Of course, we are here to help you figure out what your best options are, as well as if and when you should enroll.
Active Employer Coverage
You may have active employer coverage if you are still working. In this case, you can remain on your employer’s group health insurance plan if you would like. Your Medicare benefits can be adjusted to coordinate with your group coverage. However, the way it coordinates will depend on the size of your company.
If your health coverage is through your spouse’s employer, the same rules apply.
Medicare and Employer Coverage (20+ Employees)
Medicare is secondary if your employer has more than 20 employees and you are actively working (not a retiree or on COBRA). This case is called Medicare Secondary Payer. Your group plan pays first, and then Medicare pays second.
Most active employees with group health coverage enroll in Part A because there is no premium if you have worked at least ten years. The purpose of Part A is to lower your costs after a hospital stay. For example, let’s say your employer health plan has a $3000 deductible. The Medicare Part A hospital deductible is $1340 in 2018. If you have both your employer insurance and Part A, and you are billed for a hospital stay, you will only pay $1340. Medicare pays the rest of any Part A services.
However, if you are contributing to an HSA account and plan to continue doing so, do not enroll in Part A. Read more on that below.
Medicare as Secondary Insurance Costs Money
Unlike Part A, Part B is not premium-free. You will pay a monthly premium for Part B adjusted to your income level. Many people who are enrolled in employer group health coverage choose to delay enrolling in Medicare Part B and Part D.
Since employer coverage already includes outpatient benefits, it may not be worth it to pay Part B and D premiums.
When you delay Part B, your large group plan is considered creditable coverage. If you have creditable coverage, you may enroll in Part B later without a late penalty when you decide to retire. Once you quit and leave the group plan, your insurance company will mail you a creditable coverage letter. Be sure you keep this. You will need this to prove to Medicare that you had creditable coverage at the tie you could have enrolled in Part B.
Small Group Health: Frequently Asked Questions
What Happens if You Retire and then Later Go Back to Work?
Many people retire, get Part B, and then get a new job with employer insurance. You can cancel Part B at that time. Later when you retire again, you’ll have a second 6-month open enrollment window to get a Medigap plan with no health questions asked.
Medicare and COBRA: Avoid Medicare Penalties
With other active coverage Group Insurance pays primary and Medicare pays secondary. However, with COBRA, the opposite is true.
This is crucial information because many people don’t realize this and owe penalties.
If you are under 65 and on COBRA, you have to enroll in Part A and B during your Initial Enrollment Period when you reach 65. This is because Medicare will be your primary coverage while COBRA only pays as your secondary. Failing to enroll during your IEP, will result in a penalty. If you want to, you can keep COBRA and let it pay secondary coverage instead of a Medigap plan. Just be sure you enroll in both Part A and Part B during your IEP.
If you retire after 65, you must enroll in Part B no later than your 8th month on COBRA, even if COBRA continues beyond that. If you fail to do so, you may incur a permanent late enrollment penalty for Part B. Furthermore, you may have to wait to enroll in Medicare Part B until July of the following year.
The Option to Choose Medicare as your Primary Insurance
People using large group employer insurance have another option. They can leave their group health plan and choose Medicare as their primary insurance, and add a Medigap plan. This may end up being cheaper. In fact, for many people, this can reduce deductible spending and eliminate all doctor copays.
Whether this is a good choice depends on how much your employer coverage costs you each month in your payroll deductions. You should also consider your deductible, copays, and medications.
We can help you decide when is the right time to enroll in Medicare Part B.
Medicare and Employer Coverage for Small Companies with Less than 20 Employees
Medicare is the primary coverage if your company has less than 20 employees. You will definitely need both Part A & B because Medicare will pay before your employer insurance.
Don’t get stuck with unnecessary expenses.
Sometimes insurance companies say they will cover claims even if you don’t have Part B. Don’t listen to them. The insurance company can change that without warning. Then you will be stuck with all the expenses that Part B would normally cover.
It’s not worth the risk– you should always enroll in Parts A & B if your employer has less than 20 employees since Medicare will be your primary coverage.
However, if your group plan has RX benefits, you may be able to delay enrolling in a Part D drug plan without penalty. It is sometimes cheaper to leave the group insurance altogether and join a Medicare supplement as your secondary coverage.
HSA-Compatible Health Plans
One exception on any size employer coverage is HSA-compatible health plans. If you have a qualified high deductible health plan and you plan to contribute to a health savings account, do not enroll in Medicare. You cannot contribute if you are actively enrolled in any part of Medicare. Check with your tax adviser on rules for this.
Can your employer pay your Medigap premium?
We often get questions about whether an employer can pay for your supplemental Medigap plan. It’s often expensive for your employer to carry older employees on the group plan, and you are likely to get more comprehensive coverage with Medicare and a Plan F or G Medigap plan.
However, this is not permitted. If you reject your employer’s group insurance plan and choose Medicare as your primary, the employer cannot pay your Medigap premium on an individual basis. The only exception would be if the employer sets up a section 105 reimbursement plan for the whole group.
A Section 105 Reimbursement Plan allows the employer to deduct expenses for employees who purchase individual health insurance plans. Employers can reimburse eligible employees for Medicare Parts A and B premiums as well as Medigap plans. Check with your employer to see if they have an active Section 105 plan.
Can my employer remove me from my group health insurance when I turn 65?
It’s illegal for an employer to force any actively working employee to choose Medicare instead of their group health plan. You have the option to leave the group health plan and choose Medicare as your primary insurance instead, but your employer cannot make you do so.
Be aware though that if you are on retiree coverage from a former employer where you are no longer actively working, the employer does not have to provide a retiree plan for former employees after age 65. If that former employer DOES offer coverage, your benefits will likely change when you turn 65. This is because when you are age 65 and have retiree coverage, Medicare becomes your primary insurance, and your group coverage now pays secondary.
Prices and benefits from your employer coverage may be different once you turn 65. For example, if their retiree plan for people age 65 and older is a Medicare Advantage plan, then you will need to choose whether you want to enroll in that at 65 or switch to Original Medicare as your coverage. There are many factors to consider, such as premiums, how the plan covers your medications, and whether you have a younger spouse that needs to stay on your plan.
Can you enroll in a Medigap plan even if you have employer coverage at a large employer, just to be sure?
This would be a waste of money. A Medigap cannot pay for anything unless Medicare is your primary insurance. The insurance company’s application will ask if you are still employed. When they see that you have large group coverage, they may reject your application because they know it will be of no use to you. Medicare and Employer coverage will be good enough coverage.
If your company offers RETIREE coverage after you have stopped actively working, Medicare is PRIMARY to that coverage. Speak with the administrator of your retiree coverage to find out the costs for maintaining that coverage. If costs are high, you might consider leaving the retiree coverage for a Medigap and Part D drug plan instead.
Where to Start
Deciding all of these things requires some careful cost analysis between the costs for Medicare and the costs, copays and deductibles of your group coverage. One of our agents can walk through all of this and advise you on the parts you need to consider. If it makes sense for you to stay with your employer coverage, we’ll be the first to tell you.
This website has additional reading about Medicare coordination. See our posts for Medicare and Employer coverage for employer plans with less than 20 people. We also have a Medicare coordination of benefits post for employer plans with more than 20 people.