Employer Health Coverage After Age 65: What to ask

It’s important to understand employer health coverage rules as well as how they interact with Medicare, especially for employees (and maybe even more so for their spouses) who continue to work after the age of 65.

Typically, most employer plans including more than 20 employees are required to continue offering health coverage to their active employees, as well as their spouses, in the event that an employee chooses to continue working once they turn 65. The employee usually has the option to get Medicare in this case, and it can either be used in conjunction with the employer plan, or it can replace it.

On the other hand, smaller employer plans (fewer than 20 employees) generally requires active workers to get Medicare at the age of 65. Once this happens then the employer plan can then be moved from primary to a secondary insurer, leaving Medicare as the primary.

Once moved to secondary insurance, the employer plan offers the kind of supplemental coverage that those with original Medicare expect Medigap plans to provide. If an employee at a larger employer plan opts to keep this plan as well as get Medicare, then Medicare can still provide secondary coverage to help with payment of large deductibles, which are usually required by most employer plans.

It is essential to understand “how” and “if” employer plans offer continued coverage of things like prescriptions as well as if a Medicare Part D plan is required.

Many questions may arise from a lack of employer-plan knowledge. It should be easy to find answers to questions like these through an employer’s benefits department or even by the health insurer that oversees the employer plan.

In many cases, employees fail to get useful information from their employer plans or fail to seek help from their employer plans altogether, without even thinking to inquire to potential interactions with Medicare.

One example that demonstrates what happens when there is a miscommunication between employers and their employer insurance plan is a story from a woman in Oklahoma named Cathy.

Her husband is still working at full retirement age and his covered by a Federal Employee Health Benefits (FEHB) plan through his employment at the Post Office. She is covered by his health plan, is not currently working, and will turn 65 this summer. She expected that at his retirement they would keep his current insurance which they thought would function as their Medicare supplement along with Part A of Medicare.

She had been told by many insurance agents that offered Medigap supplement plans that keeping his FEHB plan would be more expensive than to purchase a plan from an external, commercial insurer. She and her husband believed that between Medicare Part A and their postal plan that they would owe nothing out of pocket (besides a deductible and the current insurance premiums) for his upcoming outpatient procedure and the hysterectomy she waited to schedule until after she turned 65.

Unfortunately, it turns out that as long as her husband is still working, then his postal insurance must remain as the primary insurance for both of them regardless of the fact that he has Medicare Part A and she is currently applying for it. She was also told that Part A only covers inpatient care (only if the patient is hospitalized for at least 48 hours) and does not cover hospital expenses for outpatient procedures. They always thought to turn “Medicare age” meant paying nothing out of pocket for health care except for Medicare deductibles plus the premium for his postal insurance.

At this point, Cathy wondered if it would be beneficial to shop for a Medigap plan and then as soon as she has her Part A coverage walk away from the postal insurance coverage as well as its high premiums. However, with the legislative uproar against entitlement programs like Medicare and Social Security, there is the valid concern that despite the higher costs it may be better to keep the FEHB coverage because once discontinued there is the requirement of continuous five-year coverage before it can be picked up again.

For the most part, Cathy’s understanding of Part A is typically correct. Under Part B of Medicare outpatient medical expenses are covered. Whether a hospital stay is covered under Part A or B is not reliant on the duration of the stay. It depends on how the hospital admits someone, as inpatient or outpatient, for an observation stay. The Medicare coverage is different regardless of whether inpatient or outpatient care is identical or not.

Supplemental Medicare insurance may not be the way to go though. In order to get a Medigap plan, one must first get original Medicare. This means that if Cathy’s husband lets go of his FEHB plan he would still be required to pay monthly premiums for Part B on top of any premiums for Medigap as well as premiums for a Part D prescription drug program.

Cathy needs to find out what her husband’s FEHB plan doesn’t cover so she can make an educated decision on whether Medicare is the best choice. Generally, this would be in addition to the FEHB plan. While many federal retirees choose to rely on just FEHB coverage, some have opted to add Medicare. Ditching FEHB coverage usually isn’t the wisest choice.

Overall, the most important thing is that people must find the information they need regarding the specifics of what is covered by employer plans versus Medicare coverage. From there they can make decisions based on that information when it comes to the best course of action as they approach the age of 65. While it could be overwhelming and may be difficult to extract details from employer insurers, the frustration in that experience is usually much better (and can save a lot of money down the road) if it happens before getting trapped in expensive health-insurance mistakes.

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