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Employer coverage feels like the safe choice, and for some people it is — but the only way to know is to compare the actual numbers. This calculator does that with your plan’s real figures, including spouse coverage, HSA contributions, the Part B income surcharge and your freedom to choose doctors. You get a written breakdown you can keep.
- Built for people turning 65 who are still working
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Retiring right requires a lot of planning. Health insurance coverage is one of the critical decisions that must be made as we approach retirement.
Considering that full Social Security benefits are not paid until age 66 to 67 (depending on when you were born), many people continue to work past age 65. In fact, about half the US population work past age 65. In doing so, they are faced with an important decision; keep their employer coverage or switch to Medicare coverage at age 65? To make a good decision, one must first compare the cost and benefits of Medicare vs. employer insurance. That is what this article will help you do.
Of course, most a very comfortable with their employer health benefits and have no idea that Medicare can be a lower cost and better insurance coverage than employer health plans.
This article, and the accompanying calculator will help you determine which is a better value for you, your employer health benefits or Medicare.
Short Summary
Evaluate Medicare vs. employer insurance based on premiums, deductibles, copays, network restrictions & benefits.
Understand the 3 types of Medicare coverage: Original Medicare plus supplemental coverage , Medicare Advantage Plans and Part D Prescription Drug Coverage.
Consider factors such as cost of spousal coverage, prescription drug costs, HSA plans, networks and possible changes in coverage over time.
Medicare Coverage Breakdown
Medicare is a government health care program that provides health coverage to people age 65 or older, as well as younger people with disabilities, end-stage renal disease (ESRD), or Lou Gehrig’s disease (ALS). Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), a government agency.
Medicare includes Part A hospital insurance, which covers inpatient services. Medicare Part B covers doctor visits and other outpatient services. Both Medicare Part A and Part B combined is referred to as Original Medicare.
Medicare Part D is for prescription drugs you may pick up at a pharmacy or via mail order.
For most of us, Medicare Part A is premium free because it was paid for by Medicare taxes deducted from payroll. If you or your spouse paid Medicare taxes for at least ten years, your Medicare Part A hospital insurance is paid for.
To be eligible for Medicare, you must be 65 or older and a U.S. citizen or permanent resident for at least five years in order to qualify for Medicare coverage. Or, under 65 and on Social Security Disability Income for 24 consecutive months.
That’s the high level view of Medicare, but we have plenty of articles you can explore that answer any Medicare questions you have in more depth. For instance, if you want to know more about Medicare Part A and Part B coverage or the costs associated with Medicare.
Medicare Advantage Plans
A Medicare Advantage Plan will replace your Original Medicare with similar insurance coverage managed by a private insurance company. When you have an advantage plan, you must still pay your Part B premium, but all coverage decisions are made by the for-profit insurance company managing your plan.
A few highlights of Medicare Advantage Plan feature include:
All costs and benefits can change annually. Just like your group health plan, long-term planning is made more difficult because of the annual change in benefits and costs.
You are limited to a network of doctors and hospitals. The medical provider must have a contract with your specific plan in order to provide in-network services.
Your medical provider must seek prior authorization from the insurance company prior to providing non-urgent services or procedures.
The Advantage plan is required to offer coverage in all the same benefit categories as Original Medicare, but not the same benefits. Advantage plans do not have the exact same benefits as Original Medicare.
Some Employer Sponsored Insurance Plans for retirees are actually Medicare Advantage Plans retiree insurance. If your employer group health plan coverage requires you purchase Medicare Part B, then your plan is likely an Advantage plan.
Most Advantage Plans come with bundled Part D coverage that is not included in your maximum out of pocket limit.
Prescription Drug Coverage
Medicare’s Part D prescription drug coverage is designed for those prescriptions you would pick up at a pharmacy or mail order and self administer.
Medicare Part B also includes drug coverage for prescriptions administered by a medical professional in a medical setting. Also, Part A includes drug coverage for all medications administered while an inpatient in a medical facility.
Delaying Medicare With Creditable Coverage
If you are 65 or older, actively working and your employer has at least 20 employees, your employer sponsored insurance is considered creditable coverage by Medicare.
