We can walk you thru the best option for you. The New to Medicare steps you will take will likely be different when you are still working. Many people work past age 65 these days, and this means there are decisions to make. Should you keep your employer coverage and enroll in Medicare too so that it coordinates with your other insurance? Or it more cost effective to leave that employer coverage and choose Medicare as primary insurance and add a supplement?
The answers depend on several factors, such as the size of your employer and how much you pay for your portion of that employers coverage.
Active Employee Coverage
Active employer coverage means you are still actively working, not retired. In this scenario, you have the right to remain on your employer’s group health insurance plan if you choose. Your Medicare benefits can coordinate with that coverage. HOW it coordinates depends on the size of your employer. Medicare and Large Employer Coverage – 20+ Employees: Medicare issecondaryif your employer has more than 20 employees and you are ACTIVELY working (not a retiree or on COBRA). This is called Medicare Secondary Payer. In this scenario, your group plan pays first, and then Medicare pays second.
Most active employees with group coverage enroll in Part A because it is premium-free if you have worked at least ten years. Part A can coordinate to lower your costs if you have a hospital stay. For example, let’s say your employer health plan has a $3000 deductible. The Medicare Part A hospital deductible is $1316 in 2017. So if you have both your employer insurance and Part A, and you incur a bill for a hospital stay, you will only be out $1316. Medicare pays the rest of any Part A services.
Now Part B is not premium-free. You will pay a monthly premium for Part B based on your income. Some people with large employer insurance choose to delay enrolling in Part B and Part D while still covered at work. This saves them the premiums they would have paid for those parts. Your employer coverage already includes outpatient benefits so it may not be worth it to pay those Part B and D premiums.
The key factor is usually the employer plan deductible. If your group insurance has a low deductible and therefore a low risk that you will spend much out of pocket, delaying Part B makes sense. If the deductible is high and you have regular health spending that goes against that deductible, having Part B to pay 80% of your outpatient deductible spending can be quite helpful.
If you DO delay Part B, your large group plan is considered creditable coverage. That means that you can enroll in Part B later without late penalty when you decide to retire.
Medicare and Small Employer Coverage – Under 20 employees: Medicare isprimaryif your employer has less than 20 employees. You will need both Part A & B for sure because Medicare will pay first, and then your group insurance will pay secondary. Occasionally we see some insurance companies who will cover claims even if you don’t have Part B. Don’t buy it. You run the risk of that insurance company changing that at any time without warning, and leaving you stuck with all the expenses that Part B would normally cover. It’s not worth the risk – we advise always enrolling in Parts A & B if your employer has less than 20 employees and Medicare will be primary.
However, you may be able to delay enrolling into a Part D drug plan without penalty if your group plan has RX benefits, as most do. Be sure to compare costs. It is sometimes cheaper to leave the group insurance altogether and enroll in a Medicare supplement as your secondary instead.
One exception on either large or small employer coverage is H.S.A plans. If you have a qualified high deductible health plan and you plan to contribute into a health savings account, do not enroll in Medicare. You cannot contribute if you have ANY part of Medicare active. Check with your tax adviser on rules for this.