How does Medicare work with employer insurance?

You turned 65 and kept working, and now there are two cards for one person. The question is not whether you are allowed to hold both. You are. The question is which one the hospital bills first, and that answer is decided by something you may never have thought about: how many people your employer employs.

How does Medicare work with employer insurance?

You can hold both, and one of them pays first. Medicare calls the one that pays first the primary payer, and it pays up to the limits of its coverage. The other pays only what the first did not cover, and which one that is depends on your employer's size.

Medicare's description of the second position is worth reading closely. The insurance that pays second pays only if there are costs the primary insurance did not cover.

The insurance that pays second pays only if there are costs the primary insurance did not cover.

So the second payer is not a duplicate of the first. It is a payer of leftovers, and if there are no leftovers it pays nothing.

There is one instruction Medicare gives that costs nothing and prevents a lot. Tell your doctor and other health care providers if you have coverage in addition to Medicare, which helps them send your bills to the correct payer and avoid delays.

Medicare gives its own reason for that instruction: it helps providers send your bills to the correct payer and avoid delays.

One more thing sets the frame for everything below. Medicare's rules here turn on current work. Medicare states that if you or your spouse are still working when you turn 65, Medicare works a little differently, and the situation the rules describe is coverage from a job someone is still doing.

Which brings the question to the order itself.

Which one pays first?

It depends on how many people your employer employs, and on whether you are still working there. With a current employer of 20 or more, the group health plan pays first. With fewer than 20, Medicare pays first and the plan pays second.

Those two are the main answers. The remaining situations reverse the order, and each one turns on whether the job is current or finished.

Retiree coverage is the clearest reversal. Medicare states that where your group health coverage comes from your own or your spouse's former employer, Medicare pays first and the group health plan pays second. Stopping work moves Medicare to the front.

COBRA behaves the same way for a reader of this age. Medicare states that if you have Medicare because you are 65 or older, Medicare pays first.

Medicare adds a warning to that one. COBRA may only pay a small portion of your medical costs, you may have to pay most of the costs yourself, and you should contact your COBRA plan and ask what percent they pay.

Federal employment is its own case. Medicare states that Federal Employee Health Benefits Program plans pay first for current federal employees, and that those plans include creditable prescription drug coverage, so you do not need separate Medicare drug coverage.

Every one of those turns on a number or on whether the job is current, which is worth setting out in one place.

Does my employer size change the answer?

Yes, and there are two different thresholds rather than one. Twenty or more employees puts the group health plan first if you are 65 or older. If you have Medicare through a disability, the number that decides it is one hundred.

Your situation	Who pays first	The trap
Current employer with 20 or more employees, you are 65 or older	The group health plan	Medicare pays second, not instead
Current employer with fewer than 20 employees	Medicare	Without Part B, nothing pays first
Medicare through a disability, employer has 100 or more	The large group health plan	The number here is 100, not 20
Retiree coverage from a former employer	Medicare	Stopping work moves Medicare to the front

The third row has a name attached to it. Medicare states that when an employer has 100 or more employees, the health plan it offers is called a large group health plan.

Both thresholds count more widely than one company. Medicare's own wording covers an employer that is part of a multi-employer group where at least one company meets the number, so a small firm inside a larger arrangement is not automatically under the line.

The second row is the one this article was written for, and it needs its own section.

Do I need Part B if I have employer coverage?

Ask your employer, and Medicare says so plainly. If you do not sign up for Part A and Part B, your job-based insurance might not cover the costs for services you get. Whether that bites depends on which one pays first.

At a small employer, skipping Part B leaves nothing paying first. That reading is this publication's rather than a sentence Medicare prints, and two of Medicare's own facts produce it.

Medicare states that if your current employer has fewer than 20 employees, Medicare pays first and the group health plan pays second. It separately states that you should ask the employer whether you need to sign up for Part A and Part B, and that if you do not sign up, your job-based insurance might not cover the costs for services you get.

