Many baby boomers are choosing to work past the age of 65. Working past 65 raises many questions for newly eligible Medicare beneficiaries. If you’re aging into Medicare & working, you’re in the right place.
The information below will help you choose which coverage option is going to be the most cost-effective. As well as help you avoid unnecessary late enrollment penalties. If your group health coverage is through your spouses’ employer, the same rules apply.
How Employer Health Insurance Works with Medicare
If you’re working, you have the option to remain on your employer’s group health insurance plan. Your Medicare benefits will coordinate with your employer coverage.
The size of your employer will determine how your Medicare benefits will coordinate with your employer coverage. It also determines if your employer coverage is considered creditable coverage or not.
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 out of pocket costs lower.
If your employer group insurance has a $4,000 deductible, it makes sense to enroll in Part A. 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.
Large Employer Group Insurance and Medicare
More than 20 Employees
If you’re aging into Medicare & working for an employer with more than 20 employees, your employer group coverage is primary. Your Medicare benefits are secondary. When Medicare benefits are secondary, it’s known as the Medicare Secondary Payer. Your group plan pays first & Medicare pays second.
Medicare Secondary Payer
As stated above, it makes sense to still enroll in Part A when you age into Medicare and are working. However, it’s a little different when it comes to Part B. Since Part B is not premium-free like Part A, those working that have group health insurance sometimes choose to delay enrolling in 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 considered 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.
Essential Facts to Know About COBRA
COBRA & Medicare don’t coordinate the same as employer coverage and Medicare. With employer coverage at a large employer, your group insurance is primary. With COBRA, this is NOT the case.
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. You could even be forced to delay your Part B coverage until July of the following year.
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.
Can I Drop My Employer Health Insurance for Medicare
If you have large group employer coverage, you do have the option to leave your group health plan and make Medicare your primary coverage. When you combine a Medigap plan with Medicare, this can, often, be more affordable for you, as well as your spouse.
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.
Our MedicareFAQ agents will listen and educate you on all your options. Including if it’s better to enroll in Part B now, or if you should stay with your current group health plan.
Small Employer Group Insurance and Medicare
Less than 20 Employees
If your employer has fewer than 20 employees, then Medicare becomes primary. Medicare will be billed first. Then your employer coverage will be billed second.
If you have small employer group insurance, it’s HIGHLY recommended that you enroll in both Part A & Part B as soon as you’re Medicare eligible. If you don’t register, the group plan can refuse to pay your claims.
Your insurance might cover claims even if you don’t have Part B. We always recommend enrolling in Part B. Your carrier can change that at any time, with no warning, leaving you responsible for Part B.
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 Medigap + Part D would cost. For many, it’s sometimes cheaper to leave your group insurance and enroll in a Medicare Supplement plan & Part D plan that’s available in your area. We can compare those costs side by side to see what makes the most financial sense for your healthcare.
Medicare Premiums and Employer Contributions
Medicare and employer coverage can work together in rare cases.
According to the Centers for Medicare and Medicaid Services, it’s illegal for employers to contribute to Medicare premiums.
The exception is employers who set up a 105 Reimbursement Plan for all employees.
This plan deducts money from the employees’ salaries to purchase individual insurance policies.
Beneficiaries who participate can receive 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 qualified out of pocket medical costs.
When enrolled in any parts of Medicare, you CANNOT contribute to a health savings account. 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.
Retiree Coverage Guidelines
If you’re not working and on a retiree coverage plan through your previous employer, Medicare is primary, and the retiree coverage is secondary.
However, if you’re not working and on retiree coverage from a former employer, they are not required to provide you with a retiree plan once you turn 65. If that former employer happens to offer coverage past 65, your benefits will likely change once you become Medicare-eligible.
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 can choose not to enroll in the retiree plan and go with Original Medicare. When you combine a Medicare Supplement with Original Medicare, your out of pocket expenses may be less than they would be with a Medicare Advantage plan.
Another factor to consider before choosing whether to enroll in your retiree plan or Original Medicare is if you have a younger spouse that may need to stay on your employer’s health plan.
If you feel the costs are too high, give us a call. It could be possible that leaving your retiree coverage and enrolling in a Medigap and stand-alone Part D plan could cost you less and provide you with better coverage.
Common Group Health and Medicare Questions
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. It’s illegal. You can always choose to have Medicare as primary and decline your group health plan, but that decision is yours and can never be forced by your employer.
Should I still enroll in Part A if I have employer health coverage?
Usually, the answer to this question is yes. As long as you worked a minimum of 10 years, Part A won’t cost you anything. When you coordinate your group insurance with Part A, you could lower your hospital bills. The only time you want to consider not enrolling in Part A is if you have an HSA. If your current health plan is compatible with your Health Savings Account, and you want to continue contributing to it, then you do not NEED to enroll in Part A.
If I have employer health coverage, should I enroll in Part B?
The answer to this question boils down to the size of your employer. If there are more than 20 employees, then your employer is considered a large employer. In this case, you can delay enrolling in Part B without being penalized. If your employer has less than 20 employees, then you do need to enroll in Part A & Part B since Medicare will be your primary insurance.
What happens if I have small employer group coverage and don’t enroll in Part B?
If your group insurance is secondary to Medicare, then the law states your employer insurance only has to pay after Medicare first pays as your primary insurance. Therefore, if you delay your Part B, you could be responsible for the first 80% of your medical costs that Part B would’ve covered. This is because your small group coverage ONLY has to pay what would’ve been leftover after Medicare paid their portion.
Should I elect Medicare as my primary insurance and leave my group health insurance?
If this option is more cost-effective for you, then absolutely. You’ll want to take into consideration how much you’re paying for your employer group health coverage. If your employer is paying most or all the costs, then it may be more cost-effective for you to keep your employer coverage as your primary insurance.
If you find yourself spending more on your group health insurance than what it would cost to enroll in Part B and pick up a Medicare Supplement plan, you should consider leaving your group insurance and enroll in Part A & B.
This is something we can help you figure out. We’ll compare what you’re currently paying with what you would be paying for Original Medicare & Medigap to see which is the more affordable option for you.
Should my spouse stay on my group plan or enroll in Medicare?
Often, we find that it costs less for your spouse to enroll in Medicare vs. staying on the employer plan. The reason is that most employers don’t help pay for the costs of spousal insurance. If your spouses’ insurance is costing you hundreds of dollars a month, you should consider enrolling them in Medicare.
Start Here with Medicare and Group Insurance
If you have any questions, we can help! If you’re having a hard time choosing Medicare over group health insurance, we can advise you on all the different factors to consider to help you make the best decision.
Our licensed insurance agents are available and happy to help with whatever you may need, don’t hesitate to give us a call. If you would like to compare all your Medicare options and rates in your area, fill out our compare rates form.