Can you stick with employer insurance or move to Medicare?

As soon as you turn 65, you are likely inundated with mail and people reaching out to get you to sign up for Medicare. But you may not need to sign up if you are still working and have creditable coverage. How can you tell if you have creditable coverage? Read on to find out.

What is creditable coverage?

Creditable coverage is insurance coverage that you can keep instead of Medicare. For your insurance coverage to qualify as creditable, it must have benefits as good if not better than what you get with Medicare. Typically, your private insurance coverage is creditable if you work for a company with at least 20 employees. But there are exceptions, so we recommend you check with your company's human resources department to verify that you have creditable coverage.

Employer/Union and other group health plans are required to provide Medicare-eligible employees with a Notice of Creditable Coverage each year by October 15th.

What if you don't have creditable coverage?

Suppose you do not have creditable coverage and you choose not to enroll in Medicare. In that case, you will likely face a lifetime Late Enrollment Penalty (LEP) in addition to your monthly premium. For Part B, this penalty is 10% of the base national monthly premium ($164.90 for 2023) for every 12 months you were without coverage. For Part D, this penalty is 1% of the "national base beneficiary premium" ($32.74 in 2023) for every month you were without coverage.

For example, if you turned 65 this year and did not enroll in Medicare for a year despite not having creditable coverage, your monthly premiums would be $181.39 for Part B ($164.90 + $16.49) and $36.67 ($32.74 + $3.93) for Part D.

In the example above, $32.74 is an average premium, but the penalty will be in addition to whatever your monthly premium is for your specific plan.

What if you have creditable coverage?

The decision on whether to keep your insurance is something we've covered before when considering employer's insurance, either yours or your spouse's. The general rule of thumb is that if you have creditable coverage, stick with it. If you aren't a fan of your current insurance and want to switch to Medicare, talk with one of our licensed insurance experts at Fair Square Medicare. We can give you an honest assessment of how your current policy stacks up to what you can get with Medicare.

Some people decide to double up on coverage. For example, people like to add Medicare as a secondary payer option while private insurance pays primary. Our agents can work with you to figure out what's best, but the important thing to know is that you may not need to sign up for Medicare if you have creditable coverage. You will have a special enrollment period (SEP) to enroll in Part B and/or Part D when you retire.

What about Part D creditable coverage?

The standards for Part D are as follows. To be considered creditable, your private health insurance plan must:

1. Pay at least 60% of prescription drug costs

2. Cover name brand and generic drugs

3. Include a variety of pharmacies to choose from

4. Not have a low deductible or an annual benefit cap amount

As mentioned earlier, you should receive a Notice of Creditable Coverage.

Notice of Creditable Coverage

The Notice of Creditable Coverage is the form your employer or union sends you by October 15 to inform you that your health plan meets the minimum standards required by Medicare. You don't need to do anything but hang on to this notice if you join a Part D plan later. Medicare's website recommends that you do not send in your Notice of Creditable Coverage.

Is COBRA considered creditable coverage?

COBRA is an individual policy created to mimic your former employer's group health plan. COBRA is not creditable coverage. So you will need to sign up for Medicare. Referencing the primary vs. secondary distinction from earlier, COBRA pays secondary to Medicare because it does not offer suitable coverage. In addition to COBRA following insurance options are not replaceable for creditable coverage:

• Some retirement plans

• CHAMPVA (for Parts A & B)

• Veterans Benefits (for Parts A & B)

• TRICARE (for Parts A & B)

CHAMPVA, Veterans Benefits, and TRICARE might be creditable coverage for your Part D prescription drug plan (however, for Veterans Benefits if a non-VA doctor prescribes a prescription they will not fill/cover it).

GoodRx is not considered creditable (although it is a great resource for coupons and information). Reference the four qualifications above to see if your prescription drug plan is considered creditable.

Takeaway

You can keep your employer's health insurance policy as long as it's creditable coverage. If you don't have creditable coverage, you should sign up for Medicare as soon as possible. You could face penalties for not switching to Medicare, depending on your situation. If you have a unique case not listed above, call us today at 1-888-376-2028. Our team of experts is trained to help work through all kinds of problems.