You’ll want 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
If you’re working, you have the option to remain on your employer’s group health insurance plan. The size of your employer will determine how your Medicare benefits will coordinate with your employer coverage.
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 your employer has fewer than 20 employees, then Medicare becomes primary. Medicare will be billed first. Then your employer plan will be billed second.
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
If you’re still working, it makes sense to enroll in Part A when eligible. But, 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 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 and go on 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, 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.
Medicare Premiums and Employer Contributions
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.
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 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 Medicare is active, you could face tax penalties. In the case 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.
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.
Those that miss this 8-month window, you will incur a Part B late penalty. 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.
COBRA and Medicare
COBRA is temporary insurance for retirees after separation from employment. Still, COBRA is usually costly; you pay the premium, the employer’s contribution, and any extra amount by the carrier.
Also, COBRA isn’t creditable coverage; so, you need to buy Part B. COBRA extends group benefits for a set period. It’s rare for COBRA to be best for someone Medicare eligible.
You can usually get better coverage for less money than COBRA.
Navigating End-Stage Renal Disease and Employer Coverage
Those with End-Stage Renal Disease will obtain Medicare as primary insurance after the 30th month. For the first 30 months, the employer, retiree insurance, or COBRA policy will be primary and Medicare will be secondary.
Those that have a successful kidney transplant could lose Medicare. Medicare after an ESRD kidney transplant ends after 36 months unless you qualify for disability.
For the most part, if your transplant is successful, you’ll re-enroll in Medicare at age 65.
How is my Retiree Coverage Plan Affected When I Turn 65
If you’re on a retiree coverage plan through your previous employer, Medicare is primary. But, if you’re not working and on retiree coverage from a former employer, they aren’t 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 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.
Retiree Health Insurance and Medicare
Mostly, Medicare is primary, and the retirement plan is secondary. Retiree coverage varies; so, the only way to find out risks is to speak with your benefits administrator.
Retirement plans have distinct coverages and various rules. Also, your retirement plan may coordinate benefits uniquely with Medicare.
No one wants irregular financial burdens, plan ahead of time.
To build value in a retiree plan, most offer dental, vision, and hearing. It’s essential to study and understand your benefits entirely before you decide on coverage.
Usually, you can’t return to your retirement plan once you leave.
Health Insurance for Retirees
Different types of coverages could be retirement insurance, it’s an extension of the employer plan.
There’s a new trend, employer-sponsored advantage plans. These plans are through a union or a healthcare company.
Medicare Advantage plans have deductibles, coinsurance, and Maximum Out of Pocket. Also, they replace Medicare.
Before choosing coverage, review the benefits and cost-sharing. Understanding your coverage ensures you choose the best coverage.
With so many traditional options, be sure you understand all the coverage options.
Just because your former employer offers a retiree plan doesn’t mean it’s the best option.
Most retiree plans offer better prescription coverage than Medicare.
Talk with your benefits administrator about all the details of the plan. Make a list of questions so you can choose the proper coverage.
Retiree Insurance is Secondary to Medicare
Most retiree insurance requires Part A and B; this adds to the cost. Part B has a premium; but, since it’s a retirement plan, it would pay after Medicare.
You must have Medicare in place for the retiree plan to coordinate benefits properly.
Employer Group Insurance vs. Retiree Insurance
When going from group to retiree coverage, it’s essential to remember a few things. In most cases, the coverage is different. Co-pays, premiums, coinsurance, and benefits are different.
If a group plan is primary to Medicare, you don’t need Part B. But; retiree coverage is commonly secondary to Medicare.
When Medicare is Primary, you need Part B. Talk to your employer before you turn 65; you may not need Part B before retirement.
If this is the case, you qualify for a Special Enrollment Period when you decide to enroll in Part B. Sometimes Medigap and Medicare make more sense than a Retiree plan; though, each case differs.
Some potential holes to consider when comparing retiree coverage to group plans are listed:
While Medicare has Part D you can buy, the other items Medicare doesn’t cover. You may need more coverage for these benefits.
Medicare becomes primary when you drop your employer’s plan. You need to enroll in Part B before your employer plan ends if you’re not on Medicare; by doing this you avoid gaps in coverage.
Federal Retiree Health Insurance and Medicare
Depending on your career, you may not need Part B. The Federal Employee Health Benefits can’t force you to enroll in Part B.
If you don’t enroll in Part B when first eligible, you may have to wait until the General Enrollment Period. Some Federal plans offer robust coverage; however, the cost can make it tough to manage.
Common Group Health and Medicare Questions
Start Here With Your Medicare
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