Medicare and Employer Coverage

Many people wonder how Medicare and employer coverage work together. Fortunately for them, Medicare gives you multiple options so that you can choose the type or mix of coverage that works best for you.

Medicare and Employer-Based Coverage: The Basics

In essence, you have three options once you meet the eligibility requirements for Medicare coverage:

  1. Drop your employer’s insurance and switch completely over to Medicare
  2. Keep your employer’s insurance and delay enrolling in Medicare
  3. Keep your employer’s insurance and also enroll in Medicare for dual coverage

If you are in a situation where it is your wife or husband whose job is providing insurance for the family, Medicare and spouse employer coverage also works the same way.

Depending on the size of your employer’s company, selecting keeping both forms of insurance will affect which one pays first — and whether you might incur a penalty. 

Generally speaking, it is often a better idea to simply either drop your employer’s insurance or delay enrolling in Medicare Part B rather than mix the two. Since Medicare Part A provides inpatient hospital coverage with no monthly premium cost to people who have worked at least 10 years, there are few drawbacks to enrolling when you turn 65, even if you plan on continuing to work.

There are many programs that require you to have Medicare as your primary insurance, which may not be possible if you are under an employer plan at a larger business. There are also rules that can affect things like health savings account (HSA) reimbursements if you are in a smaller company.

Keeping Your Employer’s Insurance and Delaying Medicare Enrollment

If your employer has a creditable group insurance plan, then you can delay signing up for Medicare past 65 without fear of a penalty, in most scenarios. It is important to note that this rule only applies to actual employer-based group insurance plans, not COBRA or retiree benefits or a health savings account (HSA).

Medicare Part B and Part D will typically charge you a penalty if you do not sign up for them during your initial enrollment period and then decide to apply later. Medicare Part C requires you to be enrolled in Part B, so it is also relevant to the decisions you make. You will also need to be enrolled in Parts A and B to be eligible for Medicare Supplemental Insurance (Medigap).

Once you do decide to either retire or to drop your employer’s plan, you will have 8 months to enroll in any Medicare program, including Medigap, without getting hit with a penalty every month. Your former insurer will mail you a creditable coverage letter declaring that you had qualifying coverage the entire time, so be sure to keep a copy of this letter.

You can also choose to come out of retirement and sign up for employer-based insurance later, allowing you to drop Part B temporarily with no penalty attached.

Note that small businesses that employ fewer than 20 people are exempt from rule governing their employee health plan policies, so they can actually force you to switch from their insurance to Medicare or to pick up Medicare as your primary insurance if they choose.

Having Both Medicare and Employer Insurance Coverage

If you elect to keep your employer’s group insurance plan and enroll in Medicare Part A and/or B once you turn 65, you are typically able to do so. The consequences of combining Medicare and employer coverage vary depending on whether you work at a large business with 20 or more full-time employees or a small business with fewer than 20 full-time employees.

Companies with 20 or More Employees — Medicare Acts as Secondary

If you enroll in Medicare Part A while you are still working and have employer-based insurance, then Medicare acts as your second level of coverage while your employer coverage acts as the primary. 

This scenario is called Medicare Secondary Payer, and it is popular because most people who work will qualify for $0 premiums for their Part A coverage.

Medicare Part B and Part D do cost a monthly premium, however, so the cost/benefit analysis of enrolling in either may lead you to conclude that it is cheaper to simply rely on your employer’s insurance alone. 

Businesses with Fewer Than 20 Employees

Employers who have less than 20 employees are exempt from many of the rules applying to joint employer + Medicare insurance. Employees who elect to enroll in Medicare at age 65 will have Medicare act as their primary insurance and group insurance as the secondary.

You may wish to enroll in both Medicare Part A and Part B if this situation applies to you. You may also wish to enroll in a Part D drug plan if your employer’s group plan does not provide prescription coverage.

Health Savings Accounts and Other Employer Contributions

Once you are enrolled in any part of Medicare, neither you nor your employer can contribute to your health savings account.

Similarly, your employer is not allowed to cover the costs of your Medicare premiums.

One exception is if your employer forms a Section 105 Medical Reimbursement Plan, which allows your employer to reimburse you for your premium costs and deduct the expense from their taxable revenues. A health reimbursement arrangement (HRA) is one type of these plans.

Unfortunately, the Section 105 Medical Reimbursement Plan rule applies mainly to Part B premiums. If your employer wants to cover other costs, such as the cost of your Medigap premiums, then they must cover all employees equally.

Answer Questions About Medicare and Employer Coverage, Or Select the Optimal Coverage for You and Your Family

We understand that all of the rules surrounding Medicare can get quite confusing, and you may be wondering what the most cost-effective solution would be to get the coverage you need.

Our experience with assisting individuals like you can prove invaluable for guiding you to the optimal decision. If you have any questions about coverage or want advice for selecting the right plan, we are here to help you Protect What’s Ahead.

Call us at (678) 807-8414 or contact us online to speak to a medical insurance adviser.

Honest Reviews

Loved working with this group!  Very thorough and no pressure.  Answered all my questions. 

Marg T.

Honest, personal and would recommend to anyone looking for information on their insurance needs. Was interested in everything I had to say.

Tom G.