Employee Coverage and Medicare

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Employee Coverage and Medicare

If you are a senior citizen with both Medicare and Employer Coverage, you have a few things to think about. You may be able to keep your employer insurance and Medicare will work with that coverage. Compare the cost of your employer coverage against what it would cost you to switch to Medicare as your primary insurance.

Doing your research will help you decide on which coverage option is most cost-effective. It can also help you avoid any Medicare late enrollment penalties wherever possible. The info below is for beneficiaries age 65 or older. (Medicare coordination rules are different for people under age 65 on Medicare due to disability.)

Active Employer Coverage

When you are still actively working, you are covered by your employer’s group health insurance plan. You can remain on that plan even after you become a Medicare beneficiary. The way that Medicare coordinates with your employer-sponsored coverage depends on the size of your employer.

These same rules apply if you get your group health insurance through your spouse’s employer.

Medicare and Employer Coverage – Large Companies 20+ Employees

If you are over the age of 65 and your employer has more than 20 employees, you have the right to stay on your employer’s group health insurance plan. This is called Medicare Secondary Payer. In this scenario, your group plan pays first, and then Medicare pays second. Part A can coordinate to lower your costs if you have a hospital stay.

For example, let’s say your employer health plan has a $3,000 deductible. The Medicare Part A hospital deductible is $1,556 in 2022. So if you have both your employer insurance and Part A, and you incur a bill for a hospital stay, you will only be out $1,556 for your inpatient hospital services. Medicare pays the rest of any Part A services.

Most people choose Part A only when working for a large employer. However, one exception would be if you are contributing to an HSA and plan to continue doing so. If that’s the case, do not enroll in Part A. Read more on that below.

Medicare as Secondary Insurance Costs Money

If you’re eligible for Medicare and have employer group health coverage, you may choose to delay enrolling in Medicare Part B and Part D while still covered under your group health plan. This can save you the premiums you would otherwise pay for those parts.

Your employer coverage already includes outpatient benefits, so it may not be worth it to pay the Part B and D premiums. Once you leave the group plan, your insurance company will mail you a creditable coverage letter. Be sure to keep this letter, as you’ll need it to show Medicare that you had other coverage so that you are not subject to late penalties for Parts B and D.

For more information on coordination of your Medicare benefits and large employer coverage, read ____

What Happens if You Retire and Later Go Back to Work?

If you retire and later get a new job with employer insurance, you can cancel your Part B coverage. Later, when you retire again, you’ll have a second six-month Open Enrollment window to get Medigap coverage with no health questions asked.

A Word About COBRA and Medicare

Medicare coordinates differently with COBRA than it does with active coverage. This is important because so many people get this wrong and then owe penalties.

When you are still actively working at a large employer, their Group Insurance pays primary and Medicare pays secondary. The opposite is true of COBRA. Medicare pays first and COBRA pays second.

So, if you have COBRA and then become eligible for Medicare, usually at age 65, then you must enroll in Part A and B during your Initial Enrollment Period. Your COBRA typically ends when your Medicare begins. Failure to enroll during your IEP will result in a lifelong penalty. However, your dependents can keep COBRA for up to 3 years, even if you enroll in Medicare.

If you work past age 65 and then you retire, you are allowed to enroll in COBRA. You must also enroll in Part B no later than your 8th month on COBRA insurance, even if COBRA continues beyond that because Medicare pays primary and COBRA pays secondary. However, it’s recommended you enroll in Part B as soon as you become eligible for Medicare. If you don’t, your COBRA may not pay its share since it’s secondary to Medicare. Failure to enroll in Medicare by the 8th month can result in a permanent late enrollment penalty for Part B. Even worse, it could delay your Medicare Part B until July of the following year. You do not want to find yourself in a situation where you have to wait months to buy Part B during the next General Enrollment Period.

There is one exception for people with End-Stage Renal Disease. If you have ESRD, your COBRA will pay primary during a special 30-month coordination period between Medicare and COBRA.

The Option to Choose Medicare as your Primary Insurance

It’s important to know that you have options when it comes to your Medicare coverage. If you have employer-sponsored insurance, you can choose to leave your group health plan and enroll in Medicare instead. This may be a cheaper option for you or your spouse, and it can also reduce your deductible spending and eliminate copays for doctor visits.