Put those together. At an employer under the threshold, the front of the queue belongs to Medicare. Declining Part B does not move the group plan forward. It empties the position the group plan is paying behind.

Both of those facts are Medicare's. Reading them together is ours.

At an employer of 20 or more the arithmetic is different, because the group health plan is already in the primary position and Medicare's rules allow a delay without a late penalty while that coverage lasts. How long that window runs, and what claims it, is covered on this publication's pages about the Special Enrollment Period and about delaying Part B while working.

Two situations sit outside the general rule. Medicare names being self-employed, and having health insurance that is not available to everyone at the company.

Its instruction in both is to ask your insurance provider whether your coverage counts as employer group health plan coverage, as defined by the IRS. If it does not, Medicare says to sign up at 65 to avoid a monthly Part B late enrollment penalty.

There is also a network trap that has nothing to do with Part B. Medicare states that if you are in an HMO plan or an employer PPO that pays first, and you get services outside the group health plan's network, it is possible that neither the plan nor Medicare will pay.

Its instruction is to call the plan before you go outside the network, to find out whether it will cover the service.

That is the reader's own coverage. The person sitting next to them has a different set of questions.

What happens to my spouse's coverage?

Medicare's rules turn on whether you or your spouse are still working, so a spouse's job can be what keeps the delay available. What the pages read for this article do not say is what happens to the spouse's own coverage when you take Medicare.

Start with what is published. Medicare states that if you or your spouse are still working you may be able to wait to sign up for Medicare without paying a late enrollment penalty, and the coverage in question can be from your job or from theirs.

Then there is a warning that names dependents directly, and it is the sharpest thing on either page about family. Medicare states that if you have employer or union coverage and you get Medicare drug coverage, you may lose your employer or union health and drug coverage for you and your dependents.

It goes further. If that happens, you may not be able to get that coverage back, and Medicare says this is true even if you get Extra Help. Its instruction is to call your benefits administrator before you make any changes.

Retiree coverage carries a related risk, and Medicare states it in the singular. Medicare states 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.

What no page read for this article states is what happens to a spouse's own coverage when the worker takes Medicare. Whether they keep it, lose it, or have to change it is not published on either source, so this article does not answer it. Qualifying for Medicare through a spouse's work record is a separate question and this publication answers it on its eligibility page.

The phrase that runs underneath the drug warnings is creditable prescription drug coverage. Medicare defines it as prescription drug coverage expected to pay, on average, at least as much as Medicare drug coverage, and it names coverage from a current or former employer or union among the things that can be creditable.

All of these rules have a collective name, and that name is the last thing to deal with.

What is the Medicare Secondary Payer rule?

The phrase does not appear on either page this article links to. Both set out the order of payment in full, so this section gives that order as the government states it, and does not put a definition behind a name the sources do not use.

Here is what the two linked pages do establish, in one place.

• The insurance that pays first pays up to the limits of its coverage, and the one that pays second pays only costs the first did not cover
• At a current employer of 20 or more, and you are 65 or older, the group health plan pays first
• At a current employer of fewer than 20, Medicare pays first
• Where Medicare comes from a disability and the employer has 100 or more, the large group health plan pays first
• With retiree coverage from a former employer, Medicare pays first
• With COBRA and Medicare at 65 or older, Medicare pays first

That set of rules is the substance of what the heading asks about, and it is stated here without a label attached to it, because attaching one would mean asserting something neither linked page says.

Medicare publishes a route for the cases this article cannot settle. If you have questions about who pays first, or if your coverage changes, call the Benefits Coordination and Recovery Center at 1-855-798-2627. TTY users can call 1-855-797-2627.

That number is the published answer for a situation that does not match any row above, and there are many such situations.

What this means for you

Two numbers decide most of this. Twenty or more employees at a current employer puts the plan first, fewer than twenty puts Medicare first. If Medicare pays first and you have no Part B, there is nothing paying first at all.

