A 66-year old Medicare beneficiary (we’ll call her Patricia) contacted us recently with questions about how Medicare coordinates with her group coverage. When is Medicare is primary, and when is it secondary?
First of all, what is primary insurance? It’s the insurance that pays first when you have one.
Patricia told us that since she turned 65 last year, she had been working for a employer who provided group health insurance. So she decided to delay her enrollment into Medicare. Unfortunately, she wasn’t aware that the size of the employer matters, and she did not seek out an agent for guidance.
When she went in for an MRI, she was surprised and dismayed to get a notice from her employer insurance company denying payment for the procedure. Can you guess why that happened?
Because Medicare is primary to small employer coverage, and Medicare can’t pay as your primary insurance if you never enrolled in it.
What is Medicare Primary Insurance?
As we mentioned above, Medicare Primary insurance simply means that Medicare pays first and any other insurance pays secondary. The real question then is “When does Medicare become primary?”
Medicare pays first or second depending on what types of other health coverage you have. Some people have no other coverage so Medicare becomes primary by default. Other retirees might have Tricare or VA coverage or Medicare.
Then of course there is employer coverage. If you have active employer coverage, whether Medicare is primary or secondary also depends on the size of the insurance company. We’ll discuss this more below. What’s most important is that you be aware the Medicare expects you to know the rules.
Related Article: 7 Medicare Mistakes That Could Cost You
Medicare Expects YOU to Know Who is Primary
In our example above, Patricia didn’t realize that since her employer has less than 20 employees, Medicare would be her primary coverage. By failing to enroll in Medicare, she was now responsible for paying for the cost of that MRI.
Had she properly enrolled in Medicare last year, Medicare would have paid 80% after her small Part B deductible. Then her group insurance would pay secondary. Instead, Patricia found herself stuck with the whole bill.
Telling Medicare she didn’t know the rules didn’t help her either. In their eyes, they send you a handbook at age 65 and they expect you to do your research from there on out.
Patricia had also now missed her initial election window and will owe a Part B penalty when she finally enrolls. She has to wait until the next General Enrollment Period in January to do so. That’s for another post though. For this post, let’s dive into how Medicare coordinates with other coverage so that you won’t end up in a similar dilemma as Patricia.
To Enroll or Not to Enroll?
First and foremost, not everyone needs to enroll in Medicare right when they turn 65. Many people continue to work past age 65 and have access to employer coverage through their job or a spouse’s employer. These individuals may or may not need to enroll in Medicare at 65. It depends on the size of the employer and whether the coverage is active or retiree coverage.
My team has advised thousands of New to Medicare beneficiaries over the last 10+ years. Here I’ll share some of the most common situations where Medicare is primary and secondary.
Related Article: Medicare and Employer Coverage
When Medicare is Primary
Primary insurance means that it pays first for any healthcare services you receive. In most cases, the secondary insurance won’t pay unless the primary insurance has first paid its share. There are a number of situations when Medicare is primary. Learning about them ahead of time will help you avoid costly enrollment deadlines.
You are 65 or Older and Your Employer is a Small Business
Medicare is primary when your employer has less than 20 employees. Medicare will pay first and then your group insurance will pay second. If this is your situation, it’s important to enroll in both parts of Original Medicare when you are first eligible for coverage at age 65. This rule applies for spouses on the same coverage as well.
Group health coverage at a small company is often very expensive. It’s not uncommon for us to run across people paying $600 or more for their coverage. Sometimes they pay and twice that if they are carrying a spouse.
If you are in this situation, be sure to get quotes for whether Medicare as primary insurance would be cheaper than your group coverage. We’ve found that we can often reduce our client’s monthly premiums and also lower deductible expenses by transitioning to Medicare as primary.
Read more about Medicare and Small Group coordination of benefits here.
You Have Retiree Coverage or COBRA
Sometimes a former employer provides group health insurance coverage for you AFTER you are no longer working. This is called retiree coverage. Medicare is primary and your providers must submit claims to Medicare first. Your retiree coverage through your employer will pay secondary.
