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Do You Need to Enroll in Medicare If You Have Employer Insurance?

As you near retirement age, you may often wonder how you will pay for your healthcare needs. For most older adults, some form of Medicare is often the most comprehensive and cost-effective solution. However, what about those of us who have an insurance plan through our employer?

If you continue to work even after you qualify for Medicare, should you keep your employer-sponsored health insurance? Moreover, if you have the opportunity to continue your employer insurance even after you retire, should you keep your current plan or switch to Medicare?

First, let’s take a look at some of the pros and cons of employer-sponsored health insurance.

Pros and Cons of Employer Health Insurance

For the sake of simplicity, we will evaluate some of the pros and cons of employer-based health insurance versus an individual health insurance plan. Here are some of the most important benefits of an employer health plan:

  • Your employer pays part of your premiums.
  • Your employer does all of the research and chooses the best plan for you.
  • Your insurance premiums are likely taken out from your pre-tax pay, which will reduce your taxable income.
  • Some employer plans can extend into retirement.

Alternatively, here are some of the cons of having an employer health plan:

  • You have less control over your health insurance.
  • You could lose your insurance once you retire or change jobs.
  • You could likely find cheaper individual plans on the open market.

How Does Medicare Work with Employer Insurance?

Now that you know a little bit more about the pros and cons of employer insurance, next we’ll cover the question: How does Medicare work with employer insurance?

Unfortunately, it is a pretty complex question, as the precise answer will depend on your individual needs and circumstances. That said, if you have employer insurance that extends into your retirement and you’re happy with your coverage, the answer is ‘no. You do not need to enroll in Medicare.

As mentioned above, this answer will not apply to everyone. For example, let’s say you’re turning 65’, and you are still on your employer’s health plan. If you want to get the benefits of Original Medicare, you will need to enroll in Medicare via the Social Security Administration.

Typically, it’s best to enroll during your Initial Enrollment Period so that you can avoid paying any penalty fees by signing up “late.” However, if you contact the Social Security office and inform them that you wish to stick with your employer-sponsored insurance for the time being, you can delay signing up without any penalties.

On the other hand, if you’re already over 65, you don’t need to do anything unless you lose your employer’s health plan. From there, you’ll need to enroll in Original Medicare and keep your healthcare as is or sign up for a Medicare Advantage (Part C), Medigap, or Part D plan.

Depending on the size of your employer, you may or may not have to pay a penalty for signing up after the Initial Enrollment Period. If the company has more than 20 employees, you generally will not have to pay any penalty for signing up late.

Alternatively, if you work (or worked) for a company with fewer than 20 employees, your employer decides whether or not you will need to sign up for Medicare when you become eligible. According to AARP:

“If the employer does require you to enroll in Medicare, then Medicare automatically becomes primary, and the employer plan provides secondary coverage. In other words, Medicare settles your medical bills first, and the group plan only pays for services that it covers but Medicare doesn’t. Therefore, if you fail to sign up for Medicare when required, you will essentially be left with no coverage.”

Medicare Prescription Drug Coverage (Part D) and Medicare Supplement Plans (Medigap)

Things get a little more complicated if you want Part D prescription drug coverage or a Medigap plan. If you have a large employer group coverage and decide to keep it, you’ll get a special enrollment period for Part D and Medigap plans without penalty.

Fortunately, you can also enroll in Part D even if you haven’t enrolled in Medicare Part B. That said, many employer health plans offer “creditable” drug coverage for Medicare beneficiaries, or, if you choose to delay Medicare enrollment, standard prescription drug coverage.

Every employer’s health plan is unique, so you will need to contact your employer to find out what kind of drug coverage they provide once you turn 65. If your employer’s health plan doesn’t fall in this category, then you should enroll in Part D as soon as it becomes available so that you can avoid any penalty fees.

Additionally, enrolling late will not incur a penalty with Medigap plans. You will be able to delay enrollment up until the time that your employer insurance ends. Thus, if your employer insurance allows it or qualifies for it, you can delay both Medicare and Medigap enrollment without penalty (rate increases).

Next Steps

In short, there’s no rule saying that you need to sign up for Medicare if you have employer insurance. However, signing up when you turn 65 could save you money in penalty fees. Additionally, many older adults prefer the stability of Medicare instead of the relative instability of employer-sponsored health insurance.

If you’d like to learn more about enrolling in Medicare with an employer-sponsored insurance plan or your Medicare coverage options, contact a licensed agent who is a Medicare expert so they can guide you through the process.

Are you at the 65-year age bracket? Have you signed up for Medicare or are you keeping your employer-sponsored insurance plan? Have you compared the two? What made you decide the way you did? Please share with the community!

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The Author

Jason Carrasco is the Medicare expert for Time for 65. Jason loves sharing his expertise and knowledge with older adults, loved ones and caregivers who may be new to, or who simply have a difficult time understanding the ins and outs of, Medicare.

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