Unless a person has qualifying health insurance, they must enroll in Medicare at age 65 years. However, employer-based health insurance may offer an alternative to Medicare.
This article will discuss Medicare and enrollment in Part A and Part B. It will also look at alternatives, including employer-based health insurance, and the possibility of delaying participation in Medicare.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare is a federally regulated healthcare program in the United States. It funds medical and hospital care for older adults and people with certain disabilities.
The program has four parts:
- Part A covers hospital insurance.
- Part B is for medical insurance.
- Part C, also known as Medicare Advantage, offers an alternative to original Medicare (Part A and Part B).
- Part D covers prescription drugs.
A person is eligible to enroll in Medicare when they meet one of the following conditions:
- They are 65 years old.
- They are under 65 years old and have a disability.
- They have end stage renal disease or permanent kidney failure that needs dialysis or transplant.
- If a person has amyotrophic lateral sclerosis, they will be automatically enrolled when they start getting disability benefits.
A person must also be a U.S. citizen or permanent legal resident for 5 years continuously, or they should be eligible for Social Security benefits and have made payments for at least 10 years.
If a person gets benefits from either the Social Security Administration or Railroad Retirement Board, they will be automatically enrolled in original Medicare (parts A and B) and get a Medicare card in the mail. The card will likely arrive about 3 months before a person’s 65th birthday.
There are several Medicare enrollment periods, including the:
- initial enrollment period (IEP)
- general enrollment period
- open enrollment period
- special enrollment period (SEP)
A person can take several actions during these enrollment periods, such as enrolling for original Medicare (parts A and B), switching plans, or enrolling in new ones.
During the IEP, a person can enroll in original Medicare (parts A and B). The IEP runs from 3 months before the month of the person’s 65th birthday, includes their birthday month, and ends 3 months after it.
If a person enrolls after the IEP, they may incur a late enrollment penalty fee.
If a person or their spouse has qualifying group health coverage through an employer, they can delay enrolling in Medicare.
However, some employees choose to enroll in Medicare Part A and delay enrolling in Part B (medical insurance) and Part D (prescription drug coverage). In general, a person does not pay a premium for Part A.
The decision to combine Medicare coverage with employer-based insurance depends on several factors, including:
- the reason the employee is eligible for Medicare
- if the employee or their spouse (or family member, if they have a disability) is still working
- if the employee has a group health plan through their employer
Primary and secondary employer-based insurance
A person’s job-based insurance may allow them to delay Medicare enrollment, depending on whether the employer’s insurance pays primary or secondary.
The primary payer pays first for healthcare up to the plan limits. Any outstanding amount will go to the secondary payer.
Employer-based insurance is primary if it is provided by an employer with more than 20 employees. In that case, Medicare is considered secondary, which means that a person could delay enrollment in Part B.
Employer-based insurance is secondary if it is provided by an employer with fewer than 20 employees. In that case, the employer-based insurance may provide only minimal coverage, and a person may want to enroll in Medicare Part B to avoid high medical costs.
A person, or their spouse, can contact the company’s human resources department to find out if their employer’s insurance is primary or secondary. Also, the coordination of benefits brochure should provide additional information.
Switching from Medicare to an employer’s health plan
If a person enrolled in Medicare during their IEP, they can take one of several actions.
For example, they may drop Medicare and join their employer’s qualifying health plan, or they may choose to keep Medicare along with joining their employer’s large-group health plan. In this case, Medicare is secondary insurance.
If a person intends to delay enrollment in Part B and then use a SEP to participate at a later date, they should keep a detailed record of their employer-based health coverage, as Medicare will require proof of enrollment in employer-based insurance.
Documents that may serve as proof of enrollment in an employer-based insurance plan include:
- a written notice from a person’s employer or health plan
- documents showing proof that the person paid their employer-based insurance premiums, such as pay stubs, W-2s, tax returns, or receipts for health services
- health insurance cards showing accurate coverage dates
If a person does not enroll in Medicare Part B when they are first eligible, they can do so during a SEP, depending on certain conditions. For example, a person or their spouse should currently be working and be enrolled in job-based health insurance.
Also, a person who has a disability can enroll in Part B if they, their spouse, or a family member is employed and has health coverage through their employer. In this case, the employer must have at least 100 employees.
If a person is eligible for a SEP, they can enroll in Part B with no penalty in one of two instances: at any time while the currently employed person is covered by employer-based insurance, or up to 8 months after the employer-based insurance or employment ceases — whichever occurs first.
Employer-based health insurance can provide an alternative to Medicare, though a person needs to consider if their employer-based insurance is the primary or secondary insurance.
A person can delay enrollment in Part B, but they should keep a record of their employer-based health coverage during this time.
A person who enrolls in Medicare during their IEP can choose to also enroll in their employer’s qualifying health plan.
We will update the 2021 costs as soon as possible after the Centers for Medicare and Medicaid Services (CMS) have released them.
We last updated the costs on this page on November 3, 2020.