Comparing Medicare and Employer Coverage
A lot of us get confused when trying to compare Medicare and Employer coverage. She wasn't the first one to get confused.
My friend almost made a huge mistake when she tried to compare Medicare and her Employer Retiree Plan. She almost wound up without insurance at all.
I get this question all the time from people who are trying to figure out whether to stay on their existing plan or sign up for Medicare. For my friend, she almost asked me too late. I'll call her Sue, but her details and name have been changed.
Secondary to Medicare
Sue delayed getting Medicare because she had excellent retiree coverage. When she compared Medicare and employer coverage, Medicare came up short to her. She used to work for a large company and the drug portion of her benefits could not be beaten. Sue was getting brand name drugs at an excellent price. I was jealous of her plan.
Over the years Sue had referred her friends and clients to me as they turned 65, but she didn't want to change her own plan because she needed to wait for her husband to turn 65 too since her retiree plan also covered him.
Her birthday passed and her cake was long gone. She hadn't signed up for Medicare yet. I had reminded her a few times, but she said she wanted to stay on her existing plan. I'm glad that I was persistent. I wanted her to be absolutely sure that she didn't need to sign up for Medicare. Anyone who knows me also knows that I can be like a pit bull and a bone when I have an idea about something.
After months passed, Sue called me the day before her ability to sign up for Medicare ended. I offered to make a three-way call so we could verify her coverage. She agreed, so we called her human resources department at her former company and spoke with them. Sue gave permission for me to speak with them, so I asked, “Is your retiree plan primary or secondary to Medicare?”
Then I held my breath because I already knew the answer.
The H.R. representative responded that it was “Secondary to Medicare”.
I carefully and slowly said… “So that means that if Sue doesn't have Medicare, then she's not covered at all, right?” and the representative confirmed that I was correct. Sue didn't have Medicare yet, and her 65th birthday was in the rear-view mirror. Even though she had compared Medicare to Employer coverage, Sue had forgotten to find out what the rules were for her retiree plan. Retiree rules and Employee rules are different.
You could hear Sue gasp on the other end of the line.
Her birthday was almost four months ago.
Sue couldn't believe it! All this time she thought she had an excellent plan! And she did have an excellent plan, but only if she had Medicare first. So right now Sue had no coverage even though she was spending over $1000 per month for it as a retiree.
After we hung up, we frantically started making plans. Sue already understood the urgency of the situation. We had calculated what her deadline was, and it was tomorrow. She had to get her application in right away.
Luckily, there was one day left. Sue canceled all of her appointments and went to the Social Security office that day. She applied for Medicare one day before the ability to apply ended.
When she got back from the Social Security office, with her confirmation of application in hand, we all breathed a sigh of relief.
What would have happened if she hadn't applied that day?
If Sue had missed the deadline, it would have been terrible for her. She would have been without insurance for a long time.
If you miss the deadline, you must wait until the Medicare General enrollment period, (GEP) which is January through March of every year. After you apply during this GEP, the insurance takes effect on July 1st.
Let's say that your deadline was April 1st and you missed it. If this happened, you could not enroll until January of the following year. But your Medicare plan wouldn't go into effect until July 1st.
If this happened in April 2017, then you'd be without insurance from April 2017 until July 1st, 2018, or 15 months.
The reason she had to apply was that she retired and had a retiree plan. If she was still working, she could have declined Medicare coverage until she retired.
One thing Sue and I didn't discuss was COBRA.
Although Sue wasn't on COBRA, it's important to understand one thing about it. I don't recommend going on COBRA after you turn 65 years old because COBRA is not creditable coverage. That means if you are on COBRA you could have the same issue as Sue.
Also, Sue wasn't on a large company employee's plan. She was on a retiree plan.
Had Sue been working for a large employer and on their medical plan, the results would have been different. If you are still working and your employer has 20 or more employees, you probably need not sign up for Part B right away because your employer's group health plan will be the primary insurer. And then when you retire, you get a special enrollment period (SEP) of eight months to sign up for Medicare Part B, without a penalty.
Most workers enroll in Medicare Part A when they are first eligible at age 65.
It's free for most people and covers institutional care in hospitals and skilled nursing facilities, certain care given by home health agencies and care provided in hospices.
Sometimes I come across a Medicare beneficiary who is paying for Part B along with an employer plan. This rarely makes financial sense unless your spouse needs coverage.
The program doesn't always fill in all the gaps between what a provider charges and what your employer pays.
If you are still working, you can usually drop your employer plan and enroll in Part B if you want to. But many times your employer plan covers medications better than Medicare does. Make sure you know the facts before dropping your employer's plan.
But if married, consider staying on your employer plan. Before deciding, compare your costs and speak to your Human Resources department about this. Verify what the rules are. Don't make the same mistake my friend did, thinking the plan is primary to Medicare when it's secondary to Medicare.
Once you have the knowledge, you need to compare Medicare and Employer coverage, or Medicare and retiree coverage, you will be better able to decide, should you go or should you stay…
Here are some questions to ask yourself and your HR department to help you compare Medicare and Employer coverage:
- Is Medicare Primary or Secondary to the employer plan?
- Important: If your plan is secondary to Medicare, you must have Medicare in order for your employer or retiree plan to work.
- Is the plan creditable (most plans over 20 employees are creditable)?
- If it's creditable, you can stay if you want to. If it's not creditable, you must sign up for Medicare.
- If you leave the plan, can your spouse stay on the plan?
- Be careful not to leave your spouse without insurance!
- If you leave your employer plan and go to Medicare instead, can you switch back later?
- This is very important. A few plans, but not many, will allow you to return to your employer retiree plan if you don't like the plan you found outside.
- Does the employer plan cover the donut hole for medications, or does it have a donut hole for people are on Medicare?
- If you are taking or might take expensive drugs at some time in the future, this is very important. Many company plans and company retirement plans do not have a donut hole. If they don't have a donut hole, it could save you a lot of money over time.
- What is the monthly premium for:
- The drug portion, if it's separate.
- Medical Portion, if it's separate.
- Any other portion, if it's separate (vision, dental, etc.)
- Can you keep a portion of the plan if you leave another portion? Example: Can you keep the drug plan portion but move your medical portion somewhere else?
- If you drop the plan, do you lose any other benefits such as Long Term Care?
- What kind of plan is it?
- HRA? Health Reimbursement Account
- If it's an HRA:
- Can you use your reimbursement with any broker or must you stay with their broker/TPA?
- For example, some plans such as ATT allow you to use your HRA amount with any broker as long as you place one portion of business with the TPA (AON). ATT retirees can purchase the drug plan via AON and their Medicare Supplement Plan with the broker of their choice. However, since the drug plan is usually part of a Medicare Advantage Plan, employees opting for Medicare Advantage must place their account through AON.
- If you don't use all the money in a calendar year does it roll over to the next year?
- Can you use your reimbursement with any broker or must you stay with their broker/TPA?
- Does the company pay your Part B deductible?
- If you go outside their broker, will the company continue to pay the Part B deductible?
- Is there an Out-of-Pocket Maximum?
- If so, what is it?
- Can you go to any doctor in the USA or is there a network?
- For example, could you go to the Cleveland Clinic, the Mayo Clinic, or MD Anderson if you wanted to?
- Do you need pre-authorization for expensive procedures or is it covered as long as your doctor orders it?
- Do you need to go through pre-authorization or step therapy for medications?
Once you have some of these answers, it should be easier for you to decide between Medicare and Employer Coverage.
If you would like us to help you with this decision, gather up as much of the information as you can by calling your HR department and asking the questions above, and then call us at 866-445-6683 or use this form to contact us.