How Does Medicare Work With Retiree Insurance?

While you are working, your employer will likely offer group insurance. Sometimes after you retire, your employer will continue to provide this insurance at a higher rate.

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This type of insurance is called retiree insurance. But as you approach 65, you may wonder: how does Medicare work with retiree insurance?

If you retire before age 65, retiree insurance can be a good transition from group coverage until you are eligible for Medicare. If you retire when you are eligible for Medicare, you should consider which coverage is best for your needs. Below, we review how Medicare works with retiree insurance and how to know which coverage is right for you.

Do I Need Medicare If I Have Retiree Insurance?

Once you retire, you may have the option to continue group retiree insurance, enroll in Medicare, or have both coverage types. To qualify for Original Medicare (Part A and Part B), you must be a U.S. citizen or legal resident of at least five years. Additionally, you must meet one of the following qualifications:

  • At least 65 years of age
  • Receiving Social Security Disability Income (SSDI) benefits for at least 24 months
  • Diagnosis of end-stage renal disease or amyotrophic lateral sclerosis

On the other hand, retiree coverage eligibility is different for everyone. Your employer will determine whether this type of coverage is available to you.

Generally speaking, if you have Original Medicare and retiree insurance, Medicare will act as your primary insurance, paying your health care bills first. In this case, your retiree coverage is your secondary insurance. Thus, it works like a Medicare Supplement policy.

However, you should know that retiree insurance is not creditable coverage for Original Medicare. Therefore, if you wish to keep your group coverage, you must enroll in Original Medicare during your Initial Enrollment Period to avoid late enrollment penalties.

It is possible to drop your retiree insurance for Original Medicare. However, ineligible spouses and dependents cannot enroll in Medicare with you. Thus, if the retiree plan covers them, they will lose coverage if you drop it.

Can You Continue Employer Coverage After You Retire?

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If your employer offers retiree insurance, you can continue coverage past retirement. Most employers who provide employee group insurance also offer retiree insurance to those who meet specific criteria.

Each company can set its own criteria, so it is essential to understand if you qualify before enrolling. Speak to your plan administrator or human resources representative for more details about your specific plan.

If you are eligible for Medicare once you retire, your employer coverage can be a great option to pay secondary to Original Medicare. However, simply because the option is available does not mean it is the best coverage for your needs. You should still review the available Medicare Advantage plans and Medicare Supplement plans in your area and compare your options.

What Types of Retiree Insurance Coordinate with Medicare?

Some types of retiree insurance that coordinate with Medicare are Private Fee-for-Service, Health Maintenance Organizations, and Preferred Provider Organizations plans.

HMO and PPO policies are managed care plans. So, to use this coverage, you may need to adhere to a network of doctors who accept it. Private Fee-for-Service plans are a bit more lenient on network restrictions and allow you to visit a wider variety of doctors and hospitals.

If your employer sponsors a Medicare Supplement plan, you will want to enroll in this coverage. Medicare Supplement plans offer you the highest level of coverage and allow you to visit any physician who accepts Original Medicare.

Most retiree plans coordinate flawlessly with Original Medicare. However, to avoid coverage issues, you must ensure you choose the right plan for your needs.

Do I Need Medicare Part D if I Have Retiree Coverage?

Having prescription drug coverage is crucial. Luckily, if your retiree plan offers drug benefits, you may not have to enroll in a Medicare Part D Prescription Drug plan.

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Retiree drug coverage is creditable for Medicare Part D, which will protect you from late penalties if you wait to enroll in Medicare prescription drug coverage. Thus, if your plan covers your medications at a low cost, you may not need to change plans.

However, if you find that a Medicare Part D plan covers you best, you can drop retiree drug coverage to enroll. On the other hand, if you do not have creditable drug coverage through your retiree plan, it is best to enroll in Medicare Part D as soon as you become eligible to avoid the Medicare Part D penalty.

How to Understand if Your Retiree Insurance Works With Medicare

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  1. Retiree Insurance, Medicare. Accessed August 2022.
  2. Employer/retiree Coverage, KFF . Accessed August 2022.

David Haass

  • Chief Technology Officer

David Haass is the Chief Technology Officer and Co-Founder of Elite Insurance Partners and He is a member and regular contributor to Forbes Finance Council and stay up-to-date with the latest Medicare trends and changes. He holds a Bachelor of Science in Business Administration and Management from the University of Florida.

4 thoughts on “How Does Medicare Work With Retiree Insurance?

  1. Thanks for the informative article. I am having trouble finding the answer to this question: My husband has been covered by retiree insurance (with creditable drug coverage) secondary to Medicare parts A and B for six years, since he turned 65. If he wishes to now drop the retiree insurance and purchase a Medigap policy, will he need to go through underwriting? Or is it considered a guaranteed acceptance period? If the former, is the answer the same if the employer ceases to provide the retiree insurance? Thank you for your thoughts.

    1. Hi Marcelle, if your husband has employer coverage secondary to Medicare Part A and B and drops the employer coverage, he may be given a Special Enrollment Period to enroll in a Medigap plan without underwriting. I say “may” because this exception is only made in certain states. What state does your Husband reside in?

  2. Do I need to apply for Medicare Parts C and D after I retire, I am 65 and already have Parts A and B. My employer has a plan for Medical and Perscription when I retire.
    Is it good to have both Medicare Parts C and D and my Employer medical plan that covers the same things?

    1. Hi Neal! Since each employer plan is different, I’m unable to give you advice on which route to go. You would want to speak to your benefits administrator to find the best route to go.


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