How Medicare Works With Employer Coverage

Americans are retiring later and later. The percentage of men over the age of 65 still in the labor force is among the highest since the 1970’s, and the percentage of women age 65 and over who are still working is the highest it’s ever been.1

If you are eligible for Medicare and also have health insurance coverage from your employer, you may have some questions. Which coverage pays for what services? Will you have to pay more in premiums?

Here we will answer those questions and more as we examine the relationship between Medicare and employer coverage.

Doctor reviewing information with a patient

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

Yes, you can have both Medicare and employer-provided health insurance.

In most cases, you will become eligible for Medicare coverage when you turn 65, even if you are still working and enrolled in your employer’s health plan. You are welcome to drop the employer coverage and have only Medicare if you so choose, but you are not required to do so.

When enrolled in both Medicare and employer insurance, each type of coverage is called a “payer.” Which type of coverage pays first depends largely on the size of your employer.

The primary payer pays up to the limits of its coverage, and the secondary payer pays any (but not necessarily all) covered costs not paid by the primary payer. Even with two payers, you may still have some out-of-pocket costs for your care.

  • Large companies (20 or more employees)
    A company is classified as “large” by Medicare if it has 20 or more employees.2 If you receive your employer health coverage from a large company and are still an active (not retired) employee, that coverage serves as the primary payer. Medicare acts as the secondary payer.
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  • Small companies (fewer than 20 employees)
    Medicare categorizes a company of fewer than 20 employees as “small.” If you are an active employee at a small company, Medicare will be the primary payer. Any employer coverage you receive will be the secondary payer.
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  • Having employer coverage during retirement
    If you are retired but still receive employer health coverage, Medicare will serve as the primary payer no matter the size of the company for which you worked.
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  • Being under 65 years old with a disability
    If you are under 65 but are enrolled in Medicare because of a disability and are also covered by an employer health plan, the employer will serve as the primary payer if it has more than 100 employees. With fewer than 100 employees, Medicare becomes the primary payer.

*An exception to the above scenarios is with HSA-compatible health plans. If the employer coverage you are enrolled in is a high deductible health plan coupled with a health savings account, you or your employer will not be able to make any contributions to the HSA while enrolled in Medicare.

Going back to work after turning 65

The above scenarios apply to people who are still working when they turn 65 and become eligible for Medicare. But what if you’re already retired and enrolled in Medicare but then return to a job that has employer health coverage?

If you return to work, the same rules apply according to the size of your employer. If you enrolled in Medicare Part B, you may cancel it upon enrolling in the employer coverage under no penalty. When you retire again, you will be granted a Special Enrollment Period if you wish to re-enroll in Part B.

Medicare and COBRA insurance

If you are first enrolled in Medicare and then become eligible for COBRA, you may keep both types of coverage. Medicare will serve as the primary payer, and COBRA will act as the secondary payer.

If you are first enrolled in COBRA coverage and then become eligible for Medicare, your COBRA coverage will end. If any of your family members were also covered under your COBRA coverage, their COBRA benefits will remain in place.

Medicare and military coverage

Medicare works with military health insurance in the following ways:

  • TRICARE
    For active military members with TRICARE, TRICARE works as the primary payer, and Medicare is the secondary payer. Retired members of the military who receive TRICARE for Life are required to enroll in Medicare Part B if eligible, and Medicare will serve as their primary payer.
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  • Veterans Affairs (VA)
    You may have both VA benefits and Medicare. If you receive care at a VA medical facility, your VA benefits will be used. If you receive care at a non-VA facility that accepts Medicare, your Medicare coverage will be used.

Medicare late enrollment penalties

Those who are not covered by another type of health insurance and do not enroll in Medicare when they first become eligible may face late enrollment penalties when they finally do sign up. If you delay your Medicare enrollment because you are enrolled in employer coverage, you may do so without penalty.

When your employer coverage does finally end, you will be given eight months to enroll in Medicare Part A and Part B, and you’ll have 63 days to enroll in a Medicare Advantage plan before facing any late enrollment penalties.

Choosing between Medicare and employer coverage

If you are eligible for both Medicare and employer coverage, you will generally have three options:

  1. Keep both types of coverage
  2. Drop your employer coverage and just have Medicare
  3. Delay Medicare enrollment and just have employer coverage

If Medicare can offer you smaller premiums and greater coverage than your employer plan, you might consider dropping your employer coverage. But if you have exceptionally good employer coverage that you wish to keep, you may choose to delay Medicare enrollment or at least enroll only in Part A, since most people do not have to pay a premium for Part A anyway.

The size of your company and whether Medicare will be your primary or secondary payer may also factor into your decision.

If you have further questions about how Medicare works with employer coverage and how your coverage, eligibility or enrollment may be affected, connect with a licensed insurance agent to learn more.  

Call TTY Users: 711 24 hours a day, 7 days a week to speak with a licensed agent who can help you compare the Medicare plan options available where you live.

 

1 Scommegna, Paola. Will More Baby Boomers Delay Retirement? Population Reference Bureau. (April 23, 2018). Retrieved from https://www.prb.org/will-more-baby-boomers-delay-retirement
2 Medicare.gov. Should I get Parts A & B? Retrieved from https://www.medicare.gov/sign-up-change-plans/get-parts-a-and-b/should-you-get-part-b/should-i-get-part-b.html#collapse-3156.

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