Do I Need to Sign Up For Medicare If I Have Insurance with My Employer?
This is an important question. If you sign up for Medicare, and you didn’t need to, you end up forking over cash in premiums for insurance you don’t even need. However, if you don’t sign up for Medicare and you needed to, the results are equally frustrating: penalties or high out-of-pocket expenses that suck the life out of your nest egg.
Here is an easy-to-follow guide to help you make a decision that’s the best for you. I’ll address each part of Medicare individually to help you come to a decision for each.
For a more in-depth explanation of the parts of Medicare, click here.
Part A (A.K.A Hospital Insurance or “Inpatient Care”)
This is an easy one. You can go ahead and sign up for Part A, regardless of whether you have insurance with your employer.
Because Part A is absolutely free! If there’s no premium, why not just take the coverage? As long you or your spouse has paid into Social Security for ten years or more, there is no associated cost.
There is only one reason why you would want to delay Part A: Health Saving Account contributions. You can still withdraw from a health savings account, but you cannot continue making contributions if you are on Part A.
But other than that, this is a simple decision. More often than not, you can just go ahead and sign up.
Part B (A.K.A Medicare Insurance or “Outpatient Care”)
Part B, on the other hand, is much more complicated. But in the end, your decision will boil down to your answers to three questions:
Is my coverage through active, current employment?
The keywords there are “active” and “current.” In order to delay Part B without penalty, you or your spouse must have insurance coverage through active employment. You have to be on the floor or in the office (or at home in your PJs if you are lucky enough to have one of those jobs)! This means retiree benefits or COBRA or any other insurance that begins after you are done working do not count.
Is your employer the primary payer (as opposed to Medicare)?
You can delay Part B without penalty as long as you can answer “yes” to question #1, but unless you can answer yes to this one, you may be stuck with some hefty bills on outpatient services. If Medicare is the primary payer and you don’t have Medicare, you will have to pay 80% of your outpatient healthcare expenses.
The way to find out if your employer is the primary payer is pretty simple. If your employer’s health insurance plan covers 20 or more people, the employer pays first. If it insures less than 20 people, then Medicare pays first. Ask your employer or human resource representative for the exact number to make sure!
Is your employer plan less expensive?
None of these questions really matter if Medicare is the better value. Perhaps you can delay Part B without penalty (question 1) and without paying extra on outpatient services (question 2), but if Part B is the better value, why would you want to? That is why you must perform a cost to benefits analysis. If Medicare is the better value, then you should sign up for Part B. If it is not and you answered “yes” to the other two questions, it may be a good idea to delay.
Part D (Prescription Drug Coverage)
All that matters when it comes to deciding if you need to sign up for part D is whether or not your current drug coverage is “creditable.” In order for your drug coverage to be considered “creditable,” it must be at least as good as part D. In other words, it is expected to pay (on average) at least as much as a Medicare part D plan. To find out, ask your human resources department. When you turn 65 your employer will send you a letter telling you whether or not your coverage is creditable, but it is a good idea to find out beforehand for planning purposes.
So Let’s Recap!
- Sign up for Part A unless you want to continue HSA contributions.
- It might be a good idea to delay Part B if have insurance through current employment, your employer pays first, and your employer plan is a better value than Medicare.
- As long as your current drug plan is considered “creditable,” you can delay Medicare Part D.
Are You Still Unsure About Your Decision?
If you still have questions about how your employer plan coordinates with Medicare (or about Medicare in general), you are not alone. Many people approaching 65 find themselves overwhelmed with all of the options and information. The good news is that Seniormark is here to help, and we offer our services at no cost to you. We will guide you through the entire process, ensuring that you avoid all the costly mistakes and pitfalls. Call Seniormark at (937) 492-8800 for a free consultation.