How Does Medicare Work with Small & Large Group Insurance?

If you’re approaching Medicare eligibility while still employed, you likely have questions about your healthcare coverage. Choosing between Medicare and group coverage depends on your situation. Having both or opting for Medicare alone can be advantageous.

How does Medicare work with employer insurance?

To determine the right coverage for you, it’s crucial to comprehend how Medicare and employer coverage work together. The coordination of benefits depends on your employer’s size. If you work for an employer with 20 or more employees and become eligible for Medicare at age 65, your group plan is primary, and Medicare is secondary.

Enrolling in Medicare Part A is recommended, as it’s premium-free for those who paid sufficient Medicare tax or are collecting Social Security Income (SSI) benefits. Medicare Part A helps lower hospital costs, making it sensible to choose this option.

For outpatient and prescription drug coverage, employer group plans with 20 or more employees provide creditable coverage, protecting you from Medicare Part B and Part D late enrollment penalties.

Can you keep your employer’s health insurance when turning 65?

Enrolling in Medicare Part A upon eligibility is advised, while Part B enrollment may be delayed if you have group insurance. Maintaining both Medicare and employer coverage is possible.

Creditable coverage depends on your employer’s size. Employers with 20 or more employees offer creditable coverage, ensuring smooth enrollment in Medicare Part B. Employers with fewer than 20 employees do not provide creditable coverage, potentially leading to late enrollment penalties.

Retiring and returning to work allows pausing Medicare Part B benefits and reenrolling when retiring again without penalties.

Is Medicare primary or secondary to group insurance?

Medicare becomes primary when your employer has fewer than 20 employees, with employer coverage as secondary. Employers with more than 20 employees make Medicare secondary to group coverage. Enrolling in Medicare Part A and Part B is recommended with small group insurance to avoid coverage gaps.

Failure to enroll in Medicare when eligible may result in claim denials by small employer coverage, emphasizing the importance of having both Medicare and employer coverage. Enrolling in Medicare Part B prevents penalties and ensures continuous coverage.

Medicare premiums and employer contributions

Employers are generally prohibited from contributing to Medicare premiums. However, exceptions exist, such as the 105 Reimbursement Plan, where employees contribute to individual insurance policies, receiving tax-free reimbursements for Medicare Part B premiums.

Medicare and health savings accounts (HSAs)

Enrollment in any part of Medicare renders you ineligible for HSA contributions. Employers cannot contribute to your HSA once Medicare is active. However, funds saved in an HSA can be used for medical expenses while on Medicare.

Employer coverage and Medicare Part D

If your employer group insurance includes creditable prescription drug coverage, you can delay Medicare Part D enrollment without penalties. Comparing your group insurance to Original Medicare and Medicare plans is advised for cost-efficiency and benefits.

Showing creditable coverage after delaying part B

To demonstrate creditable coverage to Medicare, employers must complete the CMS-L564 form. Submitting this form with your Medicare application helps avoid Part B penalties when delaying Medicare Part B.

Tips for comparing group coverage with Medicare options

When considering staying on employer coverage or moving into Medicare, there are a few things to consider.

Premiums, copays, and coinsurance – Review the out-of-pocket costs of the employer plan with the costs of Original Medicare and the Medicare options available. In many cases, Medicare options provide the same or better coverage for fewer costs.
Review your medications – Medicare covers at least one drug in every class. However, group coverage could provide better coverage because of the coverage gap and other factors.
Family members – If you have a family member or members on your group plan, you should factor in their coverage costs if you leave the group coverage.
Doctors – Some people love their doctors, and others don’t really care who they see. If you want to keep your doctors, review the Medicare options that will allow you to keep the doctors.

FAQs

Can I have Medicare and employer coverage at the same time?

During employment or through a family member, you can have a group health plan or retiree coverage. Once the coordination period concludes, Medicare becomes primary, and your group health plan or retiree coverage becomes secondary.

What does Medicare consider a large group health plan?

When the employer has 100 or more employees, the large group health plan takes priority, with Medicare paying second. However, if the employer has fewer than 100 employees and is not part of a multi-employer or multiple-employer group health plan, Medicare becomes primary, and the group health plan pays second.

How do you determine which insurance is primary and which is secondary?

The primary payer is the insurance that pays first and covers expenses up to its limits. Conversely, the secondary payer pays second and covers costs that the primary insurer did not cover.

Does Medicare pay copays as a secondary insurance?

Once enrolled in benefits, Medicare typically functions as the primary payer, covering most of your expenses. Subsequently, your secondary health insurance plan will serve as the secondary payer, addressing any remaining costs like coinsurance or copayments.

What happens when one spouse goes on Medicare and the other isn’t eligible?

Enrolling in Medicare Part A at 65 is common for many, even if they have employment with a large company, especially if it comes without a premium. However, suppose you possess a high-deductible health insurance policy and intend to contribute to a health savings account. In that case, consider delaying your enrollment in Medicare Part A and Part B.

Transitioning from employer health insurance to Medicare

Properly transitioning from employer coverage to Medicare is crucial to avoid penalties or gaps in coverage. Seek assistance from a Medicare expert to navigate the process smoothly. Comparing plans and working with licensed experts ensures you choose the right coverage.

To explore top-rated plans in your area, contact our licensed Medicare experts or complete our online rate comparison form. We’re here to assist you on your Medicare journey.

Methodology

Medigap.com extracted and analyzed data from the following to provide data in this article.

“Retiree Insurance” (Medicare.gov)
“Working after 65? What you need to know about employer insurance and Medicare” (PBS.org)
“When Is the Best Time to Enroll in Medicare?” (National Council of Aging)

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Written By:

Travis Tyson,

Reviewed By:

Rodolfo Marrero, Rodolfo Marrero is one of the co-founders at Medigap.com. He has been helping consumers find the right coverage since the site was founded in 2013. Rodolfo is a licensed insurance agent that works hand-in-hand with the team to ensure the accuracy of the content.