If you’re about to become eligible for Medicare, then you’ve probably done lots of research already on what to expect, how to enroll and what kind of plan you need. But Medicare can be tough to unravel. To complicate things, if you have coverage through another source already, you may be wondering what happens to that plan once you sign up for Medicare. It’s important to understand how simultaneous coverage works – and doesn’t work – when you’re ready to sign up for a Medicare policy.
One of the questions people ask about Medicare is whether or not it can be teamed up with a marketplace plan to offer more robust coverage. In short, the answer is no. You can’t buy health insurance on the private marketplaces created under Obamacare if you have a Medicare policy in place. The two are mutually exclusive. But there are a few exceptions, so let’s look at how simultaneous coverage works with Medicare.
Medicare and the Law
Medicare is not part of the insurance marketplace under the Affordable Care Act. As a separate system created in 1965, Medicare works under its own administration with its own rules and signup stipulations. That said, the federal entitlement program for seniors does have to play by ACA rules in certain areas. Here’s what you need to know:
- Section 1882(d) of the Social Security Act prohibits the sale of a duplicate individual health plan to anyone who has Medicare coverage.
- Once you sign up for Medicare, you cannot buy a marketplace plan. In fact, it’s illegal for anyone to try and sell you an individual health plan if you already have Medicare.
- If you have an individual health plan from the marketplace before you become eligible for Medicare, though, then you can keep both.
There are a few more things to keep in mind when signing up for Medicare or a marketplace plan. You can keep both as long as you had the individual policy before you became eligible for Medicare, but there are stipulations:
- If you’ve got an individual health plan, and you become eligible for premium-free Part A, then you can have both plans. However, you’ll have to give up any tax credits you may be receiving for a marketplace plan in order to keep both policies.
- If you’ve got an individual marketplace plan and you become eligible for paid Part A and Part B, then you’ll have to give up the tax credits once you enroll in Part A if you want to keep the marketplace plan and Medicare.
- If you only want to enroll in Part B coverage and keep an existing marketplace plan, then you can keep your tax credits, too, because Part B does not count as minimum essential coverage under the law.
If you have premium-free Part A (most recipients do) and you want to drop this coverage for an individual policy on the marketplace, then you have to drop your Social Security and/or disability benefits when you drop Part A coverage. If you pay for Part A coverage and Part B coverage, then you’ll have to drop them both if you want to sign up for a marketplace plan.
Most people who pay into a marketplace plan before they’re eligible for Medicare will use their marketplace plan until Medicare takes effect. But once you become eligible for Medicare, you’ll need to crunch the numbers to see if you can keep both. Just to be clear: you cannot have a Medicare policy and an individual health plan at the same time unless you already had the individual plan in place before you signed up for Medicare.
What About Group Coverage?
The law prevents Medicare recipients from buying individual health plans because it’s considered duplicate coverage, but the same rules don’t apply to group benefits. If you have a policy through your employer, then you can keep it in conjunction with Medicare coverage. Your employer can also start offering coverage through the Small Business Health Options Program (SHOP) to you even if you have Medicare since this coverage would be considered a group policy.
In this scenario, when you have an employer-sponsored plan and Medicare at the same time, there’s a primary and secondary payer for each medical claim. Normally, the primary payer takes care of its portion of your bill, and then the secondary payer picks up the rest. But if Medicare is the secondary payer, then Medicare will only pay as much as it’s contracted to pay. So if Medicare pays 80 percent of your medical costs under normal circumstances, then it will only pay 80 percent of the leftover costs as a secondary payer. This could mean that you would have to cover more of the bill than you might have expected.
When you choose more than one health insurance plan, you’ll need to know how your coordination of benefits works. This is the process by which claims get paid. Medicare.gov offers an overview of how it works with Medicare, but talk to your insurers directly for more information. In some instances, Medicare will make a conditional payment to your medical provider to cover costs that your group coverage would not. You may have to work with the group insurance company to recover those costs and pay Medicare back.
Pros and Cons of Doubling Up
There are advantages to continuing your group coverage even after you have Medicare. Having more payers means that you might pay less than with one policy alone. You could also take advantage of Medicare Part A’s robust hospital coverage and your group plan’s robust physician coverage to get more of your bill taken care of.
But there are also several cons that come with doubling up on health insurance, not least of which is trying to keep up with which payer is responsible for which service (and how much each one will pay). You could also face higher monthly premiums than you would with a single policy, and there’s no guarantee that both plans would coordinate with each other, leaving you stuck with a higher bill until you sorted it out yourself.
Dressing Up Your Medicare Plan
If you’re tempted to keep group coverage after you enroll in a Medicare policy because you’re worried about gaps in coverage, know that you have options for rounding out your health plan that don’t include juggling two distinct major medical policies. When you first become eligible for Medicare, you can take advantage of a supplemental policy called Medigap. It’s a guaranteed-issue add-on, meaning that you can’t be denied a policy as long as you enroll once you’re first eligible, and you can’t be dropped from the plan as long as you pay your premiums. Adding Medigap could increase your monthly premiums, but these plans fill in gaps that you would otherwise have to cover yourself.
Medigap doesn’t cover prescriptions. If you want the benefits of original Medicare with added features and the potential for prescription drug coverage, then consider a Medicare Advantage plan. These plans are sold through private insurers, and you may save money by buying one over a traditional policy.
Before you opt to keep a group plan and Medicare, do the math, and discuss the details with someone who understands the true limitations and advantages of signing up for both policies. Likewise, don’t settle for original Medicare if you need more comprehensive coverage. You have options, so take the time to research them carefully before committing to a policy.