The second number applies to a different reader. If your Medicare came through a disability rather than age, the threshold is one hundred employees, and an employer under that number leaves Medicare paying first.

Stopping work reverses the order. With retiree coverage or with COBRA at 65 or older, Medicare pays first, and retiree coverage might not pay for any period when you were eligible for Medicare and did not sign up.

Before you change anything, Medicare's own instruction is to call your benefits administrator, because taking Medicare drug coverage may cost you and your dependents the employer coverage, and you may not be able to get it back.

For how long you have to sign up after the job coverage ends, read this publication's page on the Special Enrollment Period after employer coverage ends. For how the late penalty is worked out, read the page on the Part B late enrollment penalty.

FAQ

My employer has 15 people. Do I still need Part B?

Medicare does not answer that as a yes or no, and its two relevant statements point the same way. With a current employer of fewer than 20 employees, Medicare pays first and the group health plan pays second.

Separately, Medicare says to ask the employer whether you need to sign up for Part A and Part B, and that if you do not sign up, your job-based insurance might not cover the costs for services you get.

A plan in the second position pays only what the first payer did not cover, so at a small employer the question is what would be paying first. The published route for a specific situation is the Benefits Coordination and Recovery Center on 1-855-798-2627.

Why do I keep seeing 20 employees in one place and 100 in another?

Because they are two different rules for two different readers, and both are correct. The 20 employee threshold applies where you are 65 or older and covered through current employment, your own or a spouse's or a family member's. At 20 or more, the group health plan pays first.

Under 20, Medicare pays first. The 100 employee threshold applies where you have Medicare because of a disability rather than age. At 100 or more, what Medicare calls a large group health plan pays first, and under 100 Medicare pays first. Both thresholds also count a multi-employer group where at least one company meets the number.

Can I go outside my employer plan's network if Medicare is my second payer?

Medicare gives a specific warning about this and it is not the usual out-of-network cost message. If you are in an HMO plan or an employer PPO that pays first, and you get services outside the group health plan's network, it is possible that neither the plan nor Medicare will pay.

Not that you pay more. That neither one pays. Medicare's instruction is to call your plan before you go outside the network to find out whether it will cover the service. This sits alongside a separate point, that if the group health plan did not pay your entire bill your provider should send it to Medicare for secondary payment.

I retired last year. Does my retiree plan still pay first?

No. Medicare states that where your group health coverage comes from your own or your spouse's former employer, Medicare pays first and the group health plan pays second. Stopping work moves Medicare to the front of the queue, which is the reverse of the arrangement while you were working at a larger employer.

There is a second warning attached. Retiree coverage might not pay your medical costs during any period when you were eligible for Medicare but did not sign up for it, and you may need both Part A and Part B to get full benefits from the retiree plan.

Medicare's instruction is to ask your benefits administrator how the retiree plan works with Medicare.

Will taking Medicare drug coverage affect my family's insurance?

It can, and Medicare states it in unusually direct terms. If you have employer or union coverage and you get Medicare drug coverage, you may lose your employer or union health and drug coverage, for you and for your dependents.

If that happens, you may not be able to get the employer or union coverage back, and Medicare says this holds even if you get Extra Help. Its instruction is to call your benefits administrator before you make any changes or sign up for Medicare drug coverage.

What neither page read for this article states is what happens to a spouse's own separate coverage when the worker takes Medicare, so that question is not answered here.

When will my Part B actually start once I sign up?

Medicare states that your coverage will start the month after Social Security, or the Railroad Retirement Board, processes your completed form. It gives one piece of timing guidance around that. If your employer coverage is ending, check when the current coverage ends and sign up for Medicare about a month earlier, which can help you avoid a gap in coverage.

Medicare does not publish how long the processing itself takes, and no page read for this article states a processing time, so none is given here. How long you have to sign up after job coverage ends is covered on this publication's page about the Special Enrollment Period.