Should I keep my employer coverage or go for Medicare coverage?
If you are retiring and have employer coverage, then Medicare may or may not be beneficial for you. It’s going to depend on a few factors such as how much your coverage costs, how long you can keep it, and if you have a spouse or dependent that relies on your employer coverage.
When on employer coverage, the first thing to know is if your coverage is “creditable.” This is the term used to identify if your employer coverage is approved by Medicare to pay – on average – as much as the standard Medicare plan. If it’s “creditable”, then your plan is approved by Medicare and therefore you will not have to pay any penalties for not enrolling into any Medicare coverage when first eligible. Your employer is required to let you know if your health and drug coverage is considered “creditable.” If your employer coverage isn’t “creditable,” then you may want to enroll into Medicare to avoid any penalties.
Active Employer Coverage
If you are actively working, then it’ll be your choice to enroll into Medicare when you are first eligible. As long as your employer coverage is “creditable” and active, then it will be an option for you to enroll into Medicare Part B. We generally recommend enrolling into Part A since it is premium-free after working ten years and can only help in most cases. The only exception is if you are contributing to a Health Saving Account (HSA) and will continue to do so. We will cover this in more detail further down.
I Already Have An HSA
Aside from the HSA exclusion, most people will only need to decide if they should enroll into Medicare Part B or not. The option is always yours, but there are a few cases when you should more than likely enroll into Part B along with your employer coverage. Much of the decision-making is based on the size of your employer. Important Note: These same rules apply if you’re insured through your spouse’s employer coverage.
Large Companies (Over 20 Employees)
If your company has over 20 employees, then any Medicare coverage you choose to enroll in will be secondary to your employer coverage. This means that your employer coverage will be the first to pay and cover any services needed. If there are any shares of cost remaining, or if the service is not covered by the employer coverage, then any Medicare coverage will be billed. This doesn’t mean 100% of the bill is paid all the time if you have both Medicare and employer coverage. Below are two examples.
Example 1: If your employer coverage has a $5000 deductible. If you have a hospital stay, then you would be responsible for that deductible in normal circumstances. Now, if you also have Medicare then things would be different. In 2020 Medicare Part A (Hospital coverage) only has a $1,408 deductible. Therefore, if you have both employer coverage and Medicare Part A then you would only be responsible for the Medicare Part A deductible of $1,408. Medicare will pay for all other services during a hospital stay.
Example 2: Your doctor says you need prescription level compression socks for Deep Vein Thrombosis (DVT) and your employer insurance doesn’t cover them. Even if you had both Medicare Part A and Part B, you would not have coverage for these socks and would have to pay out-of-pocket for them. This is because in this situation Medicare does not cover these socks either.
If you have both Medicare and employer coverage, you will generally move forward with the coverage that has the lower share-of-cost. This is a good, general rule of thumb to work with. A frequent question we get asked in this situation is should I enroll into Medicare Part B? If your employer coverage is “creditable," then you do not have to enroll into Part B. And, it might not even make sense to do so because Part B is not free. In 2020, the Part B Premium is $144.60 a month and it has a general 20% coinsurance for most services. So, if your employer coverage has a good provider network, low out-of-pocket costs and a comparably inexpensive monthly premium, then it may be better to keep it and not enroll into Part B.
Even if your employer coverage is “creditable,” you may still find Medicare to be a great option in a few situations.
If your employer coverage costs you more than $300 per month you can often enroll into a Medicare Supplement plan (Medigap) for less and have most everything covered. The Plan G, for example, pays for 100% of all Medicare copays and coinsurances after an annual $198 deductible – leaving you nothing to pay in terms of out-of-pocket expenses for all Medicare covered services. You can have Plan G, Medicare Part B, and a Drug Plan for just below $300 per month if you’re 65 years old, and just a slightly higher cost if you’re older.
