Before you choose which option makes the most sense, you’ll need to know how your employer coverage works with Medicare. In your research, you’ll learn when having both works and when you should choose one over the other. Or, in some cases, why taking Medicare could make more sense than holding on to your employers’ policy.
First, let’s learn how employer coverage works with Medicare.
How Does Employer Health Insurance Work with Medicare
For example, if you’re aging into Medicare while working for an employer with over 20 employees, your group plan is primary.
In this case, your group plan pays first, and Medicare pays second.
Even with employer group health insurance, you should still sign up for Part A once you become eligible. As long as you paid enough Medicare taxes, Part A is premium free.
If you find yourself in need of a hospital stay, Part A can help keep your costs lower. For example, if the employer group insurance has a $4,000 deductible, it makes sense to enroll in Part A since the deductible under Part A is less than your group insurance deductible.
Therefore, if you end up in the hospital, you’ll only have to pay the Part A deductible vs. the group insurance deductible.
Medicare and Small Group Insurance
If you have small employer group insurance, it’s HIGHLY recommended that you enroll in both Part A and Part B as soon as you’re eligible. If you don’t, the employer 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.
When it comes to Part D, you may be able to delay your enrollment if your employer group insurance has prescription coverage.
Always compare your group insurance to what the cost of Medicare + Medigap + Part D would cost.
For many, it’s cheaper to leave group insurance and enroll in a Medicare Supplement plan and Part D plan available. We can compare those costs side by side to see what makes the most financial sense for you.
Can I Get Medicare While Working
Since Part B is not premium-free like Part A, those working that have group insurance sometimes choose to delay Part B. The same situation applies to Part D.
If your employer group insurance includes outpatient benefits and prescription coverage, it might make more financial sense to delay enrolling in Part B & Part D.
Since large group insurance is creditable coverage, you won’t incur a late penalty when you do retire and are ready to enroll.
When you leave group health coverage, the insurance carrier will mail you a creditable coverage letter. You will need to show this letter to Medicare to protect you from late penalties.
Returning to the Active Work Force After Retiring (Un-Retire)
Often, you might retire and later go back to work for one reason or another. If you “un-retire” and your large employer offers you group insurance, you can cancel Part B.
In the future, when you choose to retire again, you’ll be able to enroll back into Part B without incurring any penalties.
Can I Drop My Employer Health Insurance for Medicare
You would need to compare both your Part B & Medigap premiums with your employer coverage costs that are deducted from your payroll.
Knowing these costs will let you know which route is the most cost-effective. You would also need to consider the costs of your medications in addition to any deductible and copays.
How is my Retiree Coverage Plan Affected When I Turn 65
Once you become Medicare-eligible, your retiree group coverage becomes secondary, and Medicare becomes primary. It’s essential to know how your employer coverage will change once you turn 65.
If the 65+ retiree plan offered from your previous employer is a Medicare Advantage plan, you’ll want to educate yourself on the other options available to you. You might have better benefits with Original Medicare.
At this time, you may choose to go with Medicare. When you combine a Medicare Supplement with Medicare, your costs may be less than they would be with an Advantage plan.
Another factor to consider before choosing whether to enroll in your retiree plan or Medicare is if you have a younger spouse that may need to stay on your employer’s health plan.
For some, taking Medicare will make sense; for others, delaying enrollment makes sense. It all depends on your situation.
Medicare Premiums and Employer Contributions
Beneficiaries who participate can get tax-free reimbursements, including their Part B premium.
A Health Reimbursement Arrangement is a well-known Section 105 plan. An HRA reimburses eligible employees for their premiums, as well as other medical costs.
Rules for Medicare and Health Savings Accounts
When enrolled in any parts of Medicare, you CANNOT contribute to a Health Savings Account (HSA). Your employer also cannot contribute to your HSA once your Medicare is active.
If you continue to add to your HSA after your Medicare is active, you could face tax penalties. In the case your spouse has coverage on your group health 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.
Essential Facts to Know About The Consolidated Omnibus Budget Reconciliation Act
The Consolidated Omnibus Budget Reconciliation Act (COBRA) helps employees extend benefits past employment.
COBRA & Medicare don’t coordinate the same as employer coverage and Medicare. When you have COBRA, Medicare pays first, and COBRA pays second.
If you’re working past 65 and retire later, you MUST enroll in Part B within the first eight months you have COBRA even if your COBRA stays active longer than eight months. If you miss this 8-month window, you will incur a late enrollment penalty for Part B that sticks with you for life.
If you’re on COBRA and under 65, then you must enroll in Part A and B during your Initial Enrollment Period. Your IEP will begin three months before your 65th birthday. If you don’t join during this 7-month window, you’ll incur that lifelong penalty.
Common Group Health and Medicare Questions
Start Here With Your Medicare
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