Medicare and Employer Insurance
These days it’s common for people to still be working at 65 or even older. If you are nearing or past “Medicare age” and employed, you may find yourself with both federally-administered Medicare and employer-sponsored health insurance. More coverage would seem to be better than less, but here it pays to research your options. A key finding is who pays first when a medical bill comes in.
Primary vs. Secondary
The way it works is, group health plans for companies with 20 employees or more pay first and Medicare pays second. The employer’s plan will pay up to the limits of its coverage, and whatever isn’t covered will be picked up by Medicare.
If your company is fewer than 20 people, your group plan will be the secondary payer. In this case, you may need to sign up for Medicare Part B before your insurance will pay. The system is accommodating, allowing you to piggyback on your spouse or relative’s employment-sponsored plan.
Getting your benefits to work together
Medicare Part A is popular with active employees who have worked at least ten years because it’s premium free and can coordinate with your group plan to bring down your inpatient hospital costs. Part B comes with a monthly premium, so some people delay enrolling in B and D while they still have group coverage, which comes with outpatient benefits already.
It’s important to note that when you delay on Part B, your group plan counts as “creditable coverage.” This distinction means that you aren’t liable for a late-enrollment penalty when you do retire. When the time comes to leave your job and group plan, you’ll receive a creditable coverage letter from the insurance company — keep this in your records! It’ll come in handy to show Medicare proof you had coverage so you can’t be hit with late penalties for Part B and D.
Life is long, and you may decide to rejoin the workforce. Now you’ve got employer insurance again. Your best plan of action is to cancel Part B, and then enroll in a Medigap plan with no health-related questions asked when you retire for the second time.
The COBRA Question
It gets a bit more complicated when you have COBRA benefits, and this is where people end up owing penalties. If you work for a large employer, their group healthcare plan will cover primary medical costs, and Medicare will get the secondary expenses. With COBRA the reverse applies: Medicare primary, COBRA secondary.
It’s absolutely key to enroll in Parts A and B in your Initial Enrollment Period when you are 65 and covered by COBRA. Why? Because Medicare needs to be primary if COBRA is secondary, and if you skip your IEP, you’ll be paying a lifelong penalty. Instead of a Medigap plan, you can keep COBRA if you’d like to cover your secondary payments.
The other important detail to know is that if you retire after 65, you have to enroll in Part B within the first 8 months of your COBRA coverage. Missing this enrollment can cause a lifelong late-enrollment penalty for Part B, and worse, it could set back your Part B coverage until July of the following year. This could end up being a very costly mistake.
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I have group coverage from my small company. How would claims get paid if I added Medicare coverage?
If your company is fewer than 20 people, Medicare would pay first, then your group carrier. Companies with more than 20 employees pay first, and then Medicare covers the remainder.
First of all, it’s critical that you enroll in Medicare Parts A and B during the Initial Enrollment Period while you’re receiving COBRA benefits. Because COBRA is for people no longer employed, Medicare has to be your primary coverage, with COBRA as your secondary. Miss your IEP, and you’ll have to pay a lifetime late-enrollment penalty equal to 20 percent of the Part B base premium for the rest of your life. This year, for example, the penalty increases the monthly standard premium of $164.90 to $178.20.
- Best overall Medicare supplement for new enrollees: Plan G.
- Best overall Medicare supplement before 2020: Plan F.
- Best low cost Medicare supplement: Plan K.
- Best alternative to Plan G Medicare supplement: Plan N.
Medicare Supplement policies are private health insurance designed to cover gaps in Original Medicare. They are also known as Medigap plans. These take care of costs such as copays, coinsurance, and deductibles which can become expensive if you need regular care from a doctor or hospital. If you need medical care while traveling outside the U.S., you can buy Medigap policies to help cover those costs. As a supplement to Original Medicare, you’re required to have Part A and Part B before you canget a Medigap policy. This way, Medicare is responsible for the Medicare-approved costs of the covered care, and the remainder is covered by your Medigap plan.
Optimal coverage comes with higher costs, making Plan F the most expensive Medigap plan. Plan F is known as “first-dollar coverage” and it takes care of everything provided during a doctor or hospital visit. Your only responsibility is for dental, vision, medications, and equipment, such as hearing aids.
The Federal government ended the Plan F option for new enrollees last year to keep the healthcare system from being overused by patients who had their deductibles covered. The next best coverage after Plan F is Plan G.
Medigap Plan G offers every advantage of Plan F except for the deductible, which you have to cover. Because it isn’t as comprehensive as Plan F, Plan G is more affordable.
For people who don’t go to the doctor often, Plan K is worth considering. It is the most affordable because it provides just 50% of Medicare Part B coinsurance, the Part A deductible, blood, skilled nursing, and Part A hospice costs. For comparison, Plan G and others offer full coverage of these expenses, and more.
It’s hard to argue against plans which cut your traditional Medicare costs. For most people, having the extra coverage these supplemental plans provide is common sense, unless they want the specific features of a Medicare Advantage plan.
Most people would benefit from not having to pay out-of-pocket to stay healthy. Medicare supplement insurance or a Medicare Advantage plan offer vital savings now, but are indispensable should a catastrophic health issue occur.
Of the 10 Medicare-approved Medigap plans, Plan G and Plan N are the most popular. Plan F is no longer available to new Medicare enrollees as of 2020, but it is still popular among people who bought this plan prior to 2020.
- Plan F$128–$342
- Plan F (high deductible)$22–$88
- Plan G$106–$325
- Plan G (high deductible)$29–$58
Before getting a Medicare supplement plan, you need to be enrolled in Medicare Part A (hospital insurance) and Part B (medical insurance). People with Medicare Advantage Plans who want to go back to Original Medicare can buy a Medigap policy prior to switching.
The security of having lower or no out-of-pocket healthcare costs can offset the premiums you’ll have to pay for whichever Medigap plan you choose, which vary depending on the benefits offered.
The national average cost for Medicare Supplement Plan F is $1,824 annually, which is $152/month; Medigap Plan G will cost you around $143 per month.
Since Plan F was discontinued for new enrollees as of 2020, Plan G offers the most coverage for people 65 and older. It has a lower premium than Plan F and duplicates its benefits, except for the Part B deductible.
It depends on your specific needs, but for most people a Medigap plan is very useful in supplementing the coverage of Medicare Part A and Part B. A Medicare Advantage plan is an affordable way to get healthcare coverage not offered by Original Medicare.
Historically, Plan F has been the most popular because it covers all the out-of-pocket costs Medicare does’t pay for. This includes the 15% extra charge billed by providers who do not take Medicare as full payment.