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Life Health > Health Insurance > Medicare Planning

When Medicare Enrollees Return to Work: A Medicare Customer Q&A

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What You Need to Know

  • The rules for small employer plans and large employer plans are different.
  • The large-employer cutoff is low.
  • Clients who can go to work for large employers may face more complicated decisions.

All of the news about hard-to-fill job openings may tempt some of your retired clients back into the labor market.

What if a retired client is already on Medicare?

Here are some key ideas to consider when an older client is thinking about enrolling in an employer-sponsored health plan for active employees.

Question:

What happens to your Medicare coverage when you return to work after retiring?

Answer:

A client who is rejoining the workforce and has Medicare may have a choice between keeping the Medicare health care coverage or discontinuing it until the client needs to reenroll.

The most important aspect to consider is the size of the new employer.

The rules for small and large companies are different.

Small Employers

If your client’s new employer qualifies as a small company — has less than 20 workers on staff — the requirements are straightforward.

Your client will be free to explore the option of signing up for the employer-provided health plan, but your client must keep Medicare Part A hospitalization coverage and Medicare B physician and outpatient services coverage.

Medicare regulations require that anyone working for an employer with fewer than 20 employees must use Medicare as primary coverage. The company’s group health coverage will be a secondary plan.

Depending on the client’s medical needs and situation, the client may want to consider what makes for the most cost-effective option when thinking about adding the group health plan.

Health plans through smaller employers can be higher priced, and the Medicare plan coverage may already be sufficient.

Cost tends to be a leading factor for people choosing added coverage.

Large Employers

The process is a bit more complex once the client is entering the large-company tier, meaning, in this context, that the employer has 20 or more workers on staff.

If your client returns to work and is offered creditable health coverage through an employer that has more than 20 employees, the client will have to decide whether to keep the Medicare Part A and Medicare Part B coverage.

Part B coverage, for instance, comes with a premium.

And while Part A is premium-free for most beneficiaries, Part B is not required if the client is covered by an employer health plan as an actively working employee.

If the client decides to keep Medicare Part B coverage, the employer plan will be the primary payer and Medicare Part B will be the secondary payer.

A client can also choose to keep Part A and decline only Part B.

In that case, the client will get a Medicare Part B special enrollment period if and when the client decides to stop working and enroll in Medicare Part B again.

If the company’s coverage plan includes a health savings account, the client will not be allowed to make individual contributions while the client is still participating in Medicare coverage — no matter whether the coverage comes in the form of original Medicare or a Medicare Advantage plan.

Also, the client will have to drop Medicare supplement insurance, or Medigap coverage, to take advantage of a company-provided health plan.

When the client decides to stop working and return to retirement, the employer can then provide a form to submit to the Social Security Administration stating that the client had creditable coverage.

There can be some complexities for the client in choosing to stay with Medicare or leaving Medicare to use the employer’s group health coverage.

Again, cost tends to be a leading factor for those making these decisions.

Everyone’s situation is different, and the choice of going back into the workplace after a period of retirement is becoming more common.

Proactive planning with a desired goal in mind — and awareness of Medicare program details — can help your client choose the most appropriate coverage options.


Bethany CissellBethany Cissell is a health care insurance services specialist at Allsup.

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