More and more people continue to work beyond age 65 and receive health insurance from their employers. If you find yourself in a similar situation, you may be asking the same question.
If you are still working, chances are you won’t need to sign up for Medicare until you are ready to retire. You can keep your current benefits as long as you work for an employer that provides credible health insurance coverage and your current benefits are not through COBRA. At the age of 65, you’ll automatically be enrolled in Part A, but you can delay Part B and avoid any late enrollment penalties.
Today we will talk about how Medicare works with employer coverage and whether you should sign up.
Should I Get Part A & Part B?
Typically, most people who continue to work get Part A automatically. As long as you’ve worked the necessary amount of time, you’ll get your card in the mail when you turn 65. In most cases Part A is free.
Part A covers inpatient hospital stays. Read more about it here.
You can delay enrolling in Part B without paying a late enrollment penalty as long as your coverage is considered creditable (More about that in a bit).
Part B covers outpatient medical care like doctor’s visits, x-rays, and lab work. You can learn about Part B here.
The size of your employer determines how group coverage works with Part A and how claims are paid by both Medicare and your current coverage.
In a lot of situations, if you work for a small employer (less than 20 people), your employer’s health insurance may deny claims if you opt-out of Part B.
So even though Medicare won’t charge you a late enrollment penalty, your current coverage may suffer.
CALL THEM AND ASK if they require you to enroll.
Let’s discuss this in further detail below.
Employer Size Matters
When it comes to the coordination of benefits, the size of the group you work for determines how your claims will be paid.
Medicare classifies employers in two ways:
- Small employers-employ less than 20 people
- Large employers-employ 20 or more people
Check with your human resources department or the department that administers your benefits to determine whether your employer is considered large or small and if your coverage is considered creditable with Medicare.
They should send you a letter every year.
As I mentioned above, make sure to ask them if they require you to have Part B.
How Part A Works With Employer Coverage
Most people are eligible for Medicare Part A at no cost.
As we mentioned above, Social Security will automatically enroll you in Part A when you finally turn 65.
If you are eligible for premium-free Part A and you work for:
- A small employer – Medicare is your primary coverage and pays your medical bills first. While your employer coverage becomes secondary.
- A large employer – your employer coverage pays first, and Medicare Part A is secondary (basically the opposite).
The biggest difference when working for a small employer or a large employer is whether or not Medicare is your primary benefit or secondary.
Working for a small employer, they may require you to have both A and B before they pay anything. As I said before – ask them.
Let’s expand on each of these a little more.
Working for a Small Employer
If you work for a company that has less than 20 employees, you won’t need to enroll in Part B as long as the coverage you have is creditable.
As I mentioned above, your employer will notify you every year if it is or isn’t.
If the coverage is not creditable and you choose to delay, you’ll be subject to a late enrollment penalty.
The late enrollment penalty is 10% of the average monthly premium for every full year that you go without Part B.
If your coverage is creditable, you have nothing to worry about.
So if you want to keep your current coverage, you can and you’ll avoid the penalty.
There is a separate penalty for delaying Part D. Just like with Part B, if your current employer coverage does not include creditable drug benefits, you’ll need to make sure you enroll in Medicare’s drug program to avoid that penalty.
Keeping your employer benefits while having Medicare, in this situation, may not always be the best move.
Keep reading to learn more.
Working for a Large Employer
If you work for a large employer (20 or more), you can keep your current benefits and delay your enrollment into Medicare.
Since large employer coverage is also considered credible coverage, you won’t incur any penalties.
When you (or your spouse) are ready to retire, you’ll have a Special Enrollment Period (SEP) where you can enroll in Part B.
This SEP starts 2 months before you are ready to retire.
Learn more about different enrollment periods here.
Unlike working for a small employer, when your company has more than 20 people, Medicare will be your secondary coverage.
What Is Part B and Should I Delay It?
As you know, Medicare Part B is outpatient medical coverage.
We talked more about Part B and how to qualify for it in a different post. Click here to read.
Most people who are turning 65 are eligible for Medicare Part B even though, most people choose to delay their benefits, but as you read above, not everyone can.
The reasoning behind this is quite simple.
Medicare needs healthy people to be enrolled in the program. Healthy people’s premiums help offset the medical bills of people who are sick and use the benefits.
If you don’t have creditable coverage, according to them, you have no excuse and are required to enroll. If you choose not to enroll, you’ll pay a penalty.
This penalty helps offset the cost for the amount of time you were not enrolled and did not pay into the system.
So if your employer provides coverage that is not creditable (aka major medical), you’ll pay a penalty.
In some cases, small group policies will refuse to pay claims unless you have both A and B.
