Medicare and Employer Coverage

If you are currently employed and will be eligible for Medicare soon, you probably have questions regarding what to do about your employer coverage. The best choice to make depends on your circumstance.

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It can be beneficial for some to have both Medicare and employer insurance. In other cases, taking Medicare could make more sense than holding onto an employer’s policy. First, we explain how employer coverage works with Medicare.

How Does Employer Health Insurance Work with Medicare?

The size of your employer will determine how your Medicare benefits will coordinate with your employer coverage. If you are aging into Medicare while working for an employer with over 20 employees, your group plan is primary and Medicare is secondary.

In this scenario, most beneficiaries choose to sign up for Medicare Part A, since it is premium-free for those who have paid in for sufficient quarters. If you are currently collecting Social Security Income, you’ll automatically enroll in Medicare Part A. You cannot collect SSI without signing up for Medicare Part A.

If you require care at a hospital, your Medicare Part A benefits will keep your costs lower. For example, if your employer’s group insurance has a $4,000 hospital deductible, it makes sense to enroll in Medicare Part A for a lower deductible.

For your outpatient and prescription drug coverage, a plan from an employer with over 20 employees is creditable coverage. This safeguards you from having to pay late enrollment penalties for Medicare Part B and Part D, respectively.

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Medicare and Small Group Insurance: Who Pays First?

If your employer has fewer than 20 employees, then Medicare becomes primary. This means Medicare is billed first, and your employer plan will be billed second.

If you have small group insurance, we HIGHLY recommend that you enroll in both Medicare Part A and Part B as soon as you are eligible. If you do not, your employer’s group plan can refuse to pay your claims.

Your insurance might cover claims even if you do not have Medicare Part B, but we always recommend enrolling in Medicare Part B. Your carrier can change that at any time, with no warning, leaving you responsible for outpatient costs. You will also need to pay the late penalty because your group insurance will not be creditable coverage.

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Can I Get Medicare While Working?

Regardless of whether you’re employed, it makes sense to enroll in Part A as soon as you’re eligible. Since Part B is not premium-free like Part A is for most, you may wish to delay enrollment if you have group insurance.

As stated above, the size of your employer determines whether your coverage will be considered creditable once you retire and are ready to enroll. Group coverage for employers with 20 or more employees is deemed creditable when group coverage for employers with fewer than 20 employees is not.

Without creditable coverage during the time you’ve been Medicare-eligible, you’ll incur late enrollment penalties. When you leave your group health coverage, the insurance carrier will mail you a creditable coverage letter. You’ll need to show this letter to Medicare to protect yourself from late penalties.

What Should I Do When Turning 65 and Still Working?

If you plan to continue working past 65, you should determine whether your coverage through your employer is creditable for Medicare in advance. If your coverage is creditable, you may delay Medicare Part B for as long as you continue to have creditable coverage. We recommend taking Medicare Part A either way, especially if you are eligible to receive it premium-free.

If your coverage for Medicare through your employer is not creditable, you should also enroll in Medicare Part B as soon as you become eligible. As we mention above, one example of coverage that is not creditable is employer group coverage at a company with fewer than 20 employees.

Unfortunately, many people assume that because they have coverage through their job, they do not need to sign up for Medicare until they retire. Take Bob, for example. Bob never knew about the Medicare Part B penalty until he was told he would need to pay it.

Before then, he assumed Medicare Part A and his employer coverage would suffice between ages 65 and 70. He thought he would be able to enroll in Medicare Part B normally, with no issues. Watch the video below to see Bob’s story and how to avoid making the same mistake as him.

Can You Have Employer Coverage and Part D?

When it comes to Part D, you can delay enrollment if your employer group insurance has prescription coverage. This is similar to Part B. Always compare your group insurance to what the cost of Medicare + Medigap + Part D would cost. It’s cheaper to leave group insurance and enroll in a Medicare Supplement plan and Part D plan.

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What Happens to My Medicare if I Go Back to Work?

Often, you might retire and later go back to work. If you pause your retirement and your large employer offers you group insurance, you can cancel Part B. When you retire again; you can enroll back into Part B with no penalties.

Medicare Premiums and Employer Contributions

Per CMS, it’s illegal for employers to contribute to Medicare premiums. The exception is employers who set up a 105 Reimbursement Plan for all employees. The reimbursement plan deducts money from the employees’ salaries to buy individual insurance policies. Beneficiaries who participate can get tax-free reimbursements, including their Part B premium.

A Health Reimbursement Account is a well-known Section 105 plan. An HRA reimburses eligible employees for their premiums, as well as other medical costs.

Does Medicare Work With Health Savings Accounts?

When enrolled in any Medicare parts, you CANNOT contribute to a Health Savings Account (HSA). Your employer also can’t contribute to your HSA once your Medicare is active. If you continue to add to your HSA, you could face tax penalties.

If your spouse has coverage on your group insurance, they can still contribute as long as their Medicare is not active. The good news is, you can use the funds in your HSA to pay for any medical expenses.

What Forms Do I Need to Show Creditable Coverage From an Employer?

You will need your employer to fill out the CMS-L564 form. This form is a request for employment information form. Once the employer completes section B of the form, you can send in the document with your application to enroll in Medicare.


Can an employer force an employee to enroll in Medicare?
An employer can never force you to drop your group coverage and enroll in Medicare once you turn 65. You can always choose to have Medicare and decline your group plan, but your employer can never force that decision.
Can I drop my employer's health insurance for Medicare?
You can drop your employer’s health plan for Medicare if you have large employer coverage. When you combine a Medigap plan with Medicare, it’s often more affordable for you and your spouse.
Should my spouse stay on my employer group plan or enroll in Medicare?
It often costs less for your spouse to enroll in Medicare versus staying on your employer plan. The reason is that most employers don’t help pay for the costs of spousal insurance. If your spouse’s insurance costs you hundreds of dollars a month, they should consider enrolling in Medicare.
Do I need Medicare if I have employer insurance?
Part A is free for most people, so taking it makes sense. Since Part B comes with a premium, you may choose to delay Part B until you’re ready to retire if you have large employer group insurance.

How to Get Medicare while Working with Employer Coverage

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Jagger Esch

Jagger Esch is the Medicare expert for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

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