Medicare and Employer Coverage. What you need to know
Are you turning 65, or over 65 and still working? If you are covered by your group health insurance, you will have to make some decisions about Medicare and employer coverage. Here are your choices:
Continue working and keep Employer Coverage
You may decide to continue working and stay on your group health insurance. If you do, your Medicare benefits will work with your current insurance. Most importantly, how Medicare and employer coverage work together, depends on several factors. These are the number of employees in your company and if you enroll in both Medicare A and Medicare B. Medicare Part A is your hospital insurance and Medicare Part B covers doctors and outpatient tests and services.
Small Company with 20 or less employees
If your company has 20 or less employees, Medicare will be your primary insurance. If you keep your group insurance, it will be secondary. That means that you will have to enroll in both Medicare Part A and Medicare Part B. Most likely your insurance company won’t cover you for those expenses and you will be stuck with the bills.
If you have worked for 10 or more years, or your spouse has, there will be no charge for Medicare Part A. On the other hand, if you aren’t in either of these situations, you will have to pay a premium to Social Security for Medicare Part A coverage.
When you enroll in Medicare Part B, you will be charge a monthly premium by Social Security. Social Security will send you a bill for the premium. The standard monthly premium in 2017 is $134.00 per month. You may have to pay a higher amount for your Medicare Part B premium if you are in a higher income bracket. Visit what Original Medicare cost for more information on Medicare Part A and Part B premiums.
If you keep your company health insurance and it includes drug coverage, you may not need to enroll in a separate drug plan, Medicare Part D. As long as your drug coverage is considered to be “creditable”coverage by Medicare. Creditable coverage means it’s as good as the Medicare drug standard benefit. You need to check with your employer. If for some reason, your employer coverage is not considered “creditable”, you need to enroll in Medicare Part D. Otherwise, you will have to pay a penalty of 1% of the national average premium for each month you don’t have Medicare Part D or other “creditable” coverage. That penalty would be in effect as long as you have Medicare Part D coverage.
Large Company with 20 or more employees
If your company has 20 or more employees, Medicare will be your secondary insurance. Your group insurance will be primary and pay your bills first. Medicare will be your secondary insurance, or secondary payer. They two types of insurance will work together to lower your bills.
Should you Enroll in Medicare Part A
I recommend you enroll in Medicare Part A, especially if it is premium free, based on your or your spouse’s working 10 or more years. If you are hospitalized, your group insurance will pay first but will likely have a deductible. That means, you will have to pay the deductible amount before your plan pays your bills. If you have Medicare Part A, you will only have to pay the Medicare Part A annual deductible and Medicare will pay the rest of your hospital covered services. In 2017, the deductible for hospitalization is $1316.00 and that’s all you would have to pay.
What about Enrolling in Medicare Part B
You may or may not want to enroll in Medicare Part B to cover your doctor and outpatient services. Whether or not you enroll in Medicare Part B depends on your plans’ deductible for those services. Medicare Part B covers 20% of those bills and if your deductible is very high, it might save you money to enroll.
However, if you group plan has a low deductible and you are healthy, you may decide not to enroll in Medicare Part B and pay the monthly premium. In addition, you won’t need to enroll in Medicare Part D, drug coverage, if your company has creditable coverage.
Should you leave your group health insurance
Another option, is to leave your group health insurance and enroll in Medicare with a Medicare health and drug plan. You may decide to do this after comparing the costs for Medicare Part B and Medicare Part D coverage vs your group health insurance coverage and costs.
When and How to Enroll in Medicare
While you are still working and have employer coverage, you can enroll in Medicare anytime and won’t have to pay a penalty.
When you leave your employer coverage, or your spouse retires, you have eight months to enroll in Medicare Part A and Medicare Part B, whichever comes first.
Retired and on Cobra
If you retire with your company’s Cobra insurance, you will need to enroll in Medicare Part B by the 8th month you are on it, or you will be charged a permanent late enrollment penalty. In addition, you might have to wait for your Medicare Part B coverage to be effective.
Also, check with your benefits department to make sure your coverage is considered creditable. Otherwise you will be charged a permanent late enrollment penalty for Medicare Part D.
Making the right decision about Medicare and employer coverage will require a lot of work. You will need to compare your company’s monthly premium and copays and deductibles to your costs enrolling in Medicare. In other words, you will need to do a cost/benefit analysis.
You can read Medicare’s rules on which insurance pays first here.