If you are under 65 and actively working and qualify for Medicare through disability, your employer must have at least 100 employees to be considered creditable.
What is Creditable Coverage for Medicare?
Creditable coverage for Medicare is simply health insurance that Medicare deems roughly equal in benefits to Original Medicare (both Medicare Part A and Part B) or Part D. When you have creditable coverage, you can delay your enrollment in Medicare indefinitely without a late enrollment penalty.
If you are outside of your Initial Enrollment Period and used creditable coverage to delay enrolling in Medicare, you can create your own Special Enrollment Period to enroll in Medicare without a late enrollment penalty. When you are ready to enroll in Medicare, simply have your employer complete and sign form CMS-L564 attesting to the fact that you had creditable coverage since turning 65 and are not subject to a penalty. This way Medicare will not impose a late enrollment penalty.
When you are ready to sign up for Medicare, enroll in Medicare Part B (and Part A if not already enrolled) through the Social Security website. Make certain you cancel your employer’s health plan so your employer coverage ends as your Medicare and supplement starts.
Choosing a Medigap Policy
You will want to understand the benefits and cost of the different Medicare supplement plans available to you before making a decision between your employer’s group health coverage and Medicare. We strongly advise a person first research their Medicare supplemental coverage options. Only if Medicare supplement plans (aka Medigap plans) cannot fit into your budget should you then research your Medicare Advantage plan choices.
Benefits of Medigap Plans
Medicare supplement plans allow you to keep the most important benefits of Original Medicare, the benefits you lose when you convert your Original Medicare health coverage to an Advantage Plan.
These benefits are:
You can see any doctor or visit any hospital in the U.S. or U.S. territory who accepts Original Medicare. You have no network limitations. This means that if there is a doctor half way across the country who specializes in curing your ailment, you can see them. Medicare and your supplement will pay the medical bills as promised.
In addition, there is no insurance company between you and your medical decisions. Your doctors are not required to get prior authorization. No insurance company can delay or deny your coverage. Your healthcare decisions are between you and your doctor.
Choosing An Independent Medicare Insurance Broker
An insurance agent or agency that specializes in Medicare can help you make an informed decision with confidence. Deciding between employer insurance and Medicare is not always easy.
Medicare is complicated and insurance agents are not trained on Medicare when they get their license. Don’t settle on a local life insurance agent who also sells Medicare. What they don’t know can be your downfall.
Medigap Seminars Insurance Agency is one of the most successful and respected Medicare specialists in the country. We work in every state except Massachusetts’s and are always just a phone call away.
We also offer Medicare Advocate services to our clients.
Frequently Asked Questions
Is it a good idea to get Medicare if you re still working at 65?
For most people, Medicare plus a supplement will offer greater insurance coverage at a lower cost than employer insurance. In fact, Original Medicare plus a supplement is considered the best medical insurance you can get in the United States. Most health care providers recommend Original Medicare over other health insurance.
How to compare Medicare drug plans?
The best way to compare Medicare Part D prescription drug plans is to use a tool like the one we provide on our Part D shopper website.
Remember, you can change Part D plans every year. Choose the lowest total cost plan for the prescriptions you are currently taking.
Is Medicare the same as work insurance?
Medicare and employer group health insurance plans are two distinct types of coverage. Those meeting the set age or disability criteria can benefit from Medicare, while work insurance is typically provided by employers for their employees. Neither replaces the other. Both remain different forms of health insurance coverage.
How do you determine what to compare between health plans?
This is a great question. Way too many people get stuck trying to run hypothetical situations in their mind to see what it will cost for this procedure or that. This approach is not necessary and counter productive.
Instead, we advise looking at what it will cost you if you had a $10,000 medical bill. That is what the above calculator accomplishes for you. In addition, look at your maximum out of pocket liability. The health insurance plan with the lowest maximum out of pocket costs, is the plan with the most coverage.
Lastly, look at the plan limitations. Is there a network? Can benefits change? Are medical expenses controlled by an insurance company?
What are the key differences between Medicare and employer health insurance?
Original Medicare plus a supplement offers Medicare beneficiaries insurance coverage with benefits that never change. That makes planning for retirement easier.