When you have Medicare and another source of health care insurance coverage, you may at some point wonder, “Who pays first?” If you are like me, my first thought goes to the classic Abbott and Costello comedy routine, “Who’s on first?” and that is a much funnier topic. But with Medicare and other coverage, such as that offered by your employer, knowing which coverage is considered primary (and which then is secondary) can help to fully understand your covered insurance claims.
Point 1: The difference between primary and secondary insurance
When you have Medicare and another type of insurance, Medicare will either pay primary or secondary for your medical costs. Primary insurance pays first for your medical bills. Secondary insurance pays after your primary insurance. Usually, secondary insurance pays some or all the costs left after your primary insurance pays. For example, secondary insurance may help you pay for the copays you owe after your primary insurance pays.
Point 2: How Medicare works with employer-sponsored coverage
Employer-sponsored (or job-based) health care insurance is coverage you have from your, your spouse’s, and sometimes your family member’s current work. This does not include retiree insurance, which is coverage you have from a former employer.
If you are eligible for Medicare because you are age 65 or older—employer-sponsored health care insurance is primary if it is from an employer with 20 or more employees. Medicare is then secondary. Employer-sponsored insurance is secondary if offered by an employer with fewer than 20 employees. In this case, Medicare is primary.
These rules are different if you are eligible for Medicare due to disability —in this situation, employer-sponsored health insurance is primary if offered by an employer with 100 or more employees. Medicare is then secondary. Employer-sponsored insurance is secondary if offered as an employee benefit if offered by an employer with fewer than 100 employees. Medicare is then primary.
If your employer-sponsored insurance is primary, you may decide to delay Medicare enrollment. In this case, you already have primary coverage. You may choose to enroll into premium-free Medicare Part A (to help cover any in-patient hospitalization costs). If your primary insurance coverage is meeting all your health care needs, the additional monthly Part B premium may be an unnecessary additional expense. If your employer-sponsored insurance is secondary, you should enroll in Medicare Part B when first eligible. In this case, your employer-sponsored coverage may provide little or no coverage if you are not enrolled in Part B. Not having Part B would leave you with high costs for your outpatient health care.
If you are covered by health care insurance from your or your spouse’s current work, you are eligible for a Special Enrollment Period (SEP) to enroll in Medicare Part B. You may use the SEP while you are covered by employer-sponsored insurance and up to eight months after leaving this employment. Remember, this SEP does not apply to retiree coverage – only insurance you have or had from this most recent active employment.
Point 3: How Medicare works with retiree coverage and/or COBRA insurance
Retiree health care insurance is coverage an employer may provide as a benefit to former employees. Retiree coverage almost always pays secondary to Medicare. This means you need to enroll in Medicare to be fully covered for your health care needs.
COBRA is the acronym for a federal law passed in 1986 that extends the option to purchase coverage to employees and their spouses or dependents once the employee leaves the job or loses coverage for other reasons. This form of employer-sponsored insurance coverage was created by the Consolidated Omnibus Budget Reconciliation Act (COBRA). If you have COBRA coverage when you become Medicare-eligible, COBRA coverage usually ends the day you get Medicare. You should enroll in Part B right away. First, because COBRA is secondary to Medicare. Second, because you do not get a Part B SEP when COBRA ends. If you have Medicare Part A or Part B when you become eligible for COBRA, you must be allowed to enroll in COBRA.
You are not eligible for a Part B SEP while (or after) you are covered by retiree or COBRA coverage. However, the first eight months of retiree or COBRA coverage often coincide with the eight months of the Part B SEP for your job-based insurance. These eight months extend after the end of employer-sponsored insurance coverage.
Congratulations for making it this far in this month’s article. (Figuring out whether your Medicare coverage is primary or secondary can often make your head spin.) To discuss any concern relating to your specific Medicare coverage situation, please contact the State of Alaska Medicare Information Office at 800-478-6065 or 907-269-3680; our office is also known as the State health Insurance Assistance Program (SHIP), the Senior Medicare Patrol (SMP), and the Medicare Improvements for Patients and Providers Act (MIPPA) program. If you are part of an agency or organization that assists seniors with medical resources, consider networking with the Medicare Information Office. Call us to inquire about our Ambassador program.
Sean McPhilamy is a volunteer and Certified Medicare Counselor for the Alaska Medicare Information Office.
