Medicare and Health Insurance

If you qualify for Medicare, but plan to continue working, then you probably have questions about how your existing job-based insurance works in conjunction with Medicare and health insurance. Rest assured that you’re not alone. For many Americans over the age of 65, enrolling in Medicare can seem like a challenge when they haven’t yet retired.

Medicare and health insurance: what do I need to know?

You may not think you need Medicare coverage, despite the fact that Part A premiums are free for most people. In the following sections, we’ll help you sort through the information, so that you understand your healthcare rights and responsibilities. Medicare coverage is available for younger people with certain disabilities. But the purpose of this article is to help people over the age of 65, who are still working, to make a more informed decision about their health insurance options.

Enrolling in Medicare at 65

First, we’ll discuss eligibility requirements briefly, so that you have an idea of when you can sign up for Medicare. Unless you meet certain disability or retirement requirements, you’re eligible to enroll in Medicare beginning three months before your 65th birthday. Medicare is designed to give senior citizens affordable health insurance options starting at age 65. However, many modern senior citizens continue to work well past the age of 65.

In fact, some people don’t retire until they’re in their 70s. If you plan to retire before you turn 65, then you can enroll in all relevant portions of Medicare without waiting. However, those who plan to continue working need to keep a few things in mind.

What do you do if you’re still working when you qualify for Medicare? As mentioned above, many seniors continue working much later than they did in previous generations. Fortunately, you have options for delaying the start of Medicare. If you’re still working when you turn 65, then you may want to delay enrolling in Medicare Part B. You should enroll in Medicare Part A, regardless of your working status, for reasons listed below. The four Parts of Medicare are:

• Medicare Part A covers hospital care
• Medicare Part B covers medical care
• Medicare Part D covers prescription drugs
• Medicare Part C — also known as Medicare Advantage — combines elements of A, B and usually (though not always) D, along with additional coverage that varies by plan

Do you have work-based insurance, because you haven’t yet retired when you enrolled in Medicare? If so, you may not need the coverage provided in Parts B, C or D. People who work and have access to job-based private insurance may already have the medical and prescription drug coverage they need. Let’s look at an example of the enrollment stipulations for someone who’s still working at the time of Medicare eligibility.

• Julian works at a company with 45 employees.
• Julian’s birthday is September 12, which means he can enroll in Medicare beginning in June. He reviews his options and determines that he wants to enroll in Medicare Part A. However, he doesn’t think he needs Part B coverage yet. So, he enrolls in Part A, without a premium.
• A year later, Julian’s work policy changes. Suddenly, he no longer has access to the medical coverage that Medicare Part B would have covered.

What will Julian do now? In the following sections, we’ll check in with Julian to make sure he gets the medical coverage he needs. But first, we should make one final point about eligibility and initial enrollment.

There’s a good reason to enroll in Medicare Part A when you’re first eligible, even if you don’t plan to retire yet. For most people, Medicare Part A is premium-free. If you’ve paid into the system for at least 10 years, by working at a job that deducts Medicare payroll taxes, then you probably qualify for premium-free Part A coverage. You also may qualify for premium-free coverage if your spouse paid into the system and you’re a beneficiary of his or her Medicare insurance. Medicare Part B, Medicare Advantage and Medicare Part D require paid premiums.

Medicare’s important dates and deadlines

As mentioned above, you can enroll in Medicare up to three months before the month you turn 65. For Julian, this meant that he could enroll beginning on June 1, because his birthday is on September 12. In this section, we’ll discuss the deadlines in more detail, because they apply to everyone unless you have work-based insurance and can get a rolling extension.

Your initial Medicare enrollment period lasts for seven months: the three months prior to your 65th birthday, the month of your 65th birthday and the three months following the month you turn 65. Using Julian as our example, he would have from June 1 through December 31 to enroll in Medicare.

