on your income,” Cole said. “The government uses your modified adjusted gross income (MAGI) from your tax return from two years ago to determine your premium.”

For example, he said, if you’re enrolling in Medicare in 2023, your premium will be based on your 2021 MAGI.

Here are the 2023 standard Part B premiums for different income levels:

The income thresholds for Medicare Part B premiums for individuals who are married and file separate tax returns are as follows for the year 2023:

  • Individual Filer MAGI up to $91,000: $170.10 per month.
  • Individual Filer MAGI between $91,000 and $114,000: $238.10 per month.
  • Individual Filer MAGI between $114,000 and $142,000: $340.20 per month.
  • Individual Filer MAGI between $142,000 and $170,000: $442.30 per month.
  • Individual Filer MAGI above $170,000: $504.90 per month.

The income thresholds for Medicare Part B premiums for individuals who are married and file joint tax returns are as follows for the year 2023:

  • Joint MAGI up to $181,000: You will pay the standard monthly premium amount for Medicare Part B, which is $170.10.
  • Joint MAGI between $181,000 and $228,000: $238.10 per month.
  • Joint MAGI between $228,000 and $272,000: $340.20 per month.
  • Joint MAGI between $272,000 and $317,000: $442.30 per month.
  • Joint MAGI above $317,000: $504.90 per month.

Cole said it’s important to note that if your wife is still working and has employer-sponsored health coverage, she may be eligible for a Special Enrollment Period (SEP) to enroll in Medicare Part B without penalty when she decides to retire or when her employer-sponsored coverage ends.

Regarding your inquiry concerning coverage through Get Covered NJ Marketplace, as you indicated your wife is still working, and provided she is covered under her own employer-provided health coverage, her current income is generally not included in the calculation for your premium for a Marketplace plan, Cole said.

Additionally, as it relates to any “reduction in your premium,” which is referred to as premium tax credits and subsidies for Marketplace plans, these are primarily based on your individual or household income, Cole said.

“When you apply for coverage through the Marketplace, they will assess your individual or household income to determine your eligibility for premium tax credits or subsidies,” he said. “This income calculation is usually based on your Modified Adjusted Gross Income (MAGI), which includes your income from various sources, such as employment, investments, and certain deductions.”

Your household’s composition is also considered, Cole said.

“While your wife’s income is not directly used to calculate your Marketplace premium, her employment status and access to employer-sponsored coverage may affect your household’s eligibility for subsidies,” he said. “If she has access to affordable employer-sponsored coverage, it might impact the amount of premium assistance you receive.”

Now about that reduction in premiums.

Cole said if your income falls within a certain range, you may be eligible for premium tax credits, which can reduce the cost of your health insurance premiums purchased through the Marketplace. The amount of the premium tax credit depends on your income, household size, and the cost of coverage in your area, he said.

“To determine your specific eligibility for premium tax credits and the amount of the reduction in your premium, you’ll need to provide your income information when applying for coverage through the Marketplace,” he said. “The Marketplace will use this information to calculate your eligibility and subsidy amount.”

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This story was originally published on Sept, 18, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.