By Andrew Johnson and Justin Fundalinski, MBA | November 21, 2016
Recently, we had a few questions come in regarding delayed Medicare Part B enrollment. Because Medicare can be a complex topic and these questions are common, we wanted to share some of the concerns these folks had with you. What happens if you delay your enrollment into Part B of Medicare because you are still working and covered by your current employer’s health plan?
These are some of the things folks were wondering.
Special Enrollment Period
I delayed enrolling because of current employer coverage. Will I face a penalty for late enrollment when I stop working and enroll?
Functionally no. If you or a spouse are currently working and you receive your health care benefits through that employer group plan, you are eligible for a “Special Enrollment Period” (SEP) while you are working as well as an additional 8 months following the end of that coverage. This is not the case if you are relying on retiree benefits or COBRA benefits that you or a spouse earned while working but have since retired or left your job (“currently working” are the keywords).
During your SEP you can enroll into Medicare and are eligible for “Premium Surcharge Relief.” This means that enrolling during the SEP will offset your Part A and Part B late enrollment penalty by as many months as you were eligible but covered under a group plan of a current employer of any size. Essentially, you can enroll without penalty as long as there was no lapse of coverage while you were working.
We want to note that the employer can be of any size. There are differences in how Medicare interacts with employer group plans for employers of different sizes. Unfortunately, there is a lot of ambiguous, conflicting, and confusing information out there regarding the eligibility for an SEP if you are covered by a small employer group plan that pays secondary to Medicare. Having a small employer (less than 20 employees) plan does not preclude one from an SEP and the protections it provides from Medicare’s late enrollment penalty, but is does throw a substantial wrench into things.
Read the Fine Print
Does that mean that I can delay my enrollment while working without worry?
No, it means only that the late enrollment penalties, which can increase your monthly premiums for life, will not impact you if you were covered by a current employer’s group plan.
What can be much worse than a 10% premium penalty is your employer sponsored insurance denying claims because you didn’t read the fine print. Small group employers (20 or less) often require that you sign up for Medicare when eligible. This is because small employer plans often become the secondary payer to Medicare for insurance claims and they are certainly not going to step in as the primary payer because you decided not sign up for Medicare. This creates a situation where you believe you are covered for health care because you are paying premiums on the same policy you have had your entire working career, but functionally you may as well not have any insurance.
Required to Enroll?
I work for a small employer and delayed my Medicare enrollment. What should I do?
It is very important that you check with the current employer plan to see if it requires you to enroll in Medicare in conjunction with the group health plan in order for the group plan to pay on claims. If they do require you to enroll in Medicare then your best plan is to take advantage of your Special Enrollment Period for Medicare and enroll now! Fortunately, you will not be subject to premium penalties because you are in an SEP. Remember though that you are essentially not insured until your Medicare kicks on. If it is not a requirement, we suggest you request the section of your insurance contract that clearly states the exemption from becoming secondary payer, record your conversation with the representative you speak with, and enroll in Medicare anyway, just to hedge your bets.
What About Medicare Supplements?
Do I need to enroll in Medicare Supplements while I have my employer coverage?
Generally the way Medicare Supplement enrollment works is when you first enroll in Part B you receive a six month window for guaranteed enrollment into Medicare Supplemental Insurance. After that, your guaranteed issue right (which means an insurance company can’t refuse to sell you a Medigap policy) no longer exists unless you fall into a limited set of situations. Fortunately, one of the situations is that you have Original Medicare (Parts A and B) and your employer group plan that pays after Medicare (small group plans) is ending. You have 63 days after the date your coverage ends (limited exceptions apply) to enroll in a Supplemental policy. So if you sign up for Medicare under your SEP and then later lose your small group coverage due to retiring, you have a guaranteed issue right to obtain a Supplemental policy.
You might not have substantial changes in your working or home life from when you were 64 years old, but turning 65 can have invisible impacts on your health care coverage. Make sure to check any coverage you are relying on to make sure you know how Medicare eligibility can affect it. If you have a unique situation or questions that require clarification beyond these generalities, our office is here to help people make sense of situations like these, which many face heading into retirement.