Can I Keep My Employer Health Insurance With Medicare?
Understand how your employer health plan works with Medicare. Learn to navigate choices and optimize coverage as you near eligibility.
Many individuals approaching age 65 find themselves at a crossroads, balancing their existing employer-sponsored health insurance with the complexities of Medicare eligibility. This situation presents a common dilemma, as understanding how these two distinct healthcare systems interact is important for making informed coverage decisions. Navigating this landscape requires careful consideration of various factors to ensure continuous and adequate health coverage. This article aims to clarify the interplay between employer health plans and Medicare, providing insights into enrollment processes and comparison points.
How Medicare Interacts with Employer Health Coverage
When an individual has both employer-sponsored health coverage and Medicare, rules dictate which plan pays first, known as the primary and secondary payer rules, determined by employer size. For employers with 20 or more employees, the employer group health plan serves as the primary payer, covering services first. Medicare then pays for any remaining covered costs, up to its approved amount, acting as secondary coverage.
For employers with fewer than 20 employees, Medicare becomes the primary payer. In this scenario, Medicare pays first for covered healthcare services, and the employer plan then pays for any remaining costs.
Medicare might also become the primary payer even with a larger employer if an individual is retired but still on the employer plan, or if the employer plan’s prescription drug coverage is not “creditable coverage.” In such cases, Medicare Part D might become primary for drug coverage.
Medicare Enrollment While Covered by Employer Insurance
Individuals nearing age 65 have an Initial Enrollment Period (IEP) for Medicare, a seven-month window around their 65th birthday. During this time, individuals can sign up for Medicare Parts A and B without penalty. Enrollment in Part A is often automatic and premium-free for most who have paid Medicare taxes for at least 10 years.
A Special Enrollment Period (SEP) is available for individuals who delay Medicare Part B enrollment because they are actively working and covered by an employer group health plan. This SEP allows penalty-free enrollment while covered by the employer plan, or within eight months after employment or group health plan coverage ends. To qualify, the employer must have 20 or more employees.
Delaying Part B enrollment without qualifying for an SEP can result in permanent premium penalties. For example, if an individual’s employer has fewer than 20 employees, or if their coverage is through COBRA or a retiree plan, they do not qualify for an SEP. In such cases, Medicare becomes the primary payer, and delaying enrollment can lead to a 10% increase in the Part B premium for each full 12-month period they could have had Part B but did not sign up.
For those who miss their IEP and do not qualify for an SEP, the General Enrollment Period (GEP) runs from January 1 to March 31 each year. Enrolling during the GEP often means paying late enrollment penalties, which are added to the monthly Part B premium.
To enroll in Medicare, individuals can apply online through the Social Security Administration’s website, by mail, or in person at a local Social Security office. For those enrolling via an SEP, specific forms like Form CMS-L564 are required.
Comparing Employer Coverage with Medicare
When evaluating whether to retain employer coverage or transition to Medicare, compare costs. Consider premiums for the employer plan, Medicare Part B, Part D, and any Medigap or Medicare Advantage plan. Also, analyze deductibles, copayments, coinsurance, and out-of-pocket maximums. The standard Medicare Part B premium for 2025 is $185.00, and the average total monthly Part D premium for 2025 is projected to be around $46.50.
Examine the scope of coverage. Employer plans might offer benefits like routine dental, vision, or hearing coverage that original Medicare does not. Compare prescription drug coverage, including formulary and cost-sharing, between the employer plan and Medicare Part D. Provider networks also differ, with some employer plans offering broader PPO networks while Medicare Advantage plans may use more restrictive HMO models.
Travel coverage is another consideration, especially for frequent travelers. Some employer plans may offer more robust international emergency coverage than Medicare, which provides limited or no coverage outside the U.S. Employer contributions to health plan premiums can also make a difference.
Specific scenarios influence the comparison. COBRA coverage is a temporary, often expensive, bridge after employment ends. Medicare enrollment is recommended once COBRA begins, as it’s not considered “current employment” for SEP purposes. For Health Savings Accounts (HSAs), once an individual enrolls in any part of Medicare, they can no longer contribute without tax penalties.
Decisions for one spouse can affect the other, especially if both are covered under the same employer plan. If one spouse transitions to Medicare, the other might need new coverage or to adjust their existing plan.