Primary vs. Secondary Insurance

Why does it matter and how does it affect my Medicare?

While you can have two different health insurance plans, most of us do not.  So, as we move closer to 65 and eligibility for Medicare, it brings up the question of ‘can I keep my current insurance and have Medicare at the same time?’

In short, yes.  You can keep your current insurance.  But, like most things with Medicare, the answer can come with caveats and asterisk.  Also, the exact type of health insurance you have determines when your plan pays in relation to when Medicare pays.

This is where Primary and Secondary insurance come.

What does it mean to pay primary and pay secondary?

  • The insurance that pays first (the primary payer) pays up to the limits of the plan’s coverage.
  • The one that pays second (secondary payer) only pays if there are cost the primary insurer did not cover.
  • The secondary insurer (which may or may not be Medicare) may not pay all of the remaining cost.
  • If your group health plan or retiree coverage is the secondary payer, you will likely need to enroll in Medicare Part-B before they will pay.

Lets look at a few examples of how Medicare coordinates with other coverage.

Medicare & Employer Coverage

This depends entirely on the size of your employer.  If your employer has at least 20 employees, then Medicare pays second.  If your employer has 19 or less employees, then Medicare pays first.

Why is this important?  Lets assume that you are 66, have enrolled in Part-A, but opted out of Part-B because you are still working and have group coverage.  When you go to the doctor, if Medicare is the primary insurance (i.e. your employer has less than 20 employees), Medicare will not pay your doctor bill because you do not have Medicare Part-B doctors insurance.  They will instead send you the bill which will need to be paid before your group coverage pays their portion.

This can get a bit confusing, but it comes down to what is called creditable coverage.  You can read more about that here.

Medicare & COBRA

COBRA is a federal law that allows workers and their families who lose their health benefits the right to choose to continue the same group health benefits for a limited period of time.  Their cost of this plan is up to 102% of the actual cost, and includes the portion of the premiums paid by the employer while they were working.

With COBRA, you are paying for the exact same plan.  All of actual insurance coverage is the same, it just cost more because your employer isn’t paying for part of the premium.  The complexity arrises when we introduce Medicare eligibility into the equation.

There are two common situations related to Medicare and COBRA.

1. A person is over 65, has Medicare Part-A only and is offered COBRA at retirement.

In this circumstance, any time a person is eligible for Medicare (in this case, our person is both eligible for Medicare and already enrolled in Part-A), the day that their former employer coverage transitions from ‘active worker coverage’ to ‘COBRA coverage’, the primary insurance will be Medicare, which will be billed first.  This is problematic because in our situation this person does not have Part-B.  Because Medicare pays the first 80% of doctor bills, with COBRA paying second, that first 80% would need to come out of the pocket of this individual.

2. A person under 65 accepts COBRA coverage and then becomes Medicare-eligible after they had enrolled in their COBRA plan.

In this situation, our person has COBRA coverage before becoming eligible for Medicare.  If this person enrolls in Medicare Part A & B before the COBRA coverage ends, the COBRA plan may terminate.  This does not happen often, but it can by law.

Typically, when a person turns 65 with COBRA coverage, they enroll in Medicare A & B, and either purchase a Medigap plan or enroll into a Medicare Advantage plan.  This would allow them to leave the COBRA coverage behind as the cost will most likely be greater that the cost of the Medigap or Medicare Advantage plan.

Medicare & Retiree Coverage

For these situations, lets consider a person who is already on Medicare Parts A & B.  They just recently retired and have benefits offered by their previous employer as a retiree option.  Medicare will be the primary insurance, so do these groups of people need coverage from a Medigap plan or a Medicare Advantage plan?

  • Teachers.  In most cases, teachers have access to great coverage upon retirement that cost them very little.  This can also go for their spouse as well.
  • FEHB.  FEHB is a program available to federal workers.  It is a complex system, often times does not require them enrolling into Part-B, and has rules surrounding suspending coverage and enacting coverage.  This is not something that we work closely with.
  • United Auto Workers.  UAW offers outstanding retiree coverage.  You still need to enroll in Medicare A & B, but the UAW Trust generally covers the rest.  For salaried workers, there are typically no retiree coverage offered, but you may receive a health reimbursement account to help offset the cost of Medicare products.
  • Universities.  Many universities have really good coverage.  Your plans exact details will need to be reviewed to determine if a Medigap or Medicare Advantage plan is right for you.
  • Unions.  Most unions still have good health benefits at very little cost to the retiree.
  • Fire & Police Departments.  This is tied to the government and municipalities, so your retiree benefits may vary.
So for these people, who should purchase a Medigap plan or enroll in a Medicare Advantage plan?  It depends.  As a very general rule of thumb, if you are going to pay more than $200 per month for your retiree plan, you may be better off looking into a Medigap plan.  Every one needs to pay the Part-B premium, even those with retiree benefits.  So the $200 a month is over that
Quick tip, if you have retiree benefits, speak to someone who specializes in those exact benefits.  Better yet, contact the office that administers your program and ask for a Summary of Benefits.  We will be happy to walk through them with you and let you know what we feel your best decision moving forward is.

Medicare & VA Benefits

VA benefits and Medicare do not work together.  To be clear, VA benefits are not considered health insurance, they are a benefit.  But it is considered creditable coverage for Part-D.

Medicare does not pay for any care that you receive at a VA facility.  In order for your VA coverage to cover your care, you must generally receive health care services at a VA facility.  In order for Medicare to cover your care, you must receive care a Medicare-certified facility that works with your Medicare coverage.  VA benefits will not pay for Medicare deductibles, copays, or coinsurances.

Some recipients of VA benefits may chose not to enroll in Medicare and would rather keep their VA coverage.  Some chose to enroll in Medicare Part-A because it is premium-free but turn down Part-B because of the monthly premium.  If they chose to later enroll in Part-B they may face penalties and would likely have to wait until the General Enrollment Period.  If you chose to enroll in Part-B, you should do so during your IEP to avoid a late enrollment penalty.

There are benefits to sticking with VA benefits.  Recipients get coverage for health care services not covered by Medicare, such as over the counter medications, annual physical exams, and hearing aids.  Additionally, prescription drug coverage is included with VA benefits.

Medicare & Tricare for Life

Recipients of TRICARE are either active duty service members, military retirees, and eligible familes.  As soon as these people enroll in Medicare, their coverage with TRICARE stops and they are enrolled in Tricare for Life.  If they do not enroll in Medicare by 65, your TRICARE benefits end the first day of the month you reach 65. 

So it is important to sign up for Medicare at least a month before you turn 65 to allow enough time to receive your Medicare cards in the mail before coverage begins.  Medicare will act as the primary insurance.  There is one exception to this.  If you are active duty military, you will continue to be covered by TRICARE until the first day of the month after you retire.

Your Tricare for Life benefits are meant to supplement Medicare.  They cover deductibles and copayments and provide prescription drug coverage.  You can generally use any provider that accepts Medicare.  Billing between Medicare and Tricare for Life are generally seamless and portions not covered by Medicare will be sent directly to Tricare.

However, not all is covered.  If you use a medical service that Medicare allows but Tricare for Life does not, such as some chiropractic care, Tricare for Life will not pay anything and Medicare will bill you for the remaining portion.  You do not need a Part-D drug plan if you receive Tricare for Life.  If you do get one, you will not pay a late enrollment penalty as coverage is creditable.

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