Bonus: If you’re leaving “creditable” employer coverage, then you’re eligible for guaranteed acceptance – which allows you to enroll in a Medicare Supplement without underwriting to your health history. (Medicare Supplement plans may deny you based on health history if you don’t have a guaranteed acceptance period).
If you choose to enroll into Part B, you may be interested in a Medicare Advantage plan. In many cases, Advantage plans have low to no monthly premium after you pay your Part B premium. If the plan covers all your doctors, then you can often have: a low monthly cost and pay little to nothing when you use it (depending on the service). Bonus: they also cover Part D in many cases without a deductible.
Does your spouse and/or any dependents rely on your employer coverage? If so, then you probably won’t be interested in transitioning to a Medicare plan – even if it’s more affordable – unless they can find reasonable coverage through COBRA, ACA or something similar. All these reasons should be considered when deciding to keep your employer coverage or transition to Medicare. Whether it’s to stay or leave, help a loved one find coverage or explore your options for peace of mind, we can be a guide to educate and inform your decisions.
Small Companies (Under 20 Employees)
For smaller companies, Medicare will be the primary insurance and your employer coverage will be secondary. In these cases, we are likely to recommend enrolling into both Part A and Part B. Even if your employer coverage is willing to cover claims without Part B as a primary, there is a risk that the employer coverage can change these rules or deny a service. If your employer coverage is considered “creditable," then you will not have to enroll into Part D coverage.
If you work for a small company, it may be best to leave your employer coverage. Then, you’ll enroll into Medicare and a Medicare insurance plan. Depending on how much your employer coverage costs and the benefits it provides, it may be best to leave and get a Medicare Supplement or Advantage plan.
Medicare and HSA Coverage
Regardless of whether your employer is large or small, if they have an HSA-compatible health plan, then Medicare will complicate that. If you have a qualified high deductible health plan and you enroll into Medicare, then you will no longer be able to contribute to your health savings account.
This applies to all parts of Medicare. You cannot have Part A or Part B and make contributions to an HSA. You will not be able to accept contributions into your HSA from your employer either. If your spouse is also on the same plan and they are not enrolled into Medicare, then they can continue to make contributions to the HSA. We recommend you talk to your tax advisor about the rules for your specific situation.
This will be very important for those who work for small employers (under 20 employees). Remember, they must enroll into Part A to avoid any penalties and will likely apply for Part B as well. If they plan to keep their employer HSA plan, then they must stop making contributions.
Medicare and COBRA
COBRA is not going to work the same as active employer coverage. If you choose to take COBRA coverage, you must enroll into Part A and Part B with Medicare to avoid any penalties. This is because Medicare will always be primary and any coverage with COBRA will be secondary. When your COBRA coverage ends, you will need to use your Medicare and likely pick up a Medicare insurance plan as well. If you didn’t enroll into Medicare Part A and B when you were first eligible, then you may incur a penalty. Worst case, it could end up delaying your effective date of enrollment into Part B until July of the following year. This could leave you without any health coverage for months. For more information on COBRA, check out our article HERE
Retiree Coverage
Retiree coverage is when your employer offers specific health insurance options for their retired workforce. These plans can often be very different from the plan you had while working. In all cases, Medicare will be primary to any employer retiree coverage you have. Similar to small group coverage, you will likely enroll into both Part A and Part B of Medicare. We cannot make an accurate recommendation for what to do with retiree coverage without knowing how your specific plan works.
We have seen a wide range of variation with these plans: from the retiree pays nothing and every service is covered at 100%, to the plan costs over $700 a month and mirrors a high deductible plan. There are many instances when it makes sense to go directly to a Medicare insurance plan and drop the employer coverage altogether. slightly higher cost if you’re older.
All these reasons should be considered when deciding to keep your employer coverage or transition to Medicare. Whether it’s to stay or leave, help a loved one find coverage or explore your options for peace of mind, we can be a guide to educate and inform your decisions.
FAQ's for Employer Coverage and Medicare:
How does Medicare work with employer insurance?
