If you’re currently employed and eligible for Medicare soon, you probably have questions regarding what to do about your employer coverage. The best choice to make depends on your circumstance.
It can be beneficial for some to have both Medicare and employer insurance. In other cases, taking Medicare could make more sense than holding onto an employer’s policy. First, we’ll explain how employer coverage works with Medicare.
How Does Employer Health Insurance Work with Medicare
The size of your employer will determine how your Medicare benefits will coordinate with your employer coverage. If you’re aging into Medicare while working for an employer with over 20 employees, your group plan is primary and Medicare secondary.
In this scenario, most beneficiaries choose to sign up for Part A, since it’s premium-free for those who have paid in for sufficient quarters. If you’re currently collecting Social Security Income, you’ll automatically be enrolled in Part A. You can’t collect SSI without registering in Part A.
If you require care at a hospital, your Part A benefits will keep your costs lower. For example, if your employer’s group insurance has a $4,000 hospital deductible, it makes sense to enroll in Part A for a lower deductible.
For your outpatient and medication insurance, a plan from an employer with over 20 employees is creditable coverage. This safeguards you from having to pay late enrollment penalties for Part B and Part D, respectively.
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Medicare and Small Group Insurance: Who Pays First
If your employer has fewer than 20 employees, then Medicare becomes primary. This means Medicare is billed first, and your employer plan will be billed second. If you have small group insurance, it’s HIGHLY recommended that you enroll in both Parts A and B as soon as you’re eligible. If you don’t, your employer’s group plan can refuse to pay your claims.
Your insurance might cover claims even if you don’t have Part B, but we always recommend enrolling in Part B. Your carrier can change that at any time, with no warning, leaving you responsible for outpatient costs. You’ll also have to pay the late penalty because your group insurance won’t be considered creditable coverage.
Can I Get Medicare While Working
Regardless of whether you’re employed, it makes sense to enroll in Part A as soon as you’re eligible. Since Part B is not premium-free like Part A is for most, you may wish to delay enrollment if you have group insurance.
As stated above, the size of your employer determines whether your coverage will be considered creditable once you retire and are ready to enroll. Group coverage for employers with 20 or more employees is deemed creditable when group coverage for employers with fewer than 20 employees is not.
Without creditable coverage during the time you’ve been Medicare-eligible, you’ll incur late enrollment penalties. When you leave your group health coverage, the insurance carrier will mail you a creditable coverage letter. You’ll need to show this letter to Medicare to protect yourself from late penalties.
Can You Have Employer Coverage and Part D
When it comes to Part D, you can delay enrollment if your employer group insurance has prescription coverage. This is similar to Part B. Always compare your group insurance to what the cost of Medicare + Medigap + Part D would cost. It’s cheaper to leave group insurance and enroll in a Medicare Supplement plan and Part D plan.
What Happens to My Medicare if I Go Back to Work
Often, you might retire and later go back to work. If you “un-retire” and your large employer offers you group insurance, you can cancel Part B. When you retire again; you can enroll back into Part B with no penalties.
Medicare Premiums and Employer Contributions
Per CMS, it’s illegal for employers to contribute to Medicare premiums. The exception is employers who set up a 105 Reimbursement Plan for all employees. The reimbursement plan deducts money from the employees’ salaries to buy individual insurance policies. Beneficiaries who participate can get tax-free reimbursements, including their Part B premium.
A Health Reimbursement Account is a well-known Section 105 plan. An HRA reimburses eligible employees for their premiums, as well as other medical costs.
Does Medicare Work With Health Savings Accounts
When enrolled in any Medicare parts, you CANNOT contribute to a Health Savings Account (HSA). Your employer also can’t contribute to your HSA once your Medicare is active. If you continue to add to your HSA, you could face tax penalties.
If your spouse has coverage on your group insurance, they can still contribute as long as their Medicare is not active. The good news is, you can use the funds in your HSA to pay for any medical expenses.
What Forms Do I Need to Show Creditable Coverage From an Employer?
You will need your employer to fill out the CMS-L564 form. This form is a request for employment information form. Once the employer completes section B of the form, you can send in the document with your application to enroll in Medicare.
Can an employer force an employee to enroll in Medicare?
An employer can never force you to drop your group coverage and enroll in Medicare once you turn 65. You can always choose to have Medicare and decline your group plan, but your employer can never force that decision.
Can I drop my employer's health insurance for Medicare?
You can drop your employer’s health plan for Medicare if you have large employer coverage. When you combine a Medigap plan with Medicare, it’s often more affordable for you and your spouse.
Should my spouse stay on my employer group plan or enroll in Medicare?
It often costs less for your spouse to enroll in Medicare versus staying on your employer plan. The reason is that most employers don’t help pay for the costs of spousal insurance. If your spouse’s insurance costs you hundreds of dollars a month, they should consider enrolling in Medicare.
How to Get Medicare while Working with Employer Coverage
If you have any questions, we can help! Our agents can compare all your options and provide rates for your area. When you navigate Medicare with an expert, you save time and money. Further, our agents represent multiple carriers, giving you a one-stop-shop option to find the best policy.
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