Can I Sign Up for Medicare If I Have Employer Health Insurance?

Your employment and access to employer health insurance have no bearing on your qualification for Medicare or your ability to sign up.

Can I Drop My Employer’s Health Insurance and Go on Medicare?

This article will explain how your Medicare benefits work if you have employee health benefits through your employer. The same information applies if you have health benefits through your spouse’s employer.

Employer Health Insurance vs. Medicare

Many of us continue working beyond age 65, which creates some confusion around our Medicare and employer health benefits. Like, can you drop your group health plan and go on Medicare?

Yes, you can. And, if it’s to your benefit, you can even have both. But read our “caution” below.

You earned your Medicare benefits by paying Medicare taxes during the years you worked. So long as you worked for ten or more years, you earned premium-free Medicare Part A benefits.

Medicare Part A is your hospital insurance. There is no drawback to signing up for Part A as soon as it is eligible. After all, you earned it.

Medicare Part B, your medical coverage, is a bit different. You will begin paying a monthly premium as soon as you sign up for Part B. This year’s base premium amount is $174.70 per month. Take this into consideration.

Before making the decision between Medicare and your employer’s group health plan, compare your costs and benefits.

Health Insurance Primary Payer

When you have two insurers, one will be the primary payer, and the other will be secondary. Here’s how it works with Medicare and an employer group health plan:

• Medicare is the primary payer if the employer has fewer than 20 employees.
• The employer is the primary payer if it has 20 or more employees.

CAUTION: If you work for a company with fewer than 20 employees and you don’t sign up for Medicare Part B at age 65, Medicare will apply a penalty to your premium when you do sign up.

And there’s double jeopardy, too.

If you work for a small employer and don’t sign up for Medicare at age 65, all medical bills Medicare should have paid as the primary payer are your responsibility to pay. By law, your group health plan is the secondary payer and has no responsibility for the 80% share Medicare would pay if you were enrolled.

How Group Health Plans and Medicare Work Together

Most group health plans are HMO or PPO health network plans. You are required to use healthcare providers in the network, or you pay all costs (HMO) or higher costs (PPO). Most of these plans have some restrictions, such as referrals and/or pre-authorization.

Original Medicare is different. It has two parts, A and B. And you never need a referral or pre-authorization.

Medicare Part A is hospital coverage. It covers inpatient care. It also covers emergency transportation and emergency room costs if you are admitted as an inpatient. When you use your Part A benefits, there is a $1,632 benefit period deductible.

Medicare Part B is medical coverage. It covers doctor visits, tests, diagnostics, supplies, durable medical equipment, and drugs administered by your doctor. Medicare pays 80% of these costs, while the beneficiary pays 20%.

You also have the option to buy a Medicare Part D prescription drug plan. If you do not buy a Part D plan at age 65, and you do not have creditable prescription cover through your employer, Medicare will apply a penalty to your Part D premium when you do buy a plan.

If you remain enrolled in your group health plan, it will work with your Medicare Parts A, B, and D benefits. When you retire and no longer have a group health plan, you will be able to buy a Medicare Supplement to cover some of your Part A and B out-of-pocket costs or join a Medicare Advantage plan.

Your Options

You have several options to consider if you have group health coverage and qualify for Medicare.

1. Keep your employer group health plan and delay Medicare Part B enrollment. You can do this without penalty if your employer has more than 20 employees. When your employment ends, you can ask Medicare for a special enrollment period to get Medicare coverage.
2. Sign up for Original Medicare and drop your group health plan. Do this if your group health plan offers fewer benefits and/or costs more than Medicare. If you do this, you should also consider a Medigap policy to help cover Medicare’s out-of-pocket costs.
3. Sign up for a Medicare Advantage plan and drop your group health coverage. Most Medicare Advantage plans offer HMO and PPO-style coverage, similar to group health plans.
4. Keep your employer group health plan and enroll in Medicare Part A and Part B. Be sure to coordinate with your employer’s benefits administrator and call Medicare to verify your coverage is creditable.

As mentioned above, if you have worked for ten or more years, you qualify for premium-free Medicare Part A benefits. Unless you have a Health Savings Account (HSA) through your employer, there is no reason not to sign up for Part A benefits at age 65.

