Many employers, employee organizations, and unions offer group health plan coverage to current employees and/or retirees. In general, a group health plan provides health coverage to employees and their families. This coverage may be based on active employment, retirement, or continuation status (due to loss of coverage). The type of coverage an individual has can have an impact on Medicare coordination of benefits.
Active Employer Group Health Plan (EGHP)
An individual who currently has health coverage based on active employment (their own or spouse’s) and becomes entitled to Medicare has several options to consider. Federal law determines when Medicare is the primary payer (the insurance that pays first) and when it is the secondary payer.
If a beneficiary is 65 or older, covered by an active EGHP, and the employer has 20 or more employees, then the EGHP is the primary payer. For beneficiaries under age 65, covered by an active EGHP, and the employer has 100 or more employees, the EGHP is the primary payer. In these situations, the beneficiary can decide if they want to enroll in Medicare Part B when first eligible or use the Special Enrollment Period to enroll in Part B at a later date. However, if the EGHP is smaller than the above sizes, an individual wants to enroll in Medicare, as the employer coverage would be the secondary payer.
Health Savings Account (HSA)
An individual enrolled in a High Deductible Health Plan (HDHP) may also be making contributions to a Health Savings Account (HSA). An individual typically cannot contribute to an HSA once Medicare Part A and/or B coverage begins. Funds that are already in the HSA can be used, after enrollment in Medicare, to help pay for deductibles, premiums, copayments, or coinsurance. If a contribution is made to the HSA after Medicare coverage starts, a tax penalty may apply.
If an individual chooses to delay Medicare enrollment because they are still working and want to continue contributing to their HSA, they typically must also wait to collect Social Security retirement benefits. This is because most individuals who are collecting Social Security benefits when they become eligible for Medicare are automatically enrolled in Medicare Part A.
Retiree Group Health Plan (RGHP)
Some employers offer former employees the option to continue their health care coverage after retirement. Check with your employer to determine if this is an option to consider. Because this coverage is not from active work, for Medicare-eligible employees, Medicare will typically be the primary payer.
Contact the employer’s RGHP administrator to understand how the RGHP coordinates with Medicare as well as obtaining information on premiums, coinsurance/copays, maximum out-of-pocket costs, and any other limitations on coverage. If this coverage includes creditable prescription coverage, then the beneficiary may not need to enroll in a Medicare Prescription (Part D) Drug plan to avoid future penalties. Understanding this coverage will allow for a better comparison with the alternative options a beneficiary has when becoming Medicare eligible.
Continuation Insurance
COBRA is federal law that allows workers and their families to continue receiving employer-provided group health insurance coverage (usually at their own expense) that they would otherwise lose due to a job loss, a reduction in work hours, death, divorce, or other qualifying life event. COBRA applies to most employers with 20 or more employees. The employer may require individuals who elect continuation coverage to pay the full cost of the coverage.
The duration of COBRA continuation coverage depends on the qualifying event and can range from 18-36 months. The group health plan may terminate continuation coverage earlier for a variety of reasons, such as non-payment of premium, the employer ceases to maintain any group health plan, or a qualified beneficiary, after electing continuation coverage, begins coverage under another group health plan or becomes entitled to Medicare benefits.
Wisconsin also has continuation rights that give certain individuals, who would otherwise lose their employer group health insurance coverage, the right to continue their coverage for a period of time. This law applies to group policies issued to employers of any size. When both the Federal Law (COBRA) and Wisconsin’s continuation law apply to the group coverage and where the laws differ, the law most favorable to the insured will typically apply.
Wisconsin’s continuation law applies to most group health insurance policies providing hospital or medical coverage. Dental, vision, and prescription drug benefits are not required to be provided if offered as separate policies. Employees who live outside of the state of Wisconsin during employment with an employer located within Wisconsin would be eligible for continuation coverage.
State law allows the beneficiary the right to continue group coverage when becoming eligible for Medicare as long as the coverage does not duplicate benefits paid by Medicare.
Resources
How Medicare Works with Other Insurance (External PDF)A PDF from the Centers for Medicare and Medicaid Services (CMS) that summarizes how Medicare works with other insurance such as employer or retiree coverage.