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Medicare and Employer Coverage


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.

FAQs

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.
Do I need Medicare if I have employer insurance?
Part A is free for most people, so taking it makes sense. Since Part B comes with a premium, you may choose to delay Part B until you’re ready to retire if you have large employer group insurance.

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.

You can think of us as a guide to health insurance for people with Medicare. Give us a call at the number above to learn more about the best options for you. You can also fill out our online rate comparison form for your unique quotes for plans in your area.

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Lindsay Engle

Lindsay Engle is the Medicare expert for MedicareFAQ. She has been working in the Medicare industry since 2017. She is featured in many publications as well as writes regularly for other expert columns regarding Medicare. You can also find her over on our Medicare Channel on YouTube as well as contributing to our Medicare Community on Facebook.

20 thoughts on “Medicare and Employer Coverage

  1. My husband has prescription insurance through employer(20+ employees). My daughter has both this and Medicaid she is disabled she was signed up for a Medicare part d. I am worried his employer will drop all of us from script coverage, because she had part d. But if she drops part d her Medicaid says they won’t pay for her copays.

    1. Hi Jen! It sounds like your daughter does not need to have coverage through your husband’s employer group plan for prescription medications if she already has both Part D and Medicaid. Since Medicaid picks up the copays, she should not have any out of pocket costs for her prescriptions. I would just double-check that her Part D plan includes her medications in their drug formulary. If all checks out, I would speak to your benefits administrator to see if they have any objections to your daughter leaving that plan, leaving her enrolled in just Medicaid and Medicare.

  2. I retired from the federal government 14 years ago and did not take Part B because I continued to keep the same insurance by Federal Employee Health Insurance through BCBS. Does this qualify as employer health insurance to avoid the 10% per year penalty if I decide to enroll in Part B? Thank you for your help!

  3. I turn 65 in December. If I opt to keep employer coverage and add Part A & B (company is larger than 20 employees), will I be penalized later if I don’t sign up for a Medigap plan until I end my employer coverage?

    1. Hi Jim! Most beneficiaries who have employer group coverage at a company with more than 20 employees delay enrolling in Part B since it’s considered creditable coverage. Medigap does not come with penalties, only Part B and Part D. What you have to watch out for with Medigap is your Open Enrollment Period. Your one-time 6-month OEP is triggered by your Part B effective date. This is the time when you can enroll without any health questions. So, if you’re delaying Part B for now, then your OEP for Medigap will also be delayed. You will not be penalized.

  4. My Husband and I constantly are plagued by robo/solicitation calls about our insurance. If I call your number above, is that going to flip a switch somewhere in computer or phone land that will increase the prior mentioned calls? Please advise. Thank you.

    1. Hi Noreen! I completely understand your concern. You don’t have to worry about that with us, we do not sell your information. If you give us a call, you’ll be connected with one of our licensed in house agents that will be happy to help answer any of your questions.

  5. Hello, we are are small nonprofit with three full time employees. We pay for 50 percent of the medical benefits. One of our employees is on Medicare. Our insurance broker does not offer a 105 plan. The employee will pay directly for Medicare part b and d as well as a supplemental plan. Can we reimburse her for 50 percent of the medical cost through payroll? If so, is it taxable? This employee is not HCE. Looking forward to your answer.

  6. I recently turned 65 and was advised by my company’s health insurance, CIGNA, that the prescription coverage in our plan was non creditable and I should enroll in Medicare Part D, which I did. I selected a mail order plan as my out of pocket cost was $0 for all my prescriptions. However, when the first prescription was ordered, my Part D insurer would not pay as Medicare shows I have other coverage. Medicare tells me the prescription must first be filed with my employer’s CIGNA plan. Since the prescription is sent directly to my Medicare Part D provider who fills the prescription and files the claim, how can it be sent through my CIGNA plan first?

    1. Hi Donald! If you enrolled in your Cigna Part D plan through us, give our Client Care Team a call and they can help. If not, you’ll have to contact Cigna directly to get this issue resolved.

  7. if a person has had employer insurance, and only part A on medicare, are they able to drop employer insurance and join a medicare advantage plan at any time? Is there a penalty? Upon enrollment in the advantage plan will part B and D be added?

    1. Hi Ron! As long as the employer has more than 20 employees, then the coverage is considered creditable under Medicare. You’ll get a Special Enrollment Period when you drop employer coverage. This allows you to enroll in Part B without being penalized for not doing so when you were first eligible. You will need to enroll in Part B before you get supplemental coverage, including Medicare Advantage. Make sure to compare the pros and cons of Medicare Advantage plans before enrolling in a plan. If you want prescription drug coverage with your Advantage plan, look into enrolling in an MAPD. If you’re looking for more comprehensive coverage with less out of pocket costs, then I would recommend enrolling in a Medigap plan and Part D plan.

      1. I am 66, still working but I may retire in two years, Is there a particular document I should I submit to Medicare letting them know that my employer ( the State of New York) has covered my health insurance and that is why I have delayed the part B???

  8. Can a member drop Part B, cancel Medicare plans eg. Med Supp and Rx plans and return to group health? If so, will there be any penalties to return to Medicare in the future when retiring or will this be an eligible SEP?

    1. Hi Gillian, thank you for your question! This depends on the size of your employer. If your employer is considered a large employer with over 20 employees, then yes, you can drop Medicare without being penalized. You’ll get a SEP to enroll when you leave your employer coverage and retire. However, if your employer has less than 20 employees, you would need to contact your benefits administrator to find out if the coverage is considered creditable.

  9. IF A PERSON IS ON A RETIREMENT PLAN FROM THEIR OLD EMPLOYER, CAN THEY LEAVE THAT RETIRMEENT PLAN AT ANYT TIME & HAVE A SPECIAL ELECTION TO DO WHATEVER THEY WANT? THEY ALREADY HAVE HAD Part A & b, tHANK YOU.

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