Should You Stay on Employer Health Coverage or Switch to Medicare?

Most people understand that when they reach age 65, they’re eligible for Medicare health coverage. It’s about this time that their mailboxes get bombarded with flyers from insurance providers vying for their attention, all claiming to have the best plans. Instead of helping, most people feel more confused than ever.

Adding to the confusion is the fact that nearly 20% of Americans age 65 and over are still working and may receive health insurance through their employers. These individuals often wonder, “Even if I’m still working, should I stay on my employer’s plan or will Medicare offer better coverage at a lower premium?”

If you’re turning 65 and plan to continue working, there are things you need to know when choosing between employer-sponsored plans or Medicare. We’ll take a look at the basics of Medicare and factors that will help you determine if switching is the right move.

Various Forms of Medicare

Medicare is a health insurance program administered through the government.

The program helps with the cost of health care, but it doesn’t cover all medical expenses.

While the term Medicare is widely used to reference the program as a whole, there are various options within the program that you’ll need to familiarize yourself with:

• Medicare Part A. This helps pay for inpatient care in a hospital or rehab facility after a hospital stay. Most people receive Part A at no cost because the premiums were paid for through FICA taxes while they were working.
• Medicare Part B. Most services from doctors and other health care providers, outpatient care, home health care, medical equipment and some preventive services are covered under Part B. There is a cost for Part B, and the base premium in 2020 is $144.60 per month.
• Medicare Part C. Also known as Medicare Advantage, this combines the benefits and services covered under Part A and Part B. There are various Part C plans to choose from, and some include prescription drug coverage and other extra benefits and services.
• Medicare Part D. This insurance helps cover the cost of prescription drugs.

Medicare Enrollment Period

The process for enrolling in Medicare should not be met with a “when I get around to it” attitude. Specific enrollment periods have been established, and it’s important to comply or face possible penalties. The initial enrollment period begins three months prior to the month of your 65th birthday, your entire birthday month, and the three months following — technically a seven month span.

If you choose to stay on an employer’s plan or a spouse’s group plan, you may qualify for a "Special Enrollment Period" (SEP) that will let you sign up for Medicare later. You will need to prove that you had coverage during that time, however, to avoid being penalized.

It’s important to note that if you start collecting Social Security benefits, you will automatically receive a Medicare card, and the Part B premium will subsequently be deducted from your social security payments. If you collect Social Security but still remain on a group plan and not Medicare, you must sign the back of the card to indicate you’re waiving Part B and send it back. If you are not collecting Social Security and enroll in Medicare the government will bill you for the Part B premium quarterly. The Centers for Medicare & Medicaid Services is the agency in charge of the Medicare program, but you apply for Medicare at Social Security.

Some people don’t realize there’s a link between Medicare and Social Security. If you choose not to collect Social Security but still want Medicare, you will have to enroll either online at www.ssa.gov or visit the Social Security office in your area. If you enroll online, it’s typically processed within a week or so. If you visit the Social Security office, however, timing can vary as some may process applications slower depending on workloads.

When Switching to Medicare Makes Sense

If you plan to work past age 65 and your employer has fewer than 20 employees, Medicare will become your primary healthcare coverage and your employer plan would become your secondary. At this point, it may make sense to come off your employer plan and go on Medicare alone since it would be the primary insurance anyway.

If your employer has more than 20 employees, or your spouse still receives coverage through his or her employer, your employer plan would be the primary insurance and Medicare would be secondary. Be sure to consult with your employer and weigh the coverage benefits and out-of-pocket expenses such as deductible amounts, prescription coverage and the portion you’re required to pay for an existing employer group plan versus Medicare. This will help you to determine if staying on the employer plan or moving to Medicare makes more sense. In many cases, even if you are working past age 65 Medicare may be the more cost effective option for your healthcare.

Always be sure to consult with your employer during this process as well.

Next Steps

There is no one-size-fits-all answer when determining if going on Medicare is the right choice. For example, if you have a lot of high-cost prescriptions, there are certain plans that will offer better copay options while others may have exclusions or higher costs for certain medications. McClone’s strategic risk advisors can run an unbiased report to clearly show the differences and rank each option by out-of-pocket costs for your list of prescriptions. If you do decide to go on Medicare, we will also walk you through the “two paths” available, Medicare Supplements and Medicare Advantage plans, to see what the right fit would be for you.

Medicare versus employer-sponsored health coverage is just one of the topics we cover. Our goal is to help any Medicare age individual comb through the confusion, stress and worry step by step and assist you comfortably and accurately in finding the right Medicare health plan that meets your needs. We do this by offering individual meetings and by holding informational seminars to provide more in-depth details about Medicare and things you need to consider. Click the link below for information on our upcoming seminars. Or, simply contact us. We’ll be happy to sit down and talk through your options.