Medicare vs Employer-Sponsored Coverage
Summary: If you’re eligible for Medicare, and you also have employer-sponsored health coverage, you might be able to keep both. But since Medicare Part B comes with a monthly premium, you might want to delay enrollment in Part B. You may want to ask your plan benefits administrator how your coverage might overlap with Medicare.
You might have health insurance through your job or your-spouse’s job. When you become eligible for Medicare, it’s important to understand how Medicare works with other insurance plans, and how it compares to your existing coverage.
Of course, not all employer-sponsored coverage is the same, so it’s important to talk to your benefits administrator before deciding which health plan is right for you.
Do I have to enroll in Medicare when I turn 65?
In some cases, you may enroll in Medicare when you turn 65 even if you still have employer-sponsored coverage. You might not have to sign up for Medicare, but it ultimately depends on your situation.
You might need to sign up for Medicare if you work for a small company with fewer than 20 employees. Once you turn 65, Medicare generally becomes the primary payer. You may still keep your employer-sponsored coverage, but it only pays after Medicare has paid its share. In this case, your employer-sponsored coverage is the secondary payer.
If you work for a large company, you may be able to postpone Medicare enrollment until after your employer-sponsored coverage ends. However, most people enroll in Part A as soon as they become eligible, since there is typically no Part A premium if you have qualifying work history.
You should contact the plan administrator of your employer-sponsored coverage to see if you need to enroll in Medicare.
What does Medicare cover?
Original Medicare (Part A and Part B) may cover medically necessary care to diagnose and treat illnesses and injuries. Part A typically covers your inpatient care in a hospital or skilled nursing facility. You pay a deductible for each benefit period. You typically pay a daily coinsurance amount for stays lasting more than 60 days.
Part B typically covers outpatient care such as doctor visits, preventive care, diagnostic tests, physical therapy, mental health treatment, and durable medical equipment such as wheelchairs and home oxygen. You pay an annual deductible and a 20% coinsurance amount in most cases.
Most people qualify for premium-free Part A, but pay a monthly premium for Part B.
Original Medicare generally doesn’t cover most prescription drugs you take at home. If you want coverage for most prescription medications, you may want to sign up for a Medicare Part D prescription drug plan. You can choose a stand-alone Part D plan to go alongside Original Medicare or a Medicare Advantage plan with Part D prescription drug coverage.
How does Medicare compare with employer-sponsored coverage?
Although all employer-sponsored plans are different, they typically cover both inpatient and outpatient care, as well as prescription drugs. The following chart shows the main differences between Original Medicare, Part A and Part B, and most employer health plans.
|Standard monthly premium||$0 for Part A*, $144.60 for Part B in 2020||Varies; your employer may pay some or all of your monthly premium|
|Deductible||$1,408 per benefit period for Part A in 2020, $198 for Part B in 2020||Varies, but there is typically only one annual deductible|
|Outpatient visits||80% of allowable charges||Varies; you may pay a flat copayment or a coinsurance amount|
|Inpatient care||100% of allowable charges for the first 60 days after you meet your deductible||Varies; you may pay a flat copayment or a coinsurance percentage|
|Prescription drugs||Minimal coverage unless you sign up for prescription drug coverage under Medicare Part D||Typically covers prescription drugs with a copayment or coinsurance amount|
|Skilled nursing home care||Up to 100 days for qualified stays; you pay $0 for first 20 days and $176 per day for days 21-100 in 2020; all costs for days 101 and beyond||Varies; many plans cover skilled nursing home care. You may pay a copayment or coinsurance amount|
*Most people don’t pay a premium for Medicare Part A. You generally don’t have to pay a premium if you’ve worked at least 10 years while paying taxes.
Will I pay a penalty if I don’t enroll in Medicare when I turn 65?
If you have employer-sponsored coverage, you can generally delay your Medicare enrollment without incurring a late enrollment penalty. Once your employer-sponsored coverage ends, you typically have a special enrollment period when you can either enroll in Original Medicare (Part A and Part B) or a Medicare Advantage plan.
If you decide to stay with Original Medicare, you can also sign up for a stand-alone Medicare Part D Prescription Drug Plan at that time. You might not face a Part D late enrollment penalty, if:
- You sign up for the prescription drug plan during a Medicare special enrollment period. You might be able to do this within two months of losing your employer-sponsored coverage.
- Your employer-sponsored coverage had creditable prescription drug coverage. If your employer-sponsored coverage did not have creditable prescription drug coverage, you may pay a penalty.
There’s generally a similar-special enrollment period for Medicare Advantage plans.
Can I buy a Medicare Supplement insurance plan if I lose employer-sponsored coverage?
If you decide to stay with Original Medicare (instead of a Medicare Advantage plan), you may generally buy a Medicare Supplement insurance plan.
There’s a Medicare Supplement Open Enrollment Period (OEP). This six-month period usually starts the month you’re enrolled in Medicare Part B, and you’re at least 65. During that time, you can generally buy any plan sold in your state and you cannot be turned down for pre-existing conditions.
If you don’t buy a Medicare Supplement insurance plan during your OEP, you may have to pass medical underwriting in order to buy a plan. If you have chronic or serious health conditions, you may not be able to buy Medicare Supplement coverage. If you think you will want a Medicare Supplement insurance plan, you may want to buy it when you are first eligible and have guaranteed-issue rights.
To look for Medicare Advantage and Medicare Supplement plans in your area, enter your zip code on this page.