Medicare and Group Healthcare Coverage Explained
Approaching age 65 and considering your Medicare options can be confusing alone, but adding in the complexity of those that continue to work and have employer group coverage further muddies the water. This presentation is designed to lay out this scenario in an easy to understand format to provide important guidance and ease the pressure on the beneficiary.
Do You Need Medicare?
Medicare Part A
Most people should enroll in Medicare Part A when they turn 65, regardless if they have insurance from an employer. This is due to the fact that over 95% of beneficiaries quality for premium-free Part A coverage, having worked 40 quarters paying their Medicare taxes. However, those that are covered by a high-deductible health plan and are contributing to a Health Savings Account (HSA) should delay their Part A coverage until a later date. (more on that later on).
Medicare Part B
Most people need to enroll in Part B when they turn 65, but those that will have health insurance based on their or their spouse’s current employment may be able to delay enrolling in Part B. This is due to how benefits may coordinate between the group plan and original Medicare.
Large Group vs. Small Group
Depending on the size of the employer that is providing the group coverage, clients may or may not need to enroll in Medicare at age 65:
• Large Group = 20 or more employees
• Beneficiaries may delay Part A and/or Part B until they stop working or lose the employer coverage based on that work
• Beneficiaries will have 8 months from the loss of employment or the coverage based on that employment, whichever happens first, to sign up for Part A and/or Part B benefits. They can also sign up at any time they are working and covered by the policy.
• Small Group = fewer than 20 employees
• Beneficiaries should sign up for Part A and Part B when they turn 65
• This is due to the 1982 TEFRA law that dictates Medicare to be the primary payer in these situations. This will be covered later on in the presentation.
HSAs and Medicare
If the beneficiary is covered by a high-deductible health plan and is contributing to a Health Savings Account, they need to plan ahead for their medical and retirement benefits:
• Once they enroll in any part of Medicare, they won’t be able to contribute to their HSA account on a tax-free basis, and will be penalized when they file taxes. If they’d like to continue contributions to their savings account, they will need to delay both Part A and Part B, and their Social Security payments, until they stop working or lose their employer coverage
• If they qualify for premium-free Part A and they sign up after delaying coverage, the start date of Part A will go back retroactively 6 months from the month they sign up. They should stop making contributions at least 6 months in advance of the month they plan on signing up for Medicare or their Social Security payments.
Coordination of Benefits: Who Pays First?
Depending on the beneficiary’s situation, there may be a coordination of benefits between Medicare and their group insurance. In order for this coordination to work, they must utilize providers that accept both the group insurance and participate in the federal Medicare program.
• 65 or older and have group coverage through their or their spouse’s current employment
• If the employer has 20 or more employees, the group plan pays first and Medicare pays second. This was established by the 1982 TEFRA law.
• If the employer has less than 20 employees and isn’t part of a multi-employer health plan, then Medicare pays first and the group plan pays second. Employees should reach out to their benefits administrator in these small group to verify if they are required to sign up for Medicare.
• Under age 65, disabled, retired, and have group coverage from their former employer
• Medicare pays first and their group health plan (retiree) coverage pays second
• This is true for all Medicare beneficiaries that are on a retiree health plan
• Under age 65, disabled, retired, and have group coverage based on their family member’s current employment
• If the employer has 100 or more employees, then the large group health plan pays first and Medicare pays second
• Have Medicare due to End-Stage Renal Disease (ESRD), and group health plan coverage
• During a coordination period of up to 30 months, the group plan pays first and Medicare pays second
• After the coordination period expires, Medicare pays first and the group plan pays second
What Happens If You Lose Group Coverage?
For individuals who delayed their Part A and/or Part B, they’ll need to sign up for their benefits within 8 months of the loss of coverage or loss of employment, whichever happens first. They can sign up through Social Security either online (www.ssa.gov), through their local Social Security of-fice, or by calling them at 1-800-772-1213. They will be required to complete two forms:
• CMS-40B “Application for Enrollment in Medicare – Part B”
• CMS-L564 “Request for Employment Information”. The beneficiary completes Section A and their employer will need to complete Section B.
For those who delayed Part A and/or Part B:
• They have the right to purchase a Medicare Supplement (Medigap) plan during Open Enrollment, which lasts up to 6 months after their Part B goes into effect
• They’ll have a Special Election Period to enroll into a Medicare Advantage or Prescription Drug plan up to 2 months after the loss of coverage.
• They may also use their Initial Coverage Election Period for joining Part B, but that election period is only valid if the application for the Medicare Advantage plan is submitted prior to the Part B effective date, to start coverage on the same date.
For those who already have Part A and Part B:
• They may have a Guaranteed Issue right to purchase a Medicare Supplement (Medigap) plan without underwriting, up to 63 days after the loss of coverage. This guarantee issue situation is always valid if the loss of group coverage is involuntary. If the loss of group coverage is voluntary, availability of this Guaranteed Issue situation will vary by state.
• They’ll have a Special Election Period to enroll into a Medicare Advantage or Prescription Drug Plan up to 2 months after the loss of coverage.
• “Fact Sheet: Deciding Whether to Enroll in Medicare Part A and Part B When You Turn 65” –CMS Product No. 11962
• “Medicare & Other Health Benefits: Your Guide to Who Pays First” –CMS Product No. 02179, re-vised August 2020