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What happens when you sign up for Medicare but you’re already covered by employer insurance? You could also have parallel coverage from your spouse’s employer, a retirement plan, or Tricare military health insurance.
In most cases, this extra coverage can stay while Medicare helps with healthcare costs. In this article, we discuss situations where you can keep both Medicare and employer insurance and how you can combine them to cover your needs.
Understanding Medicare and Employer Insurance
Let us explore the details of Medicare and Employer-sponsored Insurance (ESI).
Medicare is a federal health insurance program in the US that covers senior citizens aged 65 and above, and younger individuals with certain covered diseases and disabilities. Original Medicare consists of Part A (Hospital Insurance) and Part B (Medical Insurance). Other plans within the program include Part C (Medicare Advantage), and Part D (Prescription Drug coverage), among others.
Employer-sponsored insurance covers current employees, their spouses, and sometimes retired workers. ESI comes in various types, including small-group health insurance plans tailored for organizations with two and fifty employees. These plans cover essential health benefits mandated by the Affordable Care Act (ACA). Health Reimbursement Arrangements (HRAs) are another form of ESI where your employer adds a specific amount to the HRA. This money is then utilized for approved medical expenses. Health stipends and wellness stipends are other alternatives for smaller employers that grant monthly allowances for medical expenses or wellness-related services.
Coordination of Benefits: Medicare and Employer Insurance
Insurers use Coordination of Benefits (COB) to establish how multiple health insurance plans can work together to cover an individual’s medical expenses. In cases where you have Medicare and Employer Insurance, COB determines the interaction between these plans to ensure seamless and transparent coverage for healthcare costs.
When you have Medicare and ESI, each insurer is called a “payer.” The “primary payer” – determined by your job and employer size – pays first on your bills, while the rest goes to the “secondary payer.” In some cases, there might also be a “third payer.”
Medicare is the primary payer when a beneficiary works for a company with less than 20 employees. It is the secondary payer when the employer has more than 20 employees.
Here are a few vital points to remember:
- The secondary payer, including Medicare, might not cover all unreimbursed expenses.
- If your employer insurance is the secondary payer, you might need to enroll in Medicare Part B before your insurance will pay.
- When your employer insurance is the primary payer and the claim isn’t promptly paid within 120 days, your provider can bill Medicare.
Another thing to keep in mind is insurance overpayments, which happen when an insurer mistakenly pays a provider more than the agreed service amount or covers a service not included in the patient’s insurance plan. This can lead to reimbursement complications, and you may need to deal with recovery laws.
Claim denials, which often arise due to issues with the coordination of benefits, are another consideration. If Medicare doesn’t process your claim automatically, you might need to submit claims to your secondary insurance manually.
Medicare and Employer Insurance for Active Workers
Many Americans continue to work after they’ve reached the age of 65. In such cases, they may have questions about applying for Medicare while working. Understanding the interaction of two health insurances and making the right Medicare enrollment decision in such cases is pivotal.
Understanding your Medicare enrollment choices once you’ve reached 65 years is crucial. Failing to enroll in Medicare Part A, Part B, and Part D when initially eligible can lead to late enrollment penalties.
It is generally a good idea to enroll for Medicare Part A even if you’re covered by ESI as the former provides additional coverage, particularly for hospital expenses. You typically qualify for premium-free Part A coverage if you’ve worked and paid Medicare taxes for at least ten years.
Certain situations warrant delaying Medicare enrollment. If your ESI is comprehensive and premiums are reasonable, you might delay Medicare enrollment. You can do the same if you are eligible for coverage through the ACA marketplace and find it more affordable than Medicare. Finally, if you contribute to a Health Savings Account (HSA) and want to continue, delaying Medicare enrollment can allow you to maintain your HSA contributions.
Medicare and Employer Insurance for Retirees
Retiree insurance by employers typically functions as the secondary payer in relation to Medicare. This makes it essential to enroll in Medicare for comprehensive coverage. Specific retiree policies might mandate signing up for Medicare Part A and Part B insurance once you’re eligible.
There’s also the possibility of maintaining retiree insurance as primary coverage after Medicare eligibility if you suffer from conditions such as end-stage renal disease (ESRD). The same is true if you are covered by a Federal Employees Health Benefits (FEHB) plan and choose to delay Part B enrollment. Keep in mind, however, that delayed Medicare enrollment might lead to potential penalties and coverage gaps.
You have the following options while transitioning from employer insurance to Medicare as a primary payer:
- Opt for Original Medicare and discontinue your group health plan. You might consider including a Medigap plan for additional coverage or a Medicare Part D plan for prescription medications.
- Opt for a Medicare Advantage plan instead of your group health plan. These plans often offer additional benefits like prescription drug coverage, vision and dental care, and can simplify coverage coordination.
- Keep your employer coverage while also enrolling in Original Medicare. Make sure to communicate with both Medicare and your employer’s benefits administrator to ensure smooth coordination.
- Continue solely with your employer’s coverage. You can delay Medicare enrollment without penalties if your company has over 20 employees. Once your employer coverage ends, you’ll have a Special Enrollment Period to sign up for Medicare.
Both Medicare and employer insurance have their advantages. Medicare’s comprehensive coverage effectively addresses a wide range of health needs. On the other hand, employer-sponsored retiree health insurance brings stability by allowing retirees to remain under familiar coverage, sparing them from the complexities of the individual insurance market.
A thorough assessment of both options enables retirees to make an informed decision, possibly opting for one or combining the two. This thoughtful choice can provide unmatched peace of mind.
Impact of Medicare and ESI on Costs and Coverage
Medicare isn’t cost-free. While most beneficiaries pay a monthly premium for Medicare Part B, there’s a possibility of qualifying for premium-free Medicare Part A, as mentioned earlier.
When you are covered by ESI, you could consider enrolling in Medicare Part A when initially eligible and delay Part B enrollment until your employer coverage ends. This approach can provide a budget-friendly means to enhance your insurance coverage if you decide on a combination of Medicare and employer coverage.
Enrolling in Medicare and employer insurance offers potential cost savings by combining coverage. Medicare can act as a primary or secondary payer to reduce out-of-pocket expenses. This coordination optimizes healthcare benefits and minimizes financial burdens.
Contact CoverRight for more details on coordinating employer insurance and Medicare.
Frequently Asked Questions
Do I need to enroll in Medicare if I have employer insurance?
That depends on several factors. If your employer has 20 or more employees, your employer insurance might be the primary coverage, and enrolling in Medicare Part B can be delayed without penalties. If your employer has fewer than 20 employees, however, Medicare may become your primary coverage, and enrolling in both Part A and Part B could be necessary to ensure comprehensive benefits.
Can I drop employer insurance if I have Medicare?
Yes, you can consider dropping your employer insurance if you have Medicare. It’s essential, though, to evaluate your situation thoroughly. Evaluate the benefits and potential drawbacks of both options before making a decision.
Will having both types of coverage affect my healthcare choices?
Yes. Depending on your situation, one plan might act as the primary payer, while the other serves as secondary coverage. This coordination impacts your out-of-pocket costs, the network of healthcare providers, and the services covered.
