If you’re approaching Medicare age and you’re not quite ready to retire, you probably have a few questions about how your health coverage will work once you turn 65. Will you have to give up your employer health plan—and the income boost that comes from employer-paid insurance premiums?
There’s no one-size-fits-all answer, but this article will explain how employer group health insurance works with Medicare and health reimbursement arrangements in Texas.
Do I have to sign up for Medicare at 65 if I’m working and covered by my employer’s group plan?
The key word in this question is “working.” If you are still working and covered by your Texas employer’s plan, you may not have to enroll in Medicare when you turn 65. If you are covered by COBRA or an employer retiree plan when you turn 65, you will indeed need to sign up for Medicare.
The other consideration is the size of your employer. Federal law requires large employers (with 20 or more employees) to extend group insurance coverage to their Medicare-eligible employees. If you work for a large employer, it’s up to you whether to enroll in Medicare or continue with your employer plan. You can keep your coverage until you retire, and enroll in Medicare without late penalties once you leave your job.
If you have a high-deductible plan or your premiums are higher than you’d like, you can compare your Medicare coverage with your employer plan and decide which one makes the most sense for your financial situation. Most people do, however, enroll in premium-free Part A when they turn 65. You pay nothing for the coverage in most cases and it may help offset your out-of-pocket costs for hospital stays.
If you work for a small employer, you have to enroll in Medicare once you turn 65. Medicare becomes your primary payer at age 65 and your employer plan pays second. If you don’t enroll in Medicare, your employer plan doesn’t have to cover your medical care at all. The secondary payer—your employer plan in this case—is only obligated to cover costs after Medicare pays its share.
You may be able to postpone enrolling in a Part D plan even if you work for a small employer, however. Most plans have creditable prescription drug coverage, so you won’t pay a penalty if you delay enrollment.
Can my employer pay my Medicare premiums once I turn 65?
The simple answer is no. Your employer can’t pay Medicare directly for your coverage. This may feel a bit unfair, especially if your employer paid some or all of your health insurance premiums before you turned 65.
However, nothing about Medicare is simple. Your employer can reimburse you for your Medicare premium costs for Part B and Part D if the company has a Section 105 plan.
Internal Revenue Code Section 105 deals with tax-free disbursements for health and accident plans. Companies who set up Section 105 plans, also known as health reimbursement arrangements or HRAs, can offer employees an allowance each month to be used for individual health insurance premiums. Medicare Part B and Part D qualify for HRA disbursements. Depending on the plan, your Medigap premiums and dental insurance premiums may also qualify for reimbursement.
Employers can set up company-wide HRAs open to all employees, or they can offer an HRA to individual employees based on specific criteria. Although an employer can offer HRAs to employees age 65 and eligible for Medicare, it’s against the law for an employer to use the account as an incentive to force you to enroll in Medicare.
Should I sign up for Medicare as soon as I’m eligible?
Again, there’s no one-size-fits-all answer. If you have a spouse and dependent children covered on your employer plan, switching to Medicare will affect their coverage. Medicare is an individual plan; there are no self-and-spouse or family Medicare plans. If you drop your employer coverage to switch to Medicare, you’ll have to buy separate insurance to cover your family.
As you approach Medicare age, take time to plan out your health coverage. Consider your options carefully; if you’re used to a fairly comprehensive employer health plan with predictable out-of-pocket expenses and an annual cap on costs, you may not be comfortable with the financial exposure in Original Medicare. You can protect yourself against unexpected costs with a Texas Medigap plan, but be sure to factor in your additional premiums.
Another option is Medicare Advantage. Texas is one of the most populous states—there are over 4 million Medicare enrollees in Texas. That means you have a lot of choices when it comes to Medicare Advantage. Medicare Advantage plans are very similar to many group insurance plans: You have one monthly premium, one annual deductible, and all your benefits, including prescription drugs, go through your Medicare Advantage plan. You may even get extra benefits such as vision and dental care, gym memberships, home health, and wellness benefits with a Medicare Advantage plan.
If you need help figuring out the best path forward, get in touch with a licensed Texas Medicare plan broker. These professionals can explain your options, help you find plans in your area, and get you the coverage you need when you turn 65.