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How Medicare Works With Employer Group Coverage
If you are turning 65 soon, or are over 65, and currently have group health insurance based on the active employment of either you (or your spouse), you will likely have a couple of options to think through when it comes to your coverage. So let’s dig right in…
What Are My Coverage Options?
If you are still covered by credible group health insurance once you become eligible for Medicare then you can either choose to join Medicare, or delay your Medicare enrollment and keep your current employer coverage until you retire in the future. We recommend weighing your options to see which coverage will provide you with the best benefits for the lowest premiums.
From our experience, approximately 50% of the time it is best to stay on group coverage, and the other 50% of the time, it is better to join Medicare. This decision should be based on comparing what you currently pay for your health insurance versus what you would pay for Medicare. Additionally, comparing a few of the major benefits such as the deductible and copays.
If Your Employer has 1-19 Employees:
If your employer has less then 20 employees then your group insurance company has the right to require you to sign up for Original Medicare (Parts A and B) once you become eligible at age 65. It is therefor extremely important to ask your employer whether you are required to sign up for Medicare or not.
If you are required to sign up for Medicare, then Medicare will be primary and your group coverage will pay secondary. This means that Medicare will pay your medical claims first and your group plan will only cover the remaining items and services that Medicare doesn’t pay. In this scenario, if you fail to sign up for Medicare Part A and B then you will essentially be left with no coverage.
If your group insurance plan does not require you to sign up for Medicare, then you can choose to delay your Medicare enrollment and simply remain on your employer group coverage. There is no penalty for delaying your enrollment into Medicare as long as you (or your spouse) are actively employed and you remain covered by your creditable group coverage. You will also be given an 8 month special enrollment period to sign up for Original Medicare (Part A and Part B) when you retire and leave your employer coverage.
If you work for a small company of less then 20 employees then our recommendation is to go ahead and sign up for Medicare Part A and B as soon as you are eligible regardless of whether you are required to or not. This is because your group insurance company could change their position at any time and if you miss signing up for Medicare when required you could be left in a bad situation. Additionally there is no guarantee that your group coverage will continue to be considered credible by Medicare in future years which could leave you having to pay penalties.
If Your Employer has 20+ Employees:
If you or your spouse are actively working and covered by an employer group plan (Not COBRA or a retiree plan) with 20 or more employees then you can delay enrolling in Medicare until your employment ends or your coverage stops, which ever comes first. There are no penalties for delaying your Medicare enrollment and you will be given an 8 month special enrollment period to sign up for Medicare in the future when you coverage ends.
Please be aware that if your employer as more then 20 employees then it is generally not advisable to sign up for Medicare Part B while you still have employer coverage. Since your employer plan is primary and will cover the vast majority of your medical expenses you will likely get very little from your Part B coverage even though you will still have to pay the full Part B premium each month. Additionally, you will most likely be outside of your 6 month open enrollment period to sign up for a Medicare Supplement plan when your employer coverage ends in the future. This means that insurance companies will likely require you to answer some health questions before offering you coverage though a Medicare Supplement plan.
How Medicare Works With COBRA Coverage:
Please be very careful in your planning process if you currently have or plan to use COBRA coverage.
If your COBRA coverage begins before you become eligible for Medicare at age 65, then you must enroll in Part A and Part B during your initial enrollment period. Your cobra coverage will typically end when your Medicare coverage begins. Failure to enroll in Medicare during your Initial Enrollment Period will result in a a lifelong penalty.
If you continue to work past your 65th birthday then you are allowed to enroll in COBRA. If you choose to enroll in COBRA then it is important to note that you must sign up for Medicare Part A and Part B within 8 months after the date your active employment ended, even if your COBRA coverage continues beyond that point. Failure to sign up for Medicare within this 8 month window can result in lifelong penalties and could delay your Medicare Part B enrollment until July of the following year potentially leaving you with a gap in coverage.
Due to the complex nature of how COBRA coverage and Medicare work together, we highly recommend talking though your enrollment plan with an Medicare expert prior to starting COBRA. That way you will know exactly when and how to sign up for Medicare so you can avoid the penalties and frustration that come with making a mistake during your enrollment.
If you are on COBRA and become eligible for Medicare:
You should enroll in Part B immediately because you are not entitled to a Special Enrollment Period (SEP) when COBRA ends
Your COBRA coverage will usually end on the date you enroll in Medicare
Your spouse and dependents may keep COBRA for up to 36 months regardless of whether you enroll in Medicare during that time
You may be able to keep COBRA coverage once you get Medicare for services that Medicare does not cover such as Dental & Vision (if your insurance company agrees).
If you have Medicare when you become eligible for COBRA:
You must be allowed to enroll in COBRA, which will pay secondary to Medicare
COBRA may be beneficial if you have generous benefits like low premiums and good RX coverage
Part D Drug Coverage:
COBRA RX coverage may be credible. If it is, there is no penalty for delaying your enrollment into a Part D RX plan
You MUST enroll in a Part D drug plan within 63 days of loosing credible Part D COBRA coverage to avoid a penalty
Returning to Work After Retiring?
If you retire, then later decide to go back to work with an employer that offers employer insurance, be sure carefully explore all of your health coverage options. Compare your new employer’s plan to Medicare coverage before making your final decision.
If you decide to go with your employer’s insurance, you can drop your Medicare Part B coverage if you do not need it or want it. However, be sure that your new employer plan is in effect before dropping your Part B coverage.
When you return to Medicare, you will have a 2 month enrollment period to sign up for a plan, (from the time you leave employer coverage) to do so without penalty. You can sign up for a drug plan under the ‘Leaving Employer Coverage’ Special Enrollment Period (SEP).
You will have 63 days to apply for a Medicare Supplement plan without any health questions asked.
Not Sure What Option Is Best for You?
We can help! Give us a call and speak with one of our licensed agents today. You can reach us at 1-888-321-6361 or click here to get help online and we will reach out to help you see which option would be best for your situation!