In short, it depends on the size of your company and if you are actively working or not.
Medicare is Primary when:
Your employer has less than 20 employees
You are on COBRA
You are on a Retiree plan (no longer working)
Medicare is Secondary when:
Your employer has more than 20 employees and you are actively working
Can I keep my employer’s health insurance with Medicare?
Yes. In most cases if you choose to get Medicare Part A and/or B, then you can keep those and keep your employer coverage. However, if you have Medicare and employer coverage you may risk losing your employer coverage if you enroll into a separate Medicare insurance plan (Medigap or Medicare Advantage). It all depends on your specific employer plan. We recommend asking your HR representative or your employer for details.
Is Medicare cheaper than Employer insurance?
It depends. The most expensive Medicare options are around $300 a month for a 65-year-old (Medigap plan G, Part B, and Part D monthly costs). If you have an employer plan that costs more than $300 a month, then Medicare may be cheaper and even cover more benefits than your employer coverage. If you want just the “Bare Necessities” of Medicare – Parts A, B, and D – then you could be paying as low as $160 a month (Note: your out-of-pocket costs when you use certain services may be higher with this option).
Do I have to sign up for Medicare if I have private insurance?
No. The only exceptions are: if your employer is smaller than 20 employees, you have COBRA, or you are retiring. In all these cases, you would need to enroll into Medicare as it will have to be your primary insurance, or risk paying a penalty.
How does Medicare compare to private insurance?
In terms of coverage: If you enroll into just Part A and Part B, then you will likely find Medicare lacking compared to many private employer plans. Most individuals who have Medicare will add a Medicare Supplement (Medigap) or a Medicare Advantage plan. Especially with the Medigap plan, you can often have much better coverage than an employer plan (For example, Medigap Plan G).
In terms of Price: This varies a lot. The cheapest Medicare options are as low as $144.60 a month to have an Advantage plan, which will most often satisfy Parts A, B, and D. The most expensive Medicare options can be around $300 a month or more depending on your age (Plan G, with Parts A, B, and D). An employer plan can vary greatly from $0 a month to over $1000 a month. Because of this, price will depend on your specific situation.
Is private insurance better than Medicare?
This depends. Check out the answer above.
What happens if you don’t sign up for Medicare part B at 65?
Unless your Medicare can be used as a secondary insurance (see FAQ #1), then you could be at risk for a Part B penalty. For 2020 this is $14.46 a month for life, for every full year you don’t have part B since the time you were first eligible to enroll.
You could also be at risk for a Part D penalty if your employer coverage isn’t considered “creditable." This penalty for 2020, is a permanent monthly penalty of about $0.33 for every month you don’t have drug coverage (Note: this timer begins after the first 63 days without drug coverage).
Do I need Medicare part b if I have private insurance?
In short it depends on the size of your company and if you are actively working or not.
Medicare Part B is needed if:
Your employer has less than 20 employees
You are on COBRA
You are on a Retiree plan (no longer working)
Medicare Part B is not needed if:
Your employer has more than 20 employees and you are actively working
Can you delay signing up for Medicare part b?
Yes. If your employer has more than 20 employees, you are still actively working, and your employer coverage is considered “creditable”, then you can delay adding Medicare Part B. In most other situations, you will need to add Part B to have proper coverage and/or avoid a penalty.
Can you have private health insurance and Medicaid at the same time?
In most cases you can have both. Medicaid will always be a secondary to your employer coverage. The difference is that Medicaid IS NOT Medicare. It is health insurance provided by the state, often based on having low income. If you qualify for Full Medicaid, then you will likely want to drop your employer coverage since Medicaid will cover most all services with a $0 out-of-pocket cost.
Can my employer pay my Medicare Part B Premium?
In a way, yes. They can’t literally pay the bill themselves; however, employers often choose to set up a reimbursement agreement of some sort. A Section 105 plan allows employers to reimburse employees, tax-free, for medical a