Julian chose to enroll in Medicare Part A, while delaying enrollment in Part B, since he had work-based private insurance. What would have happened if he had chosen to forgo enrollment altogether? Fortunately, Julian has a rolling deadline for Medicare, because he still has work-based coverage. Plus, he doesn’t have to pay a premium for Part A, because he paid into the system through his payroll taxes.

Some Medicare beneficiaries aren’t so fortunate. Using Julian’s friend Harriet as an example, here’s what might have happened if circumstances were different:

• Harriet qualifies for Medicare, but has not paid into the system for at least 10 years, which means she must pay for Premium Part A coverage. In this scenario, Harriet lacks coverage through her employer.
• The rate for people who have to pay a premium on Part A in 2022 is $274 or $499 a month depending on how many work credits have been earned. That increases to $278 and $506, respectively, in 2023.
• Because Harriet has to pay for Part A, she might also be required to enroll in Part B at the same time and pay premiums for both portions.
• Harriet decides against enrolling. Three years later, she realizes that she wants to take advantage of her Medicare options and enrolls in both portions.

Harriet didn’t enroll when she could have and doesn’t have insurance through her job. As such, she’ll have to pay a penalty fee of 10 percent for twice as long as she could have had insurance but didn’t. Harriet waited three years after her initial eligibility to enroll. This means she’ll be charged a 30 percent penalty fee on top of her monthly premium for the next six years.

Julian doesn’t have to worry about this penalty fee. Even if he doesn’t enroll when he’s first eligible, he still can enroll in any portion of Medicare during a special enrollment period (SEP). This period is available only to individuals who have group health insurance through their employers. The SEP can be considered a rolling deadline. If you have work-based private insurance, then you can enroll in Medicare at any point while you’re still working, as long as you still have group health insurance. If you lose that insurance, then you have an additional period of eight months from the date you lose the work-based insurance to enroll in Medicare.

Earlier, we left Julian without medical coverage, because he did not enroll in Medicare Part B during his initial enrollment period and has since lost his work-based insurance. Julian’s friend Harriet would have to pay a hefty penalty fee every month indefinitely for enrolling in Part B late. But Julian has an eight-month buffer to enroll in Part B without incurring any penalty charges. This means he loses his coverage in June, enrolls in July and enjoys the benefit of a special enrollment period without fear of unnecessary fines.

The policy about fees and deadlines for Medicare Part A also works for Medicare Parts B, C and D, as well as Medigap. What is Medigap? For people who need coverage for medical treatments and devices that Medicare doesn’t cover, Medigap is available to supplement their coverage.

Generally, Medicare beneficiaries only have six months from the day they turn 65 to enroll in a Medigap policy. Unlike other portions of Medicare, Medigap does not offer the same enrollment deadlines, because it’s sold through private insurers. After the initial six-month period, you may not be able to enroll in Medigap at all. However, people with work-based insurance get an extension to enroll in Medigap that lasts as long as they have their job-based insurance; it extends to six months after they enroll in Medicare Part B.

Keep in mind that delaying enrollment and waiting to get insurance could also result in a gap in coverage. Therefore, it’s best to enroll when you can to avoid fees and consequences altogether.

Medicare and special considerations

There are a few more things to consider when it comes to work-based insurance and Medicare. For example, retiree coverage and Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage do not count as having work-based group health insurance. If you’ve already retired from your job or have lost your job and receive benefits through the COBRA system, then you do not qualify for the exemptions and special enrollment periods outlined above. In addition, the following situations may affect your enrollment deadlines:

• If you contribute to a Health Savings Account (has) through your employer, then you may need to delay enrollment in Medicare Part A. Some employers stop contributing to HSA plans as soon as an employee enrolls in Medicare Part A.
• Self-employed people and those who work for small companies (fewer than 20 employees) should consider enrolling in Medicare Part B. You’re less likely to get the coverage you need through work; Medicare Part B could be a better option.
• Some companies alter coverage for their employees when they become eligible for Medicare. You may want to enroll in Medicare Parts A and B to offset the cost of care, even while you’re still working.

