01 Mar Can You Switch Between Employer Health Insurance and Medicare?
If you are turning 65 and are still working and getting health insurance through your employer, you may be wondering about Medicare. Or, if you are already on Medicare and are thinking about going back to work, you may be wondering if you can drop Medicare. This blog is for you. If you don’t pay attention to the rules, it could cost you.
What are the Parts of Medicare Coverage?
Medicare is a government health insurance program for those who are 65+ years old; have collected SSDI more than 24 months; or have been diagnosed with end-stage renal disease (ESRD) or ALS. There are 4 parts of Medicare coverage:
- Part A: Hospital Insurance. Includes hospital care, skilled nursing facilities, nursing homes, hospice, and home health services.
- Part B: Medical Insurance. Includes services from doctors, preventive care, outpatient care, lab tests, mental health care, ambulance services, and durable medical equipment.
- Part D: Prescription Drug Coverage. You have different plans to choose from depending on where you live, with different premiums and formularies. Make sure to select a plan that covers the drugs you take.
- Part C: Advantage Plans. Part C is an alternative to Parts A & B and it includes the benefits and services covered under Parts A & B, and usually Part D. You can select a PPO or HMO plan that is run by a private insurance company. Make sure to select a plan that covers your health care providers.
Medigap Plans are supplemental insurance plans sold by private companies. They will help pay for out-of-pocket costs, such as deductibles, co-payments, and cost-share amounts. In most states, plans are labeled as A through N. Each plan with the same letter must offer the same basic benefits. The premiums and deductibles vary with each plan. If you have chosen original Medicare (Parts A & B), there is a 20% cost share amount, a Medigap plan can help pay for that expense. For information about Medigap plans, visit Medicare.gov.
What if I am turning 65 and still working?
If you are eligible for Medicare, the 7-month initial enrolment period (IEP) begins 3 months before your 65th birthday, includes the month you turn 65, and the 3 months after you turn 65.
If you do not sign up during your IEP, you may face late enrollment penalties for the rest of your lifetime. For more information about enrollment periods, read: Quick Guide to Medicare Enrollment Periods.
If you are turning 65 and are still working and getting your health insurance coverage through your employer, you have a few options:
- You can keep your employer plan and not sign up for Medicare at all.
- You can keep your employer plan and sign up for Medicare Part A.
- You can keep your employer plan and sign up for Medicare Part A, and decide if you want to pick up B, D, and/or a Medigap Plan. Most people don’t sign up for Parts B and D, because they have a monthly premium. If you have a plan at work, especially if the premium is paid for by your employer, then you may not want to pay the extra money for Parts B and D. You can also decide if you want to get your Medicare coverage through a Part C plan.
- You can decide to sign up for Medicare and let go of your employer plan.
Beware that your employer plan may require you to pick up Medicare Parts A and B.
Note: if you have both Medicare and an employer plan, you cannot contribute to a health savings account (HSA) while on Medicare. For details, read this blog on Medicare and HSAs.
What if I am on Medicare, still working, and have an employer health insurance plan?
If you decide to leave your job, or lose your job, you have options available to you, you may be eligible for COBRA, which is a federal law that allows eligible individuals to keep their existing employer-sponsored health insurance coverage after experiencing a “qualified event,” like reduced employment hours, loss of dependent child status, divorce, or death of a covered employee. For more information, see Triage Cancer's Quick Guide to COBRA.
COBRA might be a good option to pay for medical costs that Medicare does not cover. However, you should do some math to figure out which plan is the best for you. Use this Medicare Plan Comparison Worksheet to weigh your options.
Can I get retiree insurance through my employer?
If you are retiring from your job, your employer may offer you a retiree health insurance plan. Employers aren't required to provide retiree coverage, and they can change plan benefits, premiums, or even cancel retiree coverage. You may want to consider having retiree coverage and Medicare, or you may choose to only sign up for Medicare.
Because retiree plans can be very different, it is important to talk to your employer about the details of the retiree plan and/or ask for a copy of the plan’s benefit booklet. You should get the details about what happens to your retiree plan when you become eligible for Medicare and how the plan works with Medicare
For example, when you become eligible for Medicare, most retiree plans actually require you to sign up for Medicare Parts A and B to be covered under the retiree plan.
Generally, Medicare pays first for your medical bills, and your retiree plan coverage pays for additional expenses, such as co-insurance amounts and deductibles. Your retiree plan then acts similar to a Medigap supplemental plan.
Sometimes retiree plans may also include extra benefits, like coverage for extra days in the hospital.
What if I am on Medicare and decide to go back to work?
If you are already on Medicare and decide to go back to work, and your employer offers you a health insurance plan, you have the choice to keep your Medicare coverage or drop it and re-enroll in Medicare when you stop working in the future.
But, it is important that you follow the rules or you may face lifetime penalties. To re-enroll in Medicare after you previously dropped it for an employer plan, you have an eight-month special enrollment period (SEP), in which you can sign up for Medicare Parts A, B, D, and/or Medigap, or choose a Part C plan.
If you miss the SEP, you must wait for the general enrollment period (January 1- March 31) to enroll in Medicare. The coverage is then not effective until July. You may also face late enrollment penalties for the rest of your life.
If your employer does not offer you health insurance, it is important to not drop your Medicare coverage, because then you will face penalties if you try to get Medicare back at some point in the future.
What should I consider when choosing between Medicare and an employer plan?
- Does my employer require that I elect Part A and/or Part B?
- Does the employer plan offer dental or vision coverage? Medicare does not cover these benefits.
- Does the employer plan offer prescription drug coverage? Medicare Part D covers prescription drugs, but you must buy a separate Part D plan with an additional monthly premium.
- Does the employer plan cover your spouse or dependents? Medicare coverage is for individuals, not married couples or families. If you want to cover your family members, that may be a reason to accept employer coverage.
- How will the employer plan interact with Medicare? (e.g., if you work for an employer with fewer than 20 employees, Medicare pays before your employer insurance.)
For more information about Medicare, visit TriageCancer.org/HealthInsurance
About Triage Cancer
Triage Cancer is a national, nonprofit providing free education to people diagnosed with cancer, caregivers, and health care professionals on cancer-related legal and practical issues. Through events, materials, and resources, Triage Cancer is dedicated to helping people move beyond diagnosis.
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