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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

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Lindsay Malzone

Lindsay Malzone 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.

41 thoughts on “Medicare and Employer Coverage

  1. Hello-my spouse is turning 65 soon and is on my employer coverage (over 20 employees) and we have an hsa plan with family deductible of 3,200 and oop max of 5,000/12,500. My question is if he only keeps part A on medicare and dosen’t pay into part B what would his Medicare part A meet if he had an Inpatient stay at a hospital? Would he still have to meet his family deductible(it’s an aggregate plan) and his individual oop before Medicare part A pays? I know Medicare part A would not cover any outpatient costs.

    1. Part A comes with an annual deductible, once that deductible is met then Part A would cover the costs of inpatient care. You would have to talk to your benefits administrator to determine if that deductible would count towards your family deductible.

  2. My husband is turning 65 and his employer is saying he has to enroll in Medicare and they will pay for parts B C and D, I on the other hand am only 59 and will be left with no insurance, they have more than 20 employees, what’s our best option.

    1. Hi Tina! As long as the employer has more than 20 employees, the insurance is creditable. If your husbands’ employer s saying he has to enroll in Medicare, it’s probably because they no longer want to pay the current premiums they are paying for you both. It sounds like they are trying to get him in a Medicare Advantage plan, which is not the best supplemental coverage. It’s cheaper than the alternative, which is why they are probably suggesting that. If they are going to refund the premium amount to him, then he should enroll in a Medigap plan. Unfortunately, if your husband does leave the group insurance and goes to Medicare, you will have to enroll in your own health insurance plan since you’re not eligible for Medicare yet. The Marketplace may be a good option for you.

  3. Hi Lindsay,

    My mother is turning 65. She is living outside the states, in Taiwan with National Health Insurance there. She has 28 work credits and thus not qualified for any discount on Medicare, does not receive any social security benefits. The house under her name in Kentucky is rented out as rental property and she receives rental income at right around the QMB limits, below the QMB limits after various deductions. I live in California and claimed her as dependent in tax year 2019 and 2020. She has no current plans of returning to live in the states but it could happen in the future.

    I remember seeing somewhere that UK’s NHS could be considered creditable health coverage (not sure if this is correct) and thus was wondering is the National Health Insurance in Taiwan considered creditable coverage to allow for penalty-free enrollment if/when she returns to the states permanently?

    If not, what are our options? If we need to go through QMB, do we apply for that with state of Kentucky or California?

    Any advice you have would be highly appreciated.

    1. Hi Wade! I do not believe Taiwan has an agreement with the United States regarding health insurance. I have not been able to find any information regarding this though on CMS. I would call Medicare directly to find out, but if I were to guess I would say it’s not considered creditable coverage. Your best option is to enroll her in Medicare when she is first eligible if there’s any chance she would be moving back to the states. Otherwise, she will have a significant penalty added to the standard monthly premium if she enrolls later. If she qualifies for QMB, they will pay her premiums for both Part A & Part B. You would apply for QMB in the state she will reside in. Her rental property will count as income but does not determine where she enrolls in QMB. If you think she may qualify for QMB, I would reach out to your local Medicaid office to see if they will pay any penalties she incurs due to delaying her enrollment since QMB is managed by the states Medicaid office. That may help you determine if she should enroll now or delay until, if, and when, she moves back to the states.

  4. My husband will be 65 soon and intends to continue working where there are less than 20 employees. His weekly health insurance paycheck deduction is around $70.00. From what l understand it is suggested to enroll in Part A and B. Why would he want to pay part b plus employers insurance? Can he drop his insurance through his job? Would this be a qualifying event, or would he have to drop them during open enrollment?

      1. He may still need to remain covered by his employers plan so that his wife is covered.

  5. I enrolled in Part A Medicare when I turned 65 but I was still working with a large employer (over 2000 employees) and declined to enroll in Part B as I was covered under the employer health plan. I retired in July of 2021 at age 66 and was told I had the option to stay enrolled in my health care plan via COBRA for 18 months. I opted to do this in lieu of enrolling in Part B as I was informed my COBRA plan would pay as primary. I have now learned that (a) I was required to enroll in Part B even though the premiums were higher than my COBRA plan with United Health Care; (b) that my COBRA plan is not considered credible coverage according to Medicare; (c) that because I didn’t enroll within 8 months of leaving my employment I will now have to wait until Jan. 2022 to enroll and I will not have to pay a penalty for every month I did not enrole….17 or 18 months of penalty, $14.46 per every month I failed to enroll for the rest of my life. This is in addition to the cost of Medicare, who also goes back 2 years to determine your premium. What is the purpose of basing a premium on wages in the retirees past; when you retire your income is significantly less than it was 2 years prior. This is a travesty! Why isn’t this information made clear and transparent? The websites from my employer, Medicare and other websites linked to Medicare and COBRA have conflicting information making it even more confusing.