It’s important to meet with your human resources department if you have work-based coverage. If for no other reason, you can review all of your options concerning Medicare. It can be difficult to keep up with things like copayments when you have work-based insurance and Medicare together. Fortunately, there’s a system in place to help people sort through payment options. In the following section, we’ll discuss in detail the way payments work with multiple insurance sources.

Who pays first?

If you have more than one source of insurance, including Medicare, then extra steps need to be taken to ensure the appropriate coordination of benefits. The term “coordination of benefits” refers to the system of rules that determine which insurer pays first for an insurance claim.

Each insurer is called a “payer,” and coordination of benefits rules determines the order in which payers pay for insurance charges. “Primary” payers pay first, while “secondary” payers pay additional fees. Some people may have subsequent payers, but most Medicare beneficiaries with multiple insurers only have two.

How do you handle payments under the coordination of benefits? Fortunately, you shouldn’t have to handle them on your own. Let’s return to Julian to see how he files a claim under the coordination of benefits rules.

• In this scenario, Julian enrolled in Medicare, while keeping his employer-based group health insurance.
• Julian visits his doctor for a routine checkup and discovers that he’ll need knee replacement surgery soon. He schedules the procedure, follows up with his doctor, undergoes treatment and proceeds to physical therapy after recovering.
• With all these medical and hospital bills, Julian needs to make sure that the right payer covers the costs, so that he can minimize his out-of-pocket expenses.
• Julian’s doctors file with Julian’s employer-based insurance first. Fortunately, his primary payer stays on top of things and covers the appropriate portion.
• Next, Julian’s providers file the remaining portion with Medicare, and Medicare covers its appropriate portion. Julian can then pay the remaining out-of-pocket costs as usual.

Julian was able to resolve all of these medical and hospital bills quickly, but this isn’t always the case with some people. In fact, just because an insurer acts as the primary payer doesn’t mean that the insurer always pays on time. Primary payers typically have 120 days to pay their portion of the claim. What would have happened if Julian’s primary payer failed to pay its share within the allotted time frame?

In essence, Julian’s secondary payer would have footed the bill for the time being. In Julian’s case, Medicare would have assumed the cost of both portions and collected the balance owed by the primary payer when possible. Julian didn’t have to worry about the delay, because his secondary payer stepped in to offer what’s known as a “conditional payment.”

If you enroll in Medicare while you still have group health insurance through your employer, then let your medical providers know about the change. Keeping your doctors and other providers aware of your current insurance situation ensures that claims get filed appropriately.

Also, keep in mind that you will need to cover out-of-pocket expenses on your own. Primary and secondary payers only cover claim costs up to the amount of their respective limits. Patients are still responsible for fees that fall outside of the covered limits.

For example, let’s say that a regular outpatient procedure costs $800. Your provider files the claim with your work-based insurance first and then files the rest with Medicare. Both payers pay their portion up to the limit covered under your plans for both, and the remaining balance is $143. You would need to pay this cost on your own. For help with out-of-pocket costs like this, you might consider supplemental insurance such as Medigap.

Once you retire, the rules for primary and secondary payers may change. In other words, Medicare could become the primary payer if you have retiree coverage through a former employer. Check with your employer’s human resources department to make sure you understand your rights as a retiree. It’s better to ask questions before receiving treatments, so that your providers know how to file claims correctly.

My Medicare – Planning ahead

If you’re working, then you may want to delay enrolling in certain portions of Medicare. That’s because your work-based coverage typically will take care of the same services that Medicare covers. However, keep in mind that you could experience a change in policy once you turn 65. You only have eight months from the day you lose employer-based coverage to enroll in Medicare.

Spend time familiarizing yourself with the materials associated with Medicare, so that you can make an informed decision when you do choose to enroll. Planning ahead of time will save you time and effort. And, knowing what you want upfront may save you the trouble and expense of high out-of-pocket costs.