How Much Medicare Will Cost You

Although Medicare Part A is premium-free, if you paid Medicare taxes for ten or more years, Part B isn’t. And both Part A and Part B have out-of-pocket costs (e.g., deductibles, copays, and coinsurance).

Medicare Part A Costs

Most Medicare beneficiaries don’t pay a Part A premium. If you or your spouse have not worked the 40 quarters required to be eligible, your Medicare Part A premium will be between $278 and $506 per month (2024 rates).

In addition to the Part A deductible (if any), you pay a Part A inpatient care deductible each time you are hospitalized. The deductible is $1,632 per benefit period.

The Part A benefit period starts the first day you are admitted and ends 60 days after the last inpatient care you received related to your original inpatient admission. As a result, it is possible to have multiple benefit period deductibles in a calendar year.

Medicare Part A also has a coinsurance. The amount depends on the length of inpatient care and does not begin until you have been hospitalized for more than 60 days:

• Days 61 through 90: $408 per day
• Days 91 through your lifetime reserve days: $816 per day

If you do not have a Medigap policy, you only have 60 lifetime reserve days (for inpatient care). You get an additional 365 lifetime reserve days when you have a Medigap policy.

Medicare Part B Costs

In 2024, the Medicare part B premium is $174.70 per month. High-income beneficiaries will also be required to pay an IRMAA surcharge.

In addition to the monthly premium, Medicare Part B has a 20% coinsurance. You pay this amount for most Medicare-approved services. Some preventive healthcare services, such as annual wellness visits and vaccinations, do not have coinsurance or copayments.

NOTE: Most Medigap plans cover some or all of the Part B coinsurance.

Compare Medicare Advantage Plans

Above, we outlined what you’ll pay if you enroll in Original Medicare. Although Medicare Advantage plans are required to cover all benefits offered by Part A and Part B, their costs are not required to be the same.

In other words, each plan sets its own premiums, deductibles, copayments, and/or coinsurance rates. For this reason, it’s important to compare your group health plan costs with Medicare Advantage carefully.

When You Can Enroll in Medicare

Like other health insurance, Medicare has specific enrollment periods. During these periods, you can join, change, or drop coverage.

At age 65, you have an Initial Enrollment Period (IEP) that begins three calendar months prior to your 65th birthday and ends three months later. So, if your birth month is in June, you can sign up as early as March or as late as September.

During your IEP, you can sign up for Medicare Part A and B. You can also add a Part D plan for prescription benefits. If you prefer, you can join a Medicare Advantage plan (Part C).

When you sign up before your birth month, your coverage will begin on the first day of your birth month. If you sign up during or after your birth month, your coverage will begin on the first day of the following month.

For most people, Medicare enrollment is not automatic. You will need to call Medicare at 1-800-772-1213 to enroll. You can also visit the Social Security website to enroll.

Medicare enrollment will happen automatically if you begin collecting Social Security or Railroad Retirement Board benefits at least four months prior to your 65th birthday. In this case, Medicare will send you an information packet explaining your benefits.

You’ll be eligible for a Special Period of Enrollment (SEP) if you decide to stay with your group plan and your company has 20 or more employees. The Special Enrollment Period begins on the latest of the following dates:

• The date your employment ends; or
• The date your group health coverage ends.

You can learn more about SEPs on Medicare.gov.

Delaying Medicare Enrollment

If you do not sign up for Medicare during your IEP or your SEP, you will need to wait until the next Medicare General Enrollment Period (GEP). GEP occurs every year from January 1 through March 31.

GEP is specifically for individuals who qualify for Medicare Part A and/or Part B but are not currently enrolled. If you use the General Enrollment Period to sign up for Parts A and B, you have from April 1 through June 30 to enroll in Part D or a Medicare Advantage plan.

If you delay Medicare enrollment and do not have creditable coverage, you will have late enrollment penalties when you do sign up for Medicare Part B and Medicare Part D. There is also a late fee for Medicare Part A, but only people without premium-free Part A are required to pay it.

Need Help Deciding?

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