Often your retiree coverage will provide prescription drug benefits, so you may not need to purchase Part D. Ask your former employer for a Summary of Benefits for your group plan. This document will usually have a clear explanation of the benefits you can expect to be paid after Medicare pays first.
Similarly, Medicare will pay primary to COBRA so it’s important to enroll in Parts A and B. In fact, you must enroll in Part B within the first 8 months of COBRA. Otherwise, you will a face a late enrollment penalty. You may also be subject to a waiting period before you can enroll in Part B during the next General Election Period.
You are on SSDI under Age 65 at a Medium-Sized Employer
Some people qualify for Medicare early due to a disability. In this situation, if you have group coverage through an employer with less than 100 employees, Medicare is primary.
When you reach your 24th month of SSDI benefits, Medicare will automatically enroll you in Parts A and B. Be sure to notify your employer of your Medicare coverage.
You Have End Stage Renal Disease
People with End-Stage Renal Disease (ESRD) will automatically transition to Medicare as primary after the 30th month. Your employer insurance from any current job is primary for the first 30 months. This applies to current employer coverage as well as retiree insurance and COBRA. Medicare will pay secondary in all of these situations if you have ESRD.
Please note that Medicare obtained due to ESRD could end after you’ve received a successful kidney transplant. You would then re-enroll when you turn 65. Typically Medicare due to ESRD will end 36 months after you’ve had your kidney transplant unless you also qualify for Medicare due to age or other disability.
You Have Tricare-for-Life
Tricare-for-Life (TFL) is for military retirees and their spouses who are also eligible for Medicare. In this scenario, Medicare is the primary insurance for any care you receive at non-military providers, so you need to enroll in both Part A and B. Since TFL provides drug coverage, though, you don’t need to enroll in Part D. The drug coverage under Tricare is good and additional Part D coverage is generally not necessary.
People with Tricare sometimes also choose Medicare Advantage plans. Some Advantage plans include routine dental or vision benefits, and this may appeal to members with Tricare.
Tricare for life will help to pick up some of the copays associated with Medicare Advantage. You can read more about Tricare and Medicare Advantage here.
You have Medicaid
Medicaid is assistance with healthcare costs for people with low incomes. Medicaid never pays first. It will only pay after Medicare and or employer group health coverage has first paid. Not all Medicare providers accept Medicaid though. It’s important that you ask providers if they participate in Medicaid before seeking care. Otherwise, you may be responsible for the portions that Medicaid can’t cover.
People who qualify for Medicaid can get help paying for their Medicare Part B and D premiums. If your income is low and you think you might be eligible, contact your state Medicaid office for an application.
To learn more about Medicare vs Medicaid, click here.
When Medicare is Secondary
Secondary insurance pays after your primary insurance. It serves to pick up costs that the primary coverage didn’t cover. For example, if your primary insurance has a $1000 deductible, but your secondary insurance has a $500 deductible, your secondary would kick in to pay $500 of that $1000 bill.
This is, of course, a very simple example but in general your secondary insurance will serve to reduce the overall expenses that you have out of pocket.
You Work at a Large Employer
Medicare is secondary to your group health insurance if the company has 20 or more employees. If the group insurance is affordable, you may choose to delay your enrollment in Part B. ALWAYS speak with a licensed insurance agent who specializes in Medicare before making this decision.
It’s critical that you understand your coverage. Late enrollment into Medicare Part B can cause you to pay a penalty if certain conditions are not met. Learn more about Medicare Part B costs here.
Sometimes we find that staying your employer coverage actually costs more than if you left that coverage and let Medicare become primary. Evaluating this ahead of time will help you to evaluate which coverage is most cost effective.
You Have Filed a Workers Compensation Claim
If you have Medicare and get injured on the job, your worker’s compensation will pay first on any healthcare services you seek due to your work-related injury.
Feeling Unsure about When is Medicare Primary?
Figuring all this out is enough to give anyone a headache – we know! Fortunately Boomer Benefits has helped tens of thousands of Medicare beneficiaries with all this.
We offer free service, and we’ll help you decide your most cost effective route to getting your best coverage. Once you are enrolled in a policy through us, we also offer free help with Part D during each future Medicare Annual Election Period.
Call us today at 1-855-732-9055.