Transitioning from group health insurance to Medicare can often be a very confusing time in people’s lives because the Medicare Rules are extremely complex. Often even experienced HR employees do not know the correct and full answers to give to the employees about Medicare. We will attempt to clear up some of he most common questions regarding Medicare and group health insurance and employee benefits.
Question: My husband will turn 65 in a few months and plans to go onto Medicare and leave the employer health plan that I am also currently enrolled in. Since I am under 65 years old will I be offered Cobra and if so, for how long?
Answer: If the employer has at least 20 full-time equivalent employees you will most likely be offered Cobra. The normal duration of Cobra is 18 months. However, sometimes when Medicare is the qualifying event initiating the Cobra, a spouse may be offered 36 months of Cobra. The rules are especially complicated on this scenario and it will also depend on how the group health plan is written. But you should at least be offered the 18 months. Contact us for help with your specific scenario!
Question: If I leave my job and I am already 65, or turning 65, can I elect Cobra instead of signing up for Medicare?
Answer: No. Cobra a not valid reason to delay signing up for Medicare once you become Medicare eligible.
What I mean by this is that after your active employment ends you cannot go onto Cobra or you will incur a penalty (or at least not without signing up for Medicare in a timely manner). Once your active employment ends, your group plan will usually end, and you will be offered Cobra by most plans that fall under the Federal COBRA rules.
However, Cobra is not considered Credible Coverage for Medicare meaning you would pay a high penalty for neglecting to sign up for Medicare.
Due to the cost of Cobra it is almost always a better idea to sign up for a Medicare supplemental policy of some type (Medigap or Advantage plan) to work along with your Medicare to pick up where Medicare leaves off… instead of signing up for Cobra.
Question: I will turn 65 later this year and I currently have insurance through my husband’s employer. Am I required to sign up for Medicare if I plan to remain on my current insurance?
This is often a confusing question because the Medicare Rules are extremely complex.
Answer: Whether a person can delay signing up for Medicare, without incurring a penalty, depends on whether or not you have other health insurance coverage that is considered Credible Coverage by the Medicare rules.
An Employer health plan is considered Credible Coverage IF they qualify as a Primary Payor to Medicare.
Typically, an employer with at least 20 full-time employees is a Primary Payor to Medicare, but you need to make sure before you delay signing up for Medicare because that could be an extremely costly mistake. You must check with your current health plan.
If your group plan IS considered a Primary Payor to Medicare, then you can delay signing up for Medicare without any penalty while you or your spouse is actively employed. But you need to consult with your HR department for verification that the group plan is indeed a Primary Payor and that you are not required to sign up for Medicare.
Most of the time the group will recommend you sign up for the free Medicare Part A, as long as you are not contributing to a Health Savings Account.
If the employer group plan is NOT a Primary Payor, but instead are a Secondary Payor to Medicare, and you delay signing up for Medicare, you can face severe repercussions:
- Unpaid medical bills (this is often how people first realize there is a problem with Medicare) because the group health plan will not pay Medicare’s portion (80%) of the bills if Medicare is the Primary Payor for your group plan instead of the group plan and you did not sign up for Medicare
- In the form of Late Enrollment Penalties that increase Medicare premiums by a great deal, depending on how long you delayed the sign up. That is an increase that will remain in effect for the rest of the beneficiary’s life at a rate of 10% a year for every year you did not sign up for Medicare when you should have.
- You could miss the enrollment window for Medicare and must wait several months to sign up for Part B, leaving you partially uninsured for those services covered by Part B of Medicare and adding to your penalty.
Question: Is Medicare the better option anyway, even if the employer plan is considered the Primary Payor to Medicare?
Answer: That all depends on the cost of your Medicare Part B and the cost of your group health plan. If your group health plan has a very low cost or no cost and great coverage, then maybe it would be to your advantage to delay Medicare. Especially if Medicare considers you a high-income earner since you will be charged more money for your Part B premiums if that is the case.
Question: What are the costs associated with Medicare?
Answer: Part A does not cost you any money as long as you or your spouse have worked for at least 10 years (and payed Medicare taxes while working). If you do not qualify for the free Part A it can be purchased at a significant cost.
Part B: premium for the 2020 plan year is $144.60. However, if your income is high (as defined by Medicare in 2020 as earning over $87,000 for an individual or $174,000 for a married couple) you could pay more due to the income-related monthly adjustment amounts (IRMAA) See Chart. However, if you are low income you might get help paying for some of the cost for Medicare. You can check on the Medicare Savings Program by clicking HERE.