Alyssa Lane
If you're retired and need health coverage, you can use the Marketplace to buy an insurance plan. You can also use your retiree coverage from a former employer, which may provide additional benefits such as extra days in the hospital. However, if you're eligible for Medicare, your retiree coverage will likely pay second to it, so it's important to enroll in Medicare to ensure full coverage. If you don't want to take your employer's coverage, you can sign up for Original Medicare or a different Medicare Advantage Plan, but you may not be able to get your retiree coverage back if you change your mind later.
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What You'll Learn
Medicare and retiree coverage
When it comes to Medicare and retiree coverage, there are a few things to keep in mind. Firstly, it's important to understand that retiree health coverage is an insurance plan that some employers, unions, and trusts may offer to retiring employees and their spouses. This coverage is typically similar to the group health insurance plans offered to active employees, but the specific benefits and rules will depend on the employer's retiree plan.
If you have retiree health coverage and become eligible for Medicare, you may need to enroll in both Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) to receive the full benefits of your retiree coverage. It's worth noting that you have a limited time to sign up for Medicare without incurring a penalty. In some cases, retiree coverage may include extra benefits, such as extended hospital stays. However, your employer or union may place limits on the coverage they provide.
It's also important to know that retiree coverage is usually secondary to Medicare, meaning it pays after Medicare has paid its portion. This means that if you have both Medicare and retiree coverage, Medicare will typically pay for your healthcare bills first, and then submit the remaining amount to your retiree plan. Retiree coverage may help cover some of the costs that Medicare doesn't, such as deductibles, copayments, and coinsurance. Additionally, retiree coverage may also provide benefits for services that Medicare doesn't cover, such as vision, dental, or prescription drugs.
If you're considering enrolling in Medicare and already have retiree coverage, it's recommended to consult with your benefits administrator to understand the specifics of your plan. You can also contact your State Health Insurance Assistance Program (SHIP) for free advice on whether to purchase a Medigap policy, which can supplement your Medicare coverage. Remember that if you choose not to take your employer's retiree coverage, you may not be able to get it back at a later date.
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Medicare Parts A and B
Medicare is federal health insurance for anyone aged 65 or older and some people under 65 with certain disabilities or conditions. It consists of several parts, with Part A and Part B making up Original Medicare.
Medicare Part A
Medicare Part A is free for most people, provided they or their spouse have worked and paid Medicare taxes for at least 10 years. It covers inpatient hospital care, skilled nursing facility care, hospice care, and some outpatient home health care. To be eligible for premium-free Part A, an individual must be entitled to receive Medicare based on their own earnings or those of a spouse, parent, or child.
Medicare Part B
Most people pay a monthly premium for Part B, the exact amount of which depends on their income level. Part B covers medical insurance.
If you have retiree health coverage, you can choose to buy an insurance plan through the Health Insurance Marketplace. Losing job-based coverage qualifies you for a Special Enrollment Period, which means you can enrol in a health plan outside of the usual yearly period (November 1 to January 15) when people can enrol in a Marketplace health insurance plan.
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Retiree coverage and out-of-pocket costs
Retiree health coverage can help cover medical expenses, but out-of-pocket costs can still be significant. A recent study found that, on average, 12% of a retiree's total income goes towards medical expenses, with 25% of their Social Security benefits covering these costs. This amounts to an average of $4,311 spent on medical expenses, with most of this money going towards Medicare premiums.
If you have retiree health coverage, you may still be able to use the Marketplace to buy an insurance plan, but you will not be eligible for premium tax credits and other savings based on your income. However, if you are eligible for but not enrolled in retiree coverage, you may qualify for premium tax credits and lower out-of-pocket costs based on your household size and income.
Additionally, when you become eligible for Medicare, you may need to enroll in both Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) to get full benefits from your retiree coverage. Medicare Part D covers prescription drugs, and there are expected limits to retiree out-of-pocket costs for prescription drugs starting in 2025. It is important to note that retiree coverage might not pay your medical costs during any period when you were eligible for Medicare but did not sign up for it.
To make the most of your retiree coverage, consider the following:
- Contact your employer's benefits administrator to understand the details of your retiree coverage, including any limitations on out-of-pocket costs.
- Review the plan's description provided by your former employer or union.
- If you choose to enroll in Medicare, consider joining a Medicare drug plan when you sign up for Medicare Part A and/or Part B. If you opt out of a Medicare drug plan, ensure you have creditable drug coverage to avoid paying a Part D late enrollment penalty.
- If you don't buy a Medigap policy within 6 months of getting Medicare Part A and Part B, you may face challenges or increased costs later on.