Whether this is the best option for you depends on a few factors, including how much your employer coverage costs each month in payroll deductions, your plan deductible, copays, and medication usage. If you’re married, you’ll also need to consider the cost of health insurance for your spouse.

Our team at UrMedicare can help you decide if enrolling in Part B now or later is the best option for you. We often meet people who we advise to stay with their group plan for now if it makes more sense financially.

You can learn more about your options for Medigap or Medicare Advantage plans here. Medicare & Employer Coverage | Should You Enroll In Part B?

Medicare and Employer Coverage – Small Companies under 20 Employees

Medicare is primary if you are age 65 or older and your employer has fewer than 20 employees. You will need both Part A & B for sure because Medicare will pay first, and then your group insurance will pay secondary. Occasionally we see some insurance companies who will cover claims even if you don’t have Part B. Don’t buy it. You run the risk of that insurance company changing that at any time without warning, and leaving you stuck with all the expenses that Part B would normally cover. It’s not worth the risk – we advise always enrolling in Parts A & B if your employer has fewer than 20 employees and Medicare will be primary.

However, you may be able to delay enrolling in a Part D drug plan without penalty if your group plan has RX benefits, as most do. Be sure to compare costs. It is sometimes cheaper to leave the group insurance altogether and enroll in a Medicare supplement as your secondary instead.

Read more about Medicare and Employer coverage for small employers here.

The HSA Exception

One exception on either large or small employer coverage is HSA-compatible health plans. If you have a qualified high deductible health plan and you enroll in Medicare, you can no longer contribute to your health savings account.

You cannot contribute to a health savings account if you have ANY part of Medicare active. You also cannot accept any contributions from an employer if you have active Medicare.

Medicare and employer health insurance do not mix well if you are contributing to an HSA account. Beware of tax penalties if you contribute to an HSA.

So, if you work for a small employer, you must enroll in Parts A and B at 65 to avoid penalties. This means that if you plan to keep your HSA-qualified employer coverage, you must stop contributing into the HSA. Your spouse can still contribute if he or she is covered on your group plan and is not yet enrolled in Medicare.

Check with your tax adviser on rules for this, and read our blog post about H.S.A. rules for Medicare beneficiaries.

Can my employer pay Medicare Part B premium?

As a senior citizen, you may be wondering if your employer can help pay for your Medicare Part B premium. The answer is generally no, but there are some exceptions.

Your employer can form a Section 105 Medical Reimbursement Plan, which will enable them to set funds aside for workers to use toward health insurance and dental insurance for the employees and family. This includes Medicare Part B premiums. A Section 105 plan allows tax-free reimbursement of the employee’s medical and other insurance expenses.

One popular type of Section 105 plan is a Health Reimbursement Arrangement, or HRA. It is designed to reimburse eligible employees for their individual health insurance premiums and other qualified medical expenses.

Can your employer pay your Medigap premium?

We can tell you that it is generally not a good idea to switch from a group insurance plan to Medicare and then have your employer pay your Medigap premiums on an individual basis. One exception would be if the employer sets up a section 105 reimbursement plan for their group as a whole. A Section 105 Reimbursement Plan allows the employer to deduct expenses for employees who purchase individual health insurance plans. Eligible employees can participate and the employer can reimburse premiums for Medicare Parts A and B as well as Medigap plans. Check with your employer to see if they have a Section 105 plan in place.

I'm 65. Do I have to leave my group health insurance and enroll in Medicare?

No. It’s actually illegal for your employer to make you do so. You can choose to leave your group health plan and enroll in Medicare instead, but your employer cannot force you to do so.

However, if you’re on retiree coverage from a former employer, they are not required to provide a retiree plan for former employees after age 65. If they do offer coverage, your benefits will most likely change when you turn 65. This is because Medicare becomes your primary insurance when you’re age 65 and have retiree coverage, 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.

Retiree 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

So can you have private insurance and Medicare? Yes, but there are many factors to consider. 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. A UrMedicare agent 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.