June 8, 2018

Choosing Between Employer Coverage and Medicare

by Suzanne McClain, National United Medicare Advisors

If you have health coverage from your employer, you may be wondering whether it makes sense for you to enroll in Original Medicare, Part A (hospital insurance) and Part B (medical insurance) when you turn 65. While every person’s case is different, here are some things to consider when deciding between Medicare and employer group coverage.

Should I enroll in Medicare Part A?
Most people enroll in Medicare Part A when they turn age 65, even if they have other health coverage, since Medicare Part A has no monthly premium if they have worked at least 40 quarters and paid Medicare taxes. If your employer health coverage is a high-deductible Health Savings Account (HSA) plan, you may not be able to make further contributions in the Health Savings Account once you’re enrolled in Medicare (although you can make withdrawals for the funds you have in the account). If you have a HSA plan, I would highly recommend getting professional advice on what you should do regarding enrolling in Medicare.

Should I enroll in Medicare Part B?
Under some circumstances, you might have to pay a late enrollment penalty for Medicare Part B if you don’t enroll when you’re first eligible. Most people are first eligible for Medicare when they turn age 65 unless they qualify earlier because of disability.

However, if you have health coverage based on current employment (either through you or your spouse’s employer), usually you can delay enrollment in Medicare Part B without having to pay a late enrollment penalty when you enroll later. Many people wait to sign up for Medicare Part B if they are on a Large group (over 20) because their group plan is primary, and Medicare is secondary. If you choose not to take Part B when you retire or lose group coverage, you will have a Special Enrollment Period to sign up for Medicare Part B. The Special Enrollment Period lasts eight months, beginning as soon as your employer group coverage ends or the employment that it’s based on ends, whichever event occurs first. If you use this period to enroll in Medicare Part B, you avoid a late enrollment penalty.

Employer coverage and Medicare Part D
Medicare Part D Prescription Drug Plans are available from private insurance companies contracted with Medicare. Like Medicare Part B, there is a late enrollment penalty for Medicare Part D if you don’t sign up when you’re first eligible and you don’t have creditable prescription drug coverage. Creditable coverage is coverage that is as good as standard Medicare Part D. Most employer coverage is creditable coverage, but if it’s not you will have to pay a penalty if you enroll in a Medicare Part D at a later date. The Medicare Part D penalty may apply any time you go without creditable coverage for longer than 63 consecutive days after the end of your Initial Enrollment Period.