Unfortunately, for older adults who are currently employed, there is no official notification from the Social Security Administration to enroll in Medicare, and your employer may not alert you to take action. If the employer does provide information, it is often unreliable and can delay your enrollment in Medicare Part B, which often leads to penalties and higher medical costs.
If you have reached the age of 65 and you haven’t retired, not knowing how Medicare coordinates with your employer’s group health plan can be confusing, and you’ll likely have many questions. Let’s take a look at a few important things to consider to help steer you through this complex subject.
Rules on Coordinating Medicare and Employer Coverage
Knowing whether your employer’s health plan will pay primary or secondary to Medicare is critical in avoiding penalties and expenses. Primary means the employer’s health plan will pay medical bills first, and secondary means the plan would pay after the primary. If you are provided coverage through your employer, you are allowed to delay your enrollment without paying the Medicare Part B premium based on this information.
One condition that will help determine this is whether the employer has 20 or more employees. If this is the case, then your employer’s health plan will be considered primary and Medicare will be considered as secondary. When Medicare is secondary, to avoid paying monthly premiums, many employees choose to simply not enroll in Medicare Part B.
When working for an employer that has fewer than 20 employees, Medicare would be considered the primary coverage. Under such circumstances, you will not want to delay your enrollment in Medicare Part B. Postponing your enrollment will likely translate into higher medical care costs because your employer’s health plan will provide little or no coverage. If you are Medicare-eligible because you have End-Stage Renal Disease (ESRD) or due to a disability, the rules will apply differently.
Be aware that if you participate in a Health Savings Account (HSA), there are other considerations to take into account. Enrolling in both Medicare Part A and/or B prevents you from continuing to contribute pre-tax dollars to your HSA.
Medicare Special Enrollment Period
Once becoming eligible for Medicare, you have a Special Enrollment Period (SEP) to enroll in Medicare Part B. Your enrollment period is during the time you are covered by your employer’s health plan or up to eight months after you no longer have the coverage. This means once you become Medicare eligible, you may choose not to enroll in Part B during your initial enrollment period and will have seven months surrounding your 65th birthday to reject enrollment.
When choosing to take advantage of the SEP, you will not have to pay a late enrollment period. Delaying enrollment, for those who are Medicare eligible, and not under an employer’s plan, will cause penalty. Generally, a 12-month delay in enrollment will cause a 10% penalty, which is added to a person’s monthly premium amount. This penalty tends to last as long as they have Medicare.
Retiree Coverage, COBRA, Affordable Care Act and Medicare
It’s important to know that employee-offered retiree coverage is usually considered as a secondary form of coverage, meaning Medicare is the primary coverage. This also includes any employer-sponsored plan that you may choose to pay to keep after leaving your job, such as COBRA.
Normally, employer-sponsored plans will provide coverage for up to 18 months. You should enroll in Medicare as soon as you become eligible, so you don’t incur gaps in coverage and unnecessary penalties.
If you are enrolled in a Marketplace plan under the Affordable Care Act, you will need to take note of your circumstance as you approach Medicare eligibility and make Part B enrollment decisions. Changes in your circumstances could impact your enrollment eligibility.