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Medicare & Employer Coverage

Essential Highlights

If you actively work for an employer with 20 or more employees and are covered under that employer’s insurance, you can likely delay Medicare past 65 without penalty.
If you actively work for an employer with fewer than 20 employees and are covered by that insurance, Medicare will be primary, and the employer insurance will be secondary.
Retiree coverage, including COBRA, does not count as creditable coverage for Medicare.

Medicare and Employer Coverage

Navigating the world of healthcare can feel like diving into a sea of jargon and endless forms. But understanding your options, especially as you approach retirement age, is crucial. Let's break down two key components: Medicare and employer coverage. We'll keep it simple and  straightforward.

Employer Coverage

What is Employer Coverage?

Employer coverage, also known as group health insurance, is health insurance provided by your employer. It often covers a wide range of medical services and can be a cost-effective option for many. Employer plans vary significantly, but they usually offer comprehensive coverage that includes doctor visits, hospital stays, and prescription drugs.

Types of Employer Coverage

Group Health Insurance Plans

These plans are offered by employers to their employees and often extend to family members. They can be either fully insured or self-funded.

Self-Funded Plans

In self-funded plans, the employer assumes the financial risk for providing healthcare benefits to its employees. These plans can be more flexible but also more complex.

How Medicare and Employer Coverage Interact

Primary vs. Secondary Payer

When you have both Medicare and employer coverage, one becomes the primary payer and the other secondary. The primary payer pays first, and the secondary payer covers what’s left, within the limits of their coverage.

When Employer Coverage is Primary

If you're still working and your employer has 20 or more employees, your employer coverage is usually the primary payer, and Medicare is secondary. 

When Medicare is Primary

If you work for a company with fewer than 20 employees, Medicare typically becomes the primary payer, and your employer coverage is secondary. This situation can affect your decision on when to enroll in Medicare.

Making the Transition from Employer Coverage to Medicare

When to Enroll in Medicare

Timing is crucial when transitioning from employer coverage to Medicare. Most people first become eligible for Medicare at age 65.

Initial Enrollment Period

This period starts three months before you turn 65, includes the month you turn 65, and ends three months after. Missing this window can lead to penalties and gaps in coverage.

Special Enrollment Periods

If you're still working past 65 and covered by an employer plan, you can delay enrolling in Medicare without penalty. You’ll have an 8-month Special Enrollment Period to sign up for Medicare after your employment ends or the group coverage ends, whichever happens first.

Steps to Transition

  1. Review Your Current Coverage: Understand what your employer coverage covers and compare it with Medicare benefits.
  2. Sign Up for Medicare: If you're retiring or losing employer coverage, sign up for Medicare Parts A and B.
  3. Evaluate Additional Coverage: Consider Medicare Advantage or Medigap plans to cover additional costs.

Common Pitfalls and How to Avoid Them

    1. Late Enrollment Penalties
    2. Enrolling late in Medicare can result in lifetime penalties. These penalties can add up, increasing your monthly premiums.
    3. Overlapping Coverage

Sometimes, keeping both employer coverage and Medicare can be costly without providing extra benefits. It’s important to assess if dual coverage is worth the expense.

Frequently Asked Questions

Can I have both Medicare and employer coverage?

Yes, you can have both. Coordination of benefits will determine who pays first.

What happens if I keep working past 65?

You can delay enrolling in Medicare Part B without penalty if you have employer coverage.

 

How do I know if my employer coverage is creditable?

Your employer should provide a notice indicating whether your coverage is creditable, meaning it meets or exceeds Medicare’s standards.

 

What should I do if I lose my job and employer coverage?

You’ll have a Special Enrollment Period to sign up for Medicare without penalty. This ensures you won't have a gap in coverage.

Understanding how Medicare and employer coverage work together doesn’t have to be overwhelming. Remember, the key is to review your options, ask questions, and seek help when needed. 

Key Details Summarized

If you have creditable employer coverage, you can still choose to leave that coverage and enroll in Medicare as primary instead. Ultimately, it depends on what is more cost-effective for you.
Be aware of when you’ll need to stop contributing to your HSA account if you have one. This depends on whether you delay Medicare past your Initial Enrollment period or not.