A guide for when to delay Medicare enrollment and how you are covered

Are you turning 65 soon with no plans to end your career? If so, you are not alone. The average age of retirement dipped during the Great Resignation in 2020. But now the age of retirement is starting to climb north of 65 again as people are working longer to secure their nest egg. Let’s walk through how your employer insurance will coordinate with Medicare. 

First Things First

The first rule of Medicare and private insurance is an easy one: if you’ve got creditable coverage, stick with it. If you are looking for a deep dive on creditable coverage, check out our article here. Your private insurance coverage is creditable if you work for a company with at least 20 employees. When weighing your options, your first question should be the size of your company. If you work somewhere with less than 20 employees, it’s important to ask your HR representative if your insurance is creditable. If you don’t have creditable coverage, you should apply for Medicare Part A and Part B. The same goes for if this is your spouse's employer insurance.

Primary vs. Secondary

Once you’ve answered the first question, consider whether your insurance will pay primary or secondary. 

If your private insurance is paying primary to Medicare, Medicare pays secondary and is supplementing your employer insurance. For whatever healthcare costs pop up, your insurance takes the first swing, and if anything is leftover, Medicare comes in to cover the rest. Remember that Medicare will only pay for things covered by Medicare.

If Medicare pays primary, your employer health insurance pays secondary and is left to cover whatever Medicare will not.  

When your company has 20 or more employees, that’s considered a Group Health Plan (GHP), and your insurance will pay primary. In a Small Group Health Plan (SGHP) with less than 20 employees, your insurance will pay secondary to Medicare, so you need to sign up for Parts A, B, and likely D if Medicare is meant to pay primary.

Note: If you are under 65 and eligible for Medicare due to a disability, the number used to determine primary vs. secondary coverage jumps up to 100 employees. A plan with over 100 employees is considered a Large Group Health Plan (LGHP).

The way your Medicare plan and your GHP might work together to share costs is called the Coordination of Benefits. There are systems in place that work to ensure your healthcare claims are being billed in the right order, but it’s still important for you to know how to apply these rules to your situation in case any claims are disputed. If you have any questions about the Coordination of Benefits for your situation, you can call us at 1-888-376-2028, and you can also call the Benefits Coordination and Recovery Center (BCRC) at 1-855-798-2627.

Protections

One question that we hear a lot is whether or not you have to drop your employer’s insurance plan now that you’re turning 65 and are eligible for Medicare. The answer is no, if you have creditable coverage. And further, your employer can’t pay you less, take away your insurance, or discriminate at all just because you are now eligible for Medicare. Unfortunately, these same protections are not in place if you are part of a Small Group Health Plan.

Delaying Medicare Enrollment

The next question on your mind might be how long you should delay Medicare coverage? 

If you don’t have creditable coverage the answer is straightforward. Not only is it within your best interest to enroll in Medicare for the sake of insurance purposes, but you may also incur late enrollment penalties if you aren’t enrolled in Part B and Part D as soon as you’re eligible. Sign up for Medicare the first chance you get. Late enrollment penalties may stick with you for life, so best to avoid them. The Part B late enrollment penalty is 10% of your premium for each year you qualified but didn’t have coverage. The Part D late enrollment penalty is 1% for each month you didn’t have coverage after qualifying (or going 63 days without creditable drug coverage). 

Assuming you have creditable coverage, you will have a special enrollment period (SEP) for 6 months after you lose coverage. That means you can enroll in Medicare after your Initial Enrollment Period without facing any late enrollment penalties for Part B and/or Part D. There are more factors to weigh. You want to run a cost-benefit analysis as it relates to your specific healthcare situation. Our agents are happy to talk you through your options. But for now, here’s where your analysis might begin:

• Would switching to Medicare save you money?

  • Part A is premium-free for most people, and there’s a Part B premium depending on your income. 

  • See here how much Part B might cost you here. 

• Where does your coverage overlap?

  • If you want to keep your GHP, is the secondary coverage worth it?

  • What does your current insurance not cover that Medicare might? Or vice versa?

• Are you contributing to an HSA?

  • If you’ve delayed enrolling and contribute to an HSA within 6 months of your Medicare enrollment, you might face a tax penalty.

  • If you’re enrolling once you turn 65, you need to stop making contributions a month before your start date.

One example of delaying Medicare enrollment being necessary for one of our clients involved the cost of their prescription. Their cancer treatment medication was covered by their employer’s insurance and would have been covered under Part D. Because it was a specialty drug classification under Part D plan, this drug would have ended up costing them over $10,000 a year. In this instance, they might need to stay on their GHP until 2024, when the catastrophic coverage phase of Part D drug coverage is phased out, and the maximum out of pocket costs per year is capped around $3250.

Retirement Plans and COBRA Pay Secondary

• If you’re signed up for COBRA coverage, you should sign up for Medicare as soon as you’re eligible. You will not get a special enrollment period at the end of your COBRA, and may be subject to late enrollment penalties.

  • Medicare pays primary to COBRA.

  • If your COBRA includes creditable drug coverage, you have a special enrollment period of 63 days after your coverage ends.

• Medicare also pays primary to retirement plans. 

  • If you’ve got a retirement plan, your spouse’s GHP, and Medicare, it pays

    • 1. GHP

    • 2. Medicare

    • 3. Retirement Plan

  • If your retirement plan includes creditable drug coverage, you have a special enrollment period of 63 days after your coverage ends.

Conclusion

If you don’t have creditable coverage, you should sign up for Medicare as soon as you are eligible to avoid any lapses in coverage and late enrollment penalties. If you have insurance that pays primary to Medicare, you have different factors to think through when enrolling in Medicare. Our team of experts is ready to help you figure out what suits your situation best. Call us at 1-888-376-2028.