Medicare eligibility can be liberating for many struggling with today’s health care costs. However, having an employer health plan can make Medicare decisions complicated. When choosing between Medicare and your employer’s health plan, understand your options and the costs involved.
Do You Have to Apply for Medicare if You Have Employer Health Coverage?
Whether you have to apply for Medicare depends on the size of your employer, the status of your employment, and your Medicare eligibility.
| Employer Health Coverage vs. Medicare Eligibility | |
| Company size | Medicare considers companies with 20 or fewer employees to be small, and those with over 20 employees are considered large. Small companies may make Medicare mandatory when you become eligible. Large companies cannot establish this requirement since they are the primary payers, while small companies pay secondary to Medicare. Read the Medicare pamphlet Your Guide to Who Pays First for more info. |
| Employment status | For Medicare to consider a health plan creditable coverage, the benefits must be as good as Medicare’s. The covered employee must be currently working, and retirement and COBRA coverages are not considered creditable by Original Medicare regulations. If you do not enroll in Medicare when you first become eligible, and you lack creditable employer health coverage, you may begin to accrue late Medicare enrollment penalties and have enrollment delays. |
| Medicare eligibility | One requirement is the number of quarters you or your spouse have worked. If either of you have worked and paid taxes for 40 quarters or more during your lifetime, Medicare Part A is premium-free, and you should be enrolled when first eligible. Be careful enrolling in any part of Medicare if you or your employer will continue funding a Health Savings Account (HSA) on your behalf, as there may be tax consequences.
Part B has a monthly premium of $170.10 in 2022 and escalates as your yearly income passes predetermined thresholds. If you have creditable employer coverage, you will be eligible for a Special Enrollment Period (SEP) once your group coverage terminates. However, enrollment in Part B may still be advantageous. |
For more information, read When Do I Have To Apply For Medicare If I’m Still Working?
What Are My Options if I Keep My Employer Health Coverage?
When becoming eligible for Medicare, compare your coverage choices before enrolling in or deferring Part A and/or Part B. There are several options you can consider:
- Keeping employer-sponsored coverage as this may be the best option financially and coverage-wise.
- Enrolling in Original Medicare and maintaining employer coverage, which may be retained even if you decide to enroll in Medicare.
- Enrolling in Original Medicare without an employer plan.
- Enrolling in a Medicare Advantage (MA) Plan, which may only be done after signing up for Original Medicare.
Is Medicare Cheaper Than Employer Coverage?
Whether Medicare is cheaper than employer coverage can only be answered by conducting a thorough comparison of the costs and coverages offered by both types of insurance. It is always wise to contact the benefits department managing your employee coverage to discuss the ramifications of dis-enrollment. Consider the following:
| Coverage | Monthly Costs | Occasional Costs |
| Employer plan |
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| Original Medicare and employer plan |
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| Original Medicare without employer plan |
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| Enroll in a MA plan with or without employer plan |
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For more information, read Will My Secondary Insurance Pay For My Medicare Deductible And/Or Coinsurance?
What Should You Consider Before Keeping an Employer Plan?
Before you choose to keep an employer plan, compare your coverage options and costs. Visit with the benefits department for your employee plan and research your Medicare options. As you compare, consider these questions:
- How much will you pay in monthly premiums for each plan?
- How much will you pay for deductibles, copays, and coinsurance for both medical and pharmaceutical services?
- Are your current doctors, prescriptions, labs, and hospitals covered?
- Do the plans cover potential future needs such as out-of-network hospitals, cancer treatment centers, and specialists?
What Should You Consider Before Enrolling in Medicare?
Before dropping employer coverage to enroll in Medicare, consider all the options that are or will become available once Medicare is elected. Remember the limitations of Original Medicare and the options available through MA and Medicare Supplement Plans. Consider these questions:
- How much will you pay in monthly premiums for each plan?
- How much will you pay for deductibles, copays, and coinsurance for both medical and pharmaceutical services?
- Are your current doctors, prescriptions, labs, and hospitals covered?
- Do the plans cover potential future needs such as out-of-network hospitals, cancer treatment centers, and specialists?
- What will you pay for dental, vision, and other benefits not covered by Original Medicare?
- Employer plans may have separate coverage for medical and drugs from that of dental and vision coverage. Check with the benefits department to see if you can keep one without the other.
- MA Plans may offer vision, dental, and hearing coverage.
- Will you be able to re-enroll once you drop out of your employer plan?
- Can your underage dependents remain insured?
Learn More From Our Sources
- HHS.gov | Who is eligible for Medicare | Last accessed April 2024
- Medicare.gov | Medicare & Other Health Benefits: Your Guide to Who Pays First | Last accessed April 2024
- Medicare.gov | Part B costs | Last accessed April 2024