Planning For Medicare While Still Working Full-Time

By CalBroker Mag

When an employee reaches 65, they become eligible for Medicare coverage. Medicare-eligible employees who work full-time may opt to continue with their current employer's healthcare plan. However, an employer’s health insurance may not cover certain medical service costs if the employee or their spouse can use Medicare benefits instead. As their trusted insurance advisor, you can guide your clients in planning for Medicare while still working full-time to avoid unnecessary complications such as coverage gaps and enrollment penalties.

Employer Coverage Issues for Employees With Medicare Eligibility

Employees approaching age 65 who plan to continue working full-time should consider planning their health coverage in advance to avoid complications. If they wait until they become Medicare-eligible, they may face the following problems:

Refusal of Coverage

Insurance companies sometimes refuse to pay for services covered by Medicare if they know the patient is eligible for it. They may also reduce the amount they are willing to pay for covered services. This can occur even if the patient has not formally applied for or received Medicare.

Plan B Late Enrollment Penalty

Individuals eligible for Medicare may face late penalties if they fail to enroll during the appropriate period. Typically, Medicare charges a penalty of 10% of the premium for each year the employee could have been on Medicare but did not sign up.

Coordination with employer coverage is crucial when planning for Medicare.

This penalty does not typically apply if the employee has health insurance coverage when eligible. However, if the employer coverage is limited, reduced, or eliminated because the employee is Medicare-eligible, they could also face the late enrollment penalty.

Coverage Gaps

If a full-time employee becomes eligible for Medicare but doesn't plan for potential coverage loss, they could face coverage gaps. For example, their employer's health insurance policy may automatically reduce or eliminate coverage once they become eligible for Medicare. If the employee fails to enroll in Medicare coverage within the appropriate enrollment period, they may remain without health coverage until the next enrollment period.

Understanding Medicare Enrollment Periods

Medicare is divided into four categories with different types of coverage and enrollment requirements:

• Part A, for hospital coverage

• Part B, for healthcare coverage

• Part C, for private Medicare Advantage Plans

• Part D, for prescription coverage

Medicare Part A allows employees to sign up as soon as they meet eligibility requirements and may cover them retroactively. On the other hand, Medicare Parts B, C, and D require enrollment within four months before or three months after the employee turns 65.

The enrollment periods may not apply if the employee is still enrolled in a group plan through their employer. They have the option to sign up for Medicare while they have employer coverage or 8 months after employment or coverage ends, whichever is first.

Other types of coverage that can affect Medicare enrollment periods include:

• Retiree coverage

• Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage

• Veterans Affairs (VA) coverage

• Individual health insurance

• Health Insurance Marketplace coverage

• Union coverage

• Active-duty and retired military coverage through TRICARE

• Federal or state employment coverage

• Medicaid Coverage

Planning for Medicare While Still Working Full Time

Coordination with employer coverage is crucial when planning for Medicare. Employees approaching 65 should contact their employer’s HR department or call the group insurance carrier directly to discuss their options. If they wish to continue with their current employment coverage, the employee may choose to delay their Part B enrollment without a penalty.

Medicare and Group Coverage Coordination of Benefits

Sometimes, employees maintain both Medicare and group health insurance. Medicare has established primary and secondary payer rules to determine which coverage pays first for services.

Generally, Medicare pays first when:

• The employee has retiree health coverage

• When the employee is over 65, and their group health plan is through a current employer with fewer than 20 employees

• When the employee is under 65 and has a disability, and their group insurance coverage is through a current employer with fewer than 100 employees

The employee’s group health insurance pays first if they are over 65 and their group coverage is through a current employer with 20 or more employees. Group insurance also applies before Medicare if the employee is under 65 with a disability and their group insurance is through a current employer with 100 or more employees.

Employees with TRICARE coverage, Medicaid, or endstage renal disease (ESRD) usually operate on different payment schedules.

Health Savings Accounts and Medicare

If an employee has an HSA account with their group insurance plan, they cannot continue to make contributions after their coverage becomes active. Typically, HSA contributions should be discontinued a month before the employee turns 65.

When an employee plans to sign up for Medicare six or more months after they turn 65, they should stop paying into the HSA six months before they apply for Medicare. If the employee makes contributions to their HSA after the required deadlines, they may be charged a tax penalty.

Options for Medicare-Eligible Spouses

For employed individuals whose spouses are eligible for Medicare, the same general rules apply. Spouses who are eligible for Medicare due to age or disability can opt to keep their spouse’s coverage through a current employer.

The order of coverage for employees who have both Medicare and group insurance depends on the spouse’s age or disability and the number of employees covered by the employer's group insurance plan.

Look Before You Leap Into Medicare

Medicare is an excellent resource for individuals over 65 or those with disabilities. However, employees who wish to continue full-time employment after they become eligible for Medicare may face complications. Planning for Medicare eligibility in advance can ensure full-time employees and their spouses maintain health insurance coverage without coverage gaps or penalties.

Employees should reach out to their employer’s HR department or group insurance carrier to discuss whether coverage will continue if they become eligible for Medicare. They should also explore the transition process from employer coverage to Medicare and the possibility of selecting a multi-payer option. With your expertise in insurance planning, you can help your clients effectively prepare for Medicare while they're still employed full-time.

SOURCES:

U.S. Department of Health and Human Services: "Medicare & You 2024." Medicare.gov: "Working past 65."