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Marc A. Hebert's Money Sense: Medicare versus your employer health plan

By MARC A. HEBERT
November 24. 2017 6:51PM




You are close to age 65, still working with no plans to retire, and participating in your employer's group health plan. At this age, you also have the option to sign up for Medicare, but should you?

As a general rule, you can wait to enroll in Medicare if you have group health insurance through your employer or your spouse's employer. Whether or not you or your covered spouse are required to enroll in Medicare to retain group health insurance benefits, once eligible, depends on your employer and the size of the company.

If your employer has 20 or more employees, your employer group health plan is generally primary and your Medicare coverage is secondary. If your employer has fewer than 20 employees, your Medicare coverage is generally primary and your employer group health plan is secondary. You should verify this with your employer and the plan's benefit administrator, as exceptions can apply.

If you do end up with coverage from both your group plan and Medicare, your benefits will be paid based on "coordination of benefit" rules. The primary insurer will pay your claims first up to the policy limits and provisions. At that point, the secondary insurer will determine how much its plan will pay. Keep in mind that even with two insurers not all of your costs are necessarily covered.

As can be seen, knowing what the group plan and Medicare will potentially cover for you is important. There are a few different parts to Medicare. Part A helps to pay for inpatient hospital care, skilled nursing facilities, hospice, and home health care. This part of Medicare coverage is free for most people, thus you might want to enroll in Part A even if you have employer coverage. If you have to pay for Part A, the premium cost will need to be part of your decision process.

Medicare Part B helps pay for physician services and outpatient expenses. You will have to pay a premium for Part B. It is best to compare the costs and benefits of Medicare to your employer's plan. Depending on how your employer's plan works, waiting to enroll in Part B could make sense.

You also should be aware that late-enrollment penalties might apply if you do not enroll in Medicare when you are first eligible. However, if you are covered by a group health plan based on current employment, these penalties generally do not apply as long as you follow certain rules. You can sign up for Medicare Part A and/or Part B at any time as long as you are covered by a group health plan through your own or spouse's employment. When your group coverage ends, you have a certain time frame within which to apply for Medicare.

These are only general guidelines. Different rules and concerns can apply. For example, whether you have retiree health coverage or when you sign up for Social Security benefits can affect the result. The rules for Medicare Part D, which deal with prescription drugs, also will need to be reviewed.

If you have a high-deductible plan at work with a Health Saving Account (HSA), you will no longer be able to contribute to the HSA after enrolling in Medicare. You will need to decide if the additional hospital coverage of Part A, for example, is more valuable than the tax-advantage for HSA contributions toward future medical expenses.

These rules are complex. Costs and benefits need to be carefully reviewed. For more information, visit medicare.gov, discuss your options with your employer's plan benefit administrator, and seek out others knowledgeable in the area to review your unique situation.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at mhebert@harborgroup.com. Your question and his response might appear in a future column.


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