Can I Drop My Employer Health Insurance and Go on Medicare?
Your employment and access to employer health insurance have no bearing on your qualification for Medicare or your ability to sign up.
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.
Key Takeaways
- If you are a U.S. citizen age 65 or older, you’re eligible for Medicare.
- Eligibility for Medicare is not affected by group health planA group health plan is a health plan offered by an employer or employee organization that provides health coverage to employees, their families, and retirees. benefits through your job.
- You can have a group health plan and Medicare benefits simultaneously. When you do, Medicare is the primary payer.
- You can delay signing up for Medicare Part AMedicare Part A is hospital coverage for Medicare beneficiaries. It covers inpatient care in hospitals and skilled nursing facilities. It also covers limited home healthcare services and hospice care. and/or Part B if you have a group health plan.
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 BMedicare Part B is medical coverage for people with Original Medicare benefits. It covers doctor visits, preventative care, tests, durable medical equipment, and supplies. Medicare Part B pays 80 percent of most medically necessary healthcare services., 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 $164.90 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 MedicareOriginal Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage. 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 careInpatient care refers to care provided in a hospital or other inpatient facility. Inpatients are admitted and stay at least one night depending on their condition.. 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 $1,600 benefit periodA benefit period is a method used in Original Medicare to measure a beneficiaries use of hospital and skilled nursing facility (SNF) services. With each new benefit period, the beneficiary is charged a new benefit... deductible.
Medicare Part B is medical coverage. It covers doctor visits, tests, diagnostics, supplies, durable medical equipmentDurable medical equipment (DME) is equipment that is designed to last and can be used repeatedly. It is suitable for home use and includes wheelchairs, oxygen equipment, and hospital beds., and drugs administered by your doctor. Medicare pays 80% of these costs, while the beneficiaryA person who has health care insurance through the Medicare or Medicaid programs. 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 costsOut-of-Pocket Costs for Medicare are the remaining costs that are not covered by the beneficiary's health insurance plan. These costs can come from the beneficiary's monthly premiums, deductibles, coinsurance, and copayments. or join a Medicare Advantage plan.
Your Options
You have several options to consider if you have group health coverage and qualify for Medicare.
- 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 periodSpecial Enrollment Periods (SEPs) allow beneficiaries to change their Medicare Advantage and Part D plans due to a special circumstance. Common reasons for a SEP include moving, losing employer coverage, and Medicaid eligibility, to name... to get Medicare coverage.
- 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.
- 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.
- 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., deductiblesA deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share., copays, and coinsuranceCoinsurance is a percentage of the total you are required to pay for a medical service. ).
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 premiumMost beneficiaries get Medicare Part A benefits (inpatient coverage) premium-free based on the number of years they paid Medicare taxes. However, beneficiaries that did not pay Medicare taxes for the required 10 years pay a... will be between $278 and $506 per month (2023 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 $1,600 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: $400 per day
- Days 91 through your lifetime reserve daysMedicare Part A covers up to 90 days of inpatient care per benefit period. Beneficiaries get an additional 60 days of coverage known as lifetime reserve days. Lifetime reserve days can be used once. Beneficiaries...: $800 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 2023, the Medicare part B premiumThe Medicare Part B premium is the monthly charge paid by beneficiaries for their outpatient medical care, services, and supplies. A beneficiary's premium may be uplifted by an IRMAA surcharge if their income is above... is $164.90 per month. High-income beneficiaries will also be required to pay an IRMAAIncome Related Month Adjustment Amount (IRMAA) is a Medicare Part B and Medicare Part D premium surcharge that is levied on high-income earners. The surcharge amount is based on a beneficiary's adjusted gross income. 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 copaymentsA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service..
NOTE: Most Medigap plans cover some or all of the Part B coinsurance.
Get Your Free Medicare SupplementMedicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage. Rate Comparison
Compare Medicare Advantage Plans
Above, we outlined what you’ll pay if you enroll in Original Medicare. Although Medicare Advantage plansMedicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B). 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 premiumsA premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. , deductibles, copayments, and/or coinsurance rates. For this reason, it’s important to compare your group health plan costs with Medicare Advantage carefully.
Find Plans in your area with your ZIP Code
When You Can Enroll in Medicare
Like other health insurance, Medicare has specific enrollment periodsEnrollment periods are designated time periods to enroll or disenroll from the various parts of Medicare. There are six Medicare enrollment periods.. During these periods, you can join, change, or drop coverage.
At age 65, you have an Initial Enrollment PeriodThe Initial Enrollment Period is a seven-month period when new beneficiaries can enroll in Medicare without a penalty. Most people enroll in Medicare at age 65. (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 PeriodThe General Enrollment Period (GEP) allows beneficiaries to enroll in Medicare Part A and Part B from January 1 to March 31 if they missed their Initial Enrollment Period. Beneficiaries can also enroll in a... (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 coverageCreditable coverage refers to health insurance or prescription drug benefits that meet Medicare's minimum qualifications necessary to avoid a penalty., you will have late enrollment penalties when you do sign up for Medicare Part B and Medicare Part DMedicare Part D plans are an option Medicare beneficiaries can use to get prescription drug coverage. Part D plans provide cost-sharing on covered medications in four different phases: deductible, initial coverage, coverage gap, and catastrophic. Each.... 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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