Coordinating Medicare and Employer-Sponsored Health Insurance
As Baby Boomers work past the traditional retirement age or go back to work after retiring, more and more people over 65 are trying to figure out how to coordinate Medicare with group health plan coverage through an employer. Some are even trying to decide if they even need to sign up for Medicare at all.
If you or your spouse are currently working and you have group health plan coverage through that employer, whether you should enroll in Medicare now depends on several factors. First, think about how many employees work for the employer. Employers with 20 or more employees must offer current employees 65 and older the same health benefits, under the same conditions, they offer younger employees. Similarly, if coverage is offered to spouses, spouses 65 and older must be offered the same coverage that is offered to spouses under 65. If the employer has more than 20 employees, the group health plan generally pays for health care expenses before Medicare pays. However, if the employer has fewer than 20 employees, Medicare generally pays first, so the employer coverage may not pay much, if anything, toward your medical expenses. You should check the plan documents to confirm which coverage pays first.
Part A: The first time you can enroll in Medicare is during your initial enrollment period, which begins 3 months before the month you turn 65 and ends 3 months after the month you turn 65. Most people who do not have to pay a premium for Part A should enroll in Part A when they turn 65, even if they have group health coverage from an employer. However, if you will have to pay a premium for Part A or if you contribute to a Health Savings Account (HSA), you may want to consider signing up for Part A later. Because of an IRS rule, once you enroll in Part A, you won’t be able to contribute to your HSA.
Part B: You can wait to sign up for Part B until you or your spouse stop working or otherwise lose the employer coverage. You will not pay a late enrollment penalty for Part B as long as you enroll during the 8- month special enrollment period that will start the month after you or your spouse stop working or the month after the employer coverage ends, whichever comes first. In addition, you can postpone your one-time Medigap open enrollment period, which starts when you enroll in Part B. During your Medigap open enrollment period, you can buy any Medigap policy an insurance company sells without going through a health screening or underwriting. Once this open enrollment period ends, guaranteed issuance into a Medigap policy only occurs under very specific situations. This means that you may have to pay more for a Medigap policy, or you may not be able to buy one at all.
Prescription Drug Coverage: If you decide to enroll in Parts A and B, you’ll have to determine what type of prescription drug coverage is best for you. If you remain on an employer health plan, you should check with the plan administrator to see if the plan counts as “creditable drug coverage.” You will not pay a late enrollment penalty if you decide to enroll in a Part D plan later as long as you continue to have creditable prescription drug coverage.
However, if you think you want to sign up for a Part D plan in addition to the employer coverage, you should be sure to ask the employer if you can have both types of coverage. Many employer health plans do not coordinate with Part D plans. This means that, if you join a Part D plan, you, your spouse, and anyone else in your family who is covered under the employer health plan may lose that coverage. Once someone loses employer health coverage, it can be difficult to get that coverage back until the next open enrollment period.