We’ve seen this happen and our best guess as to why is because these companies do not want to pay the majority of your medical bills.
Small Employers and Medicare
If you work for a small employer that provides you with health insurance that is not major medical, Medicare will not consider your coverage creditable, and you need to enroll in Medicare.
Remember, that if in this situation you delay your enrollment, Medicare will charge you a late enrollment penalty.
I keep repeating this because it is crucial you understand. That penalty stays with you for the rest of your life.
Otherwise, if your coverage is creditable, you can delay enrolling in Part B but still, this may not be a good idea.
Should I Keep My Group Plan?
On a large employer plan – yes.
If you work for a small employer, there are a few things you should consider.
- Plan restrictions
Let’s briefly talk about each of these.
Most of the time, small group plans are a lot more expensive than a Medicare Supplement or an Advantage plan.
Not only will you get more benefits, but you’ll also lower your monthly premiums.
There’s no question that over the last couple of years we’ve seen deductibles and copay creep up. Medicare Supplements and Advantage Plan out of pocket expenses are a lot lower than that of a small group plan.
Plus, as I mentioned above, they cost a LOT less.
Employer plans typically have restrictions on where you are allowed to use your insurance. In a lot of cases, you’ll have to participate in their network.
Medicare Supplements have no network restrictions and Medicare Advantage Plan networks are tailored to the doctors you most frequent.
Unlike employer coverage, Medicare Advantage Plans have little to no monthly out-of-pocket costs, so you’ll enjoy savings in your premiums.
Every plan comes with its own set of restrictions. There may be procedures you need that are not covered by your current employer coverage that is with a Supplement or Advantage Plan.
If you are waiting on some kind of procedure, make sure to compare what you have to any plan you may be considering.
What Are the Alternatives to My Current Coverage?
Remember, if Medicare is your primary coverage, you can get a lot more benefits from a traditional Medicare Supplement instead of keeping your current employer plan.
As mentioned above, the cost may be significantly lower.
Make sure to talk to your insurance agent and compare your options.
If you want to learn about the different Medicare Supplements and what they cover, you can do so here.
Should I Get Part D?
Medicare Part D is prescription drug coverage.
We talked more about Pard D in a different post. Click here to read.
If you continue to work and have prescription drug coverage, you most likely do not have to enroll in a Part D plan.
As long as your plan includes creditable drug benefits, you’ll avoid the Part D penalty.
Your employer is required to send you an annual letter notifying whether or not your current prescription drug coverage is considered creditable by Medicare.
If it is not, you will need a Part D plan otherwise you’ll pay a penalty.
What About Medicare Advantage?
Medicare Advantage plans are known as Part C of Medicare.
They provide coverage for inpatient hospital stays, outpatient medical expenses, and coverage for other out-of-pocket expenses, just like traditional Medicare.
The only difference is that instead of being covered by Medicare, you’ll be covered by a privately managed plan, like an HMO or PPO.
Unlike Advantage Plans Medicare Supplements, often referred to as Medigap plans, work in addition to Medicare Part A and Part B to minimize your out-of-pocket expenses.
You must have Part B before you can apply for a Medicare Advantage Plan or a Medicare Supplement.
If you continue to work and delay Part B, you do not need any additional coverage.
You may want to consider a Medicare supplement or an Advantage plan to reduce your out-of-pocket medical expenses if you decide your best option is to go on Medicare instead of keeping your employer coverage.
Part A Isn’t Always Free
If Social Security does not automatically enroll you in premium-free Part A, it is probably because neither you nor a spouse worked long enough to qualify (you can call your local Social Security office to find out the status of your enrollment).
You can still get Part A, but you’ll pay a premium if you can’t get it for free.
Part A premiums change every year, see the latest prices here.
It takes 40 quarters of work credits to qualify for premium-free Part A. Most people continue to work until they are eligible.
So if you are still working and you have creditable group coverage, you can delay enrolling in Part A as long as you keep your coverage. This way you avoid having to pay the incredibly high Part A prices.
As you can see, there is a lot to consider when you are turning 65 and continuing to work.
You probably wouldn’t want to pay for Part B if you are not required to have it, but you certainly don’t want to pay a penalty either.
Compare the cost of Medicare for you and your spouse (if married) and the benefits to determine if it’s worth enrolling in Medicare while you are still working.
A licensed, independent, agent can help you determine all the costs.
If you have any questions, use the search tool at the top of this page or on the home page.
Or, if you would like further explanation of any of the topics we discussed, please fill out a contact form and submit your questions.
If you prefer to speak by phone, call us at 888-209-5049.