Medicare Mistake #3: Not Signing Up for Medicare If You Have Retiree, COBRA, or Other Health Coverage

In Mistake #2 of the Medicare Mistakes Series, we addressed forgetting to enroll in Medicare at age 65, but we skimmed over the issue of not enrolling if you are still working and have group health coverage through your employer. In some cases, it’s okay to keep your employer’s coverage, but in others, it’s not. In this MedicareWire article, we’ll address those issues.

When you enroll in Medicare at age 65 or start receiving Medicare benefits due to your Social Security Disability Insurance (SSDI) benefits, something magical happens. Medicare becomes the primary payer for your health care services.

When that happens, you can have other health insurance coverage, like TRICARE, Veteran Administration (VA), or union retiree benefits, but those coverages take a backseat to Medicare and become secondary payers. So, for example, when a veteran goes to the VA for a doctor visit, the VA bills Medicare for its portion of the vet’s visit. This is how it is supposed to work, and Medicare gets a little grouchy when people try to go around it.

If I have Employer Coverage, Do I Need to Enroll in Medicare?

If you are still working when you turn age 65, there are a couple of simple rules that will help you determine if you need to enroll in Medicare or not:

1. Does your employer have less than 20 employees? In this case, the Affordable Care Act says that Medicare becomes the primary payer.
2. Does your employer have more than 20 employees? In this case, the Affordable Care Act allows your group health coverage to be the primary payer for your health care.

If you have group health plan coverage through an employer who has less than 20 employees, Medicare pays first, and the group health plan pays second. If you have a group health plan through tribal self-insurance, Medicare pays first and the group health plan pays second.

When making the decision to defer Medicare enrollment, it is important to make sure your current coverage is creditable. If you overlook this step it will be a costly mistake when you do enroll. Medicare’s premium penalties can cost you as much as 10% extra for every year you delayed enrollment.

What Medicare Coverage Can Be Deferred?

In September every year, prior to open enrollmentIn health insurance, open enrollment is a period during which a person may enroll in or change their selection of health plan benefits. Health plan enrollment is ordinarily subject to restrictions...., your employer’s health plan should give you a notice informing you that their coverage is creditable. You need to pay close attention because the health plan and the drug plan are separate in Medicare. You need creditable coverage for both.

Deferring Medicare Part A (Hospital Insurance)

If you are eligible for premium-free Medicare Part A, which covers your hospital inpatient care, you can delay enrollment because no late enrollment penalty applies. You receive premium-free Part A coverage if you or your spouse paid Medicare taxes for 10 or more years. However, in most cases, there no reason not to enroll and allow Medicare to be the primary payer. When you do, your group health insurance will lower your costs.

If you are not eligible for premium-free Part A coverage, you can delay enrollment to avoid paying Part A 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. ... so long as your employer’s group health insurance is creditable. This will help you plus-up your Medicare tax account.

If you have a Health Savings Account (HSA) and want to continue contributing until you retire, you must delay enrolling in Medicare Part A. The law does not allow HSA contributions if you are receiving Medicare Part A benefits.

Deferring Medicare Part B (Medical Insurance)

Whether or not you can defer Medicare Part BMedicare Part B is medical coverage for people with Original Medicare. It covers doctor visits, specialists, lab tests and diagnostics, and durable medical equipment. Part A is for hospital inpatient care...., which covers your medical care, all depends on the number of employees your employer has. If you are self-employed or your employer has fewer than twenty employees, you must enroll in Part B at age 65 to avoid penalties.

If your employer has twenty or more employees and provides creditable group health coverage that’s more comprehensive than Medicare, the option is yours. You can delay enrollment to avoid paying the monthly Medicare Part B premium, or you can get enrolled. If you decide to enroll, you also have the option to join a Medicare Advantage plan or buy additional insurance, called Medigap.

Deferring Medicare Part D (Prescription Drug Coverage)

You can delay enrolling in Medicare Part DMedicare Part D is Medicare's prescription drug plan program. Plans are offered by private insurance companies and cover outpatient prescriptions...., which provides coverage for your prescription medications if your employer’s group coverage includes creditable prescription drug coverage. What this means is that your coverage will pay as much or more than Medicare’s standard Part D prescription drug coverage.

If you are not enrolled in creditable prescription drug coverage and are eligible through Medicare, you will incur a penalty if you later join a Medicare Part D plan. Medicare will allow you to go without coverage for up to 63 days. After 63 days your penalty clock begins.

What to Do When You Retire or Lose Employer Group Health Coverage

When you retire or lose your employer’s group health coverage, Medicare gives you an 8-month Special Enrollment Period (SEP) in which to enroll in Medicare. During your SEP you have up to 8 months to enroll in Parts A and/or B, but only the first two months to enroll in Medicare AdvantageMedicare 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).... and/or a Medicare prescription drug plan.

If You Want Medigap Coverage When Your Retire

Medicare supplement insurance (Medigap) covers the gaps in your 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.... coverage. But, unlike traditional health insurance, the law does not require insurance companies to sell you a policy if you have pre-existing conditions. In most cases, you get a single period of time that grants you the right to buy a Medigap policy. It’s called your guaranteed issue right (also called “Medigap protections”).

Guaranteed issue rightsGuaranteed-issue is a right granted to Medicare beneficiaries and applies to Medicare Supplement insurance (aka, Medigap plans). All states and the federal government enforce this essential right, which protects Medicare beneficiaries from medical underwriting.... are rights you have when insurance carriers must offer you certain Medigap policies. In these situations, an insurance company:

• Must sell you a Medigap policy
• Must cover all your pre-existing health conditions
• Can’t charge you more for a Medigap policy because of past or present health problems

Generally speaking, you have a guaranteed issue right if you have other health coverage that changes. For instance, if you no longer have health care coverage from your employer.

To use your guaranteed issue right you must apply for a Medigap policy no later than 63 calendar days after the latest of these three dates:

• Date the coverage ends
• Date on the notice you get telling you that coverage is ending
• Date on a claim denial (if this is the only way you know that your coverage ended)

If you do not apply for a Medigap policy during this period, insurance companies have the right to deny you coverage.

Need Assistance?

Before making the decision to defer enrollment in Medicare, it’s important to verify that you have crediable coverage and won’t incure Medicare penalties down the road.

If you’d like to speak with a Medicare expert who can help you decide what’s best in your situation, give us a call at 1-855-728-0510 (TTY 711). Our licensed agents are happy to help. No obligation.