- Take advantage of tax-advantaged investment accounts, such as health savings accounts (HSAs), 401(k)s, traditional and Roth IRAs, to save for retirement and medical expenses.
By being proactive and informed about your retiree coverage and the associated out-of-pocket costs, you can better manage your healthcare expenses during retirement.
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Medicare and Marketplace plans
Medicare is a federal health insurance program for people aged 65 and over, as well as certain younger people with disabilities, and those with End-Stage Renal Disease (ESRD). If you have Medicare, you don't need to join the Health Insurance Marketplace. However, if you retire before the age of 65 and lose your job-based health plan, you can use the Health Insurance Marketplace to buy a plan. Losing health coverage qualifies you for a Special Enrollment Period, meaning you can enrol in a health plan outside of the yearly period when people can typically enrol in a Marketplace health insurance plan (November 1 - January 15).
If you have both Medicare and retiree coverage from a former employer, Medicare typically pays first for your healthcare bills. You may need to enrol in both Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) to get full benefits from your retiree coverage. You can also add Medicare drug coverage (Part D) or join a Medicare Advantage Plan for extra benefits like vision, hearing, and dental.
If you have a Marketplace plan and are eligible for Medicare, you can keep your Marketplace plan until your Medicare coverage begins. However, you will have to pay full price for your Marketplace plan, and your insurance company might end your Marketplace coverage. It is important to update your Marketplace application to end your Marketplace coverage when starting Medicare to avoid having to pay back some or all of the premium tax credit when filing your federal taxes.
If you have retiree coverage and want to buy a Marketplace plan, you can, but you won't be eligible for premium tax credits and other savings based on your income. If you are eligible for but not enrolled in retiree coverage, you may qualify for premium tax credits and lower out-of-pocket costs based on your household size and income.
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Medicare and retiree prescription drug coverage
If you have retiree health coverage and want to buy a separate Marketplace plan, you can. However, you cannot get premium tax credits and other savings based on your income. This is only true if you are enrolled in retiree coverage. If you are eligible for but not enrolled in retiree coverage, you may qualify for premium tax credits and lower out-of-pocket costs based on your household size and income.
You can have both Medicare and retiree coverage from a former employer. Medicare pays first for your healthcare bills, and your retiree coverage might pay for additional costs, such as extra days in the hospital. Sometimes, your employer or union may offer retiree coverage for you and/or your spouse that limits how much it will pay. For example, it might only start paying your out-of-pocket costs when they reach a maximum amount.
You can choose to join a Medicare drug plan when you sign up for Medicare Part A and/or Part B. If you choose not to join a Medicare drug plan, you’ll need to have creditable drug coverage to avoid paying a Part D late enrollment penalty. Creditable drug coverage is coverage that provides the same value as Medicare drug coverage. If you’re not sure if your retiree drug plan is considered creditable, ask your plan – they have to tell you. Your plan will also send you this information every year.
Medicare Part B (Medical Insurance) covers a limited number of outpatient prescription drugs under certain conditions. Usually, Part B covers drugs you wouldn't typically give to yourself, like those you get at a doctor's office or in a hospital outpatient setting. Part B doesn't cover "self-administered drugs" in a hospital outpatient setting. "Self-administered drugs" are drugs you'd normally take on your own. If you get non-covered prescription drugs in a hospital outpatient setting, you pay 100% of the cost of the drugs, unless you have other drug coverage. If you have other coverage, what you pay depends on whether your drug plan covers the drug and if the hospital is in your plan’s network.
Medicare Part B covers drugs used with durable medical equipment (DME) such as an infusion pump or nebulizer if the drug used with the pump is reasonable and necessary. It also covers some antigens if a doctor or other healthcare provider prepares them, and a properly instructed person (who could be you, the patient) gives them under appropriate supervision. Part B also covers HIV prevention drugs, injectable osteoporosis drugs, and erythropoiesis-stimulating agents if you have End-Stage Renal Disease (ESRD) or need this drug to treat anemia related to certain other conditions.
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Frequently asked questions
Yes, you can have both retiree insurance and Medicare at the same time. However, Medicare typically pays first, so your retiree coverage is likely to be similar to a Medicare Supplement Insurance (Medigap) policy.
If you don't sign up for Medicare when you first become eligible, you may face a penalty when you do decide to sign up. Additionally, your retiree coverage might not pay your medical costs during any period that you were eligible for Medicare but not signed up for it.
This depends on your employer. Some employers offer retiree health benefits, which you can choose to keep or drop. If you decide to drop your employer's insurance plan, you may not be able to get it back at a later date.