  6. Hi Lindsay,
    I have had my employer’s group health coverage since 1990 up to the present day. I retired from the company in the spring 2009 but was granted inclusion in the company health coverage until 2025.
    The company was recently sold and the new owners are unwilling to continue this arrangement. I had creditable coverage uninterrupted for this entire period including Medicare Part A but not part B.
    I am in the process of rearranging my health coverage and have found some big problems. I was told by Social Security when I applied for the required part B. that I must pay a penalty based on the time I did not have part B. Keep in mind creditable coverage is still in effect. The penalty amounts to just under two thousand dollars per year every year until I pass. I was unware of this egregious situation, and have received confusing and conflicting information from various sources in my quest for a resolution.
    Please tell me there is no penalty due and why, as it seems to be the case as I read some of your writings.

    1. Hi Jim! As long as the company has more than 20 employees, it should be considered creditable. You just need to have your previous employer benefits administrator complete the CMS-L564 form to present to Social Security to show proof that you had creditable coverage the entire time.

      1. Hi Lindsay,
        Thanks for getting back to me so promptly, much appreciated.
        This is an ongoing head ache because CMS L564 was filled out and filed with the part B application and still I am told I have the penalty obligation going forward. Could it be that SS is reading line 5 of this form in appropriately? I worked for the company from 04-1990 through 04-2009 but my insurance was continued through to the present.
        I certainly hope this is the case or something similar is in error, the penalty is egregious and I believe totally unwarranted.
        Have you any other suggestions for this problem?
        Best,
        Jim McGown

      2. Hi Jim! I would contact your previous employer’s benefits administrator to confirm that the coverage was creditable. It’s not likely that SS is reading the form incorrectly. If the benefits administrator disagrees with what SS is saying, I would do a 3-way call with you, the benefits administrator, and SS to get it straightened out. Otherwise, it will be a back and forth battle.

      3. Hi Lindsay,
        One last question, does work after my retirement date have anything to do with this penalty problem?
        Conversations early on with SS make me wonder, but my memory is a bit vague so I thought I’d ask.
        The form CMS L564 is a bit vague about employment dates. That is what lead me to ask about line 5. Those that I have spoken with about this problem say no, but I’m still wondering.
        Best,
        Jim McGown

      4. Hi Jim! Your retirement dates COULD have something to do with it. Your employer coverage may have been creditable when you were still working, but once you retired that retirement plan that you stayed on may have not been considered creditable coverage. Your previous benefits administrator should know the answer to this for sure.

  7. Lindsay,
    My wife is covered as a dependent on my employers health plan. I am not yet 65, but she will turn 65 this year. Do all the rules, stipulations, etc regarding Medicare vs. employer health plans apply to a dependent the same as the employee?

    1. Hello! Yes, the rules & stipulations will be the same. Your wife should still enroll in Part A since it’s premium-free. She can choose to decline Part B without penalty as long as your employer group coverage is creditable. (over 20 employees)

      1. Lindsay,
        I work for a company of well over 20 employees and my wife is covered on my group insurance. We contribute to an HSA and would like to continue since the benefits of that outweigh the cost difference between group insurance and Medicare. My wife turns 65 this year and I would like to delay enrollment in any form of Medicare for her since that would prohibit full HSA contributions. This should be OK as long as the group plan is creditable correct? Thanks.

      2. Hi Kim! As long as your wife is NOT the one contributing to the HSA, you can continue to contribute to the HSA. This rule only impacts those on Medicare who are the ones contributing to their HSA. However, if she is the one contributing to the HSA, then yes she can delay enrolling without penalty as long as the group coverage is creditable.

  8. 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.

  9. 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!

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. 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???

  15. 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.

  16. 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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