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Employer Insurance vs Medicare: Can You Opt for Both?

Can You Have Both Employer Insurance and Medicare?

Yes, you can simultaneously have employer (otherwise known as group) health insurance and Medicare. Depending on the size of your employer, Medicare coordinates benefits with your group coverage to determine which policy pays first. You may also be eligible for retiree coverage through your former employer, which often works in tandem with Medicare. 

While you may choose to pursue both types of insurance, most people focus on just one. Individuals with robust group coverage may not want to also pay the monthly Medicare Part B premium. Others may prefer the security of enrolling in Medicare at their first opportunity when they turn 65. Explore the advantages and disadvantages of dual health insurance coverage.  

What Happens To Your Health Insurance When You Retire?

Generally, your employer sponsored healthcare benefits disappear once you are retired and no longer an employee. Though rare, your employer may offer retiree insurance, provided you meet specific criteria as a former employee. Most retiree plans also require you to enroll in Medicare. 

Your employer’s insurance company may also offer COBRA coverage, typically for up to 18 months after you discontinue employment. COBRA requires you to pay the total monthly premium, including the portion your former employer paid on your behalf. Similarly, you may purchase a plan through the Healthcare Marketplace, for which you must also pay the total price. 

How Does Choosing Between Group Health and Medicare Work?

You should consider which type of insurance best suits your circumstances, considering factors like your work status, overall health, and monthly budget.

Eligibility

You must be at least 65 or have a qualifying disability such as end stage renal disease or Lou Gehrig’s Disease (ALS) to be eligible for Medicare benefits. While Part B benefits require a monthly premium, individuals can receive Part A at no cost if they paid into social security.

Employees who work a full time schedule of at least 30 hours a week are typically considered benefits-eligible. Some employers require a waiting period of up to 90 days for new employees to become eligible for health insurance benefits. You may simultaneously have Medicare and group health insurance, provided you continue to meet their respective eligibility requirements.  

Comparing Group Health and Medicare

Group health insurance and Medicare may offer different benefits. For example, while your employer plan might include dental, vision, and hearing services and cover prescription drugs, Original Medicare does not. You must purchase Medicare Advantage (MA) or a separate plan like Part D to receive these benefits.

Some group insurance plans include other restrictions, such as limiting contributions to health savings accounts while also enrolled in Medicare. If you keep both Medicare and employer benefits simultaneously, these entities must coordinate benefits; for companies of 20 or less employees, Medicare is the primary payer, and the group insurance is secondary, and for companies of 20+ employees, the group plan pays first.

What Is Retiree Health Insurance?

Some, but not all, employers offer retiree insurance. This type of insurance typically offers minimal coverage to rising retirees who meet select criteria, such as having worked for their employer for at least ten years and participating in group benefits as a former full time employee. 

Many retiree insurance plans are contingent upon Medicare enrollment. Most insurers that offer retiree benefits also require candidates to sign up for Medicare Part A and Part B. In most cases, Medicare is the primary payer, and retiree insurance covers the remaining costs, similar to a supplemental Medigap plan.

When Should I Choose Employer Health Insurance Over Medicare?

You may sometimes prefer to keep your employer coverage instead of enrolling in Medicare. For example, you may need medical coverage for a dental, vision, or hearing condition, typically provided through your employer sponsored plan but not by Original Medicare.

You might also choose to keep employer health insurance if you have no plans to retire in the near future since employer sponsored retiree insurance is rare and often requires enrollment in Medicare anyway. Consider the following advantages and disadvantages of choosing employer health insurance over Medicare. 

Pros
  • Extended medical benefits
  • Prescription drug coverage
  • Spousal/dependent coverage
  • Established network of care
Cons
  • Fluctuating costs
  • Contingent on employment
  • Expensive to maintain
  • Limited coverage options

Advantages

  • Extended medical benefits: Your employer group coverage may include hearing, dental, and vision services, which are not covered through Medicare Part A and Part B.
  • Prescription drug coverage: You may enjoy prescription drug coverage as part of your group health insurance, whereas Medicare requires purchasing a separate drug plan through Part D or Medicare Advantage. 
  • Spouse/dependent coverage: Many employer plans extend benefits to a spouse or dependents, while Medicare only covers individuals.  
  • Established network of care: You may prefer to keep seeing the doctors and specialists you have built relationships within your group insurance network.

Disadvantages

  • Fluctuating costs: While Medicare Part B sets an annual premium for all beneficiaries, group insurance plans tend to cost more, and insurers can change prices anytime.
  • Contingent on employment: You may enjoy group benefits as a full-time employee; however, employers generally terminate coverage (typically without retiree insurance options) if you leave. 
  • Expensive to maintain: You may not miss the portion of your paycheck that goes toward health insurance benefits as an employee, but paying for it yourself through COBRA or a retiree plan once you are no longer employed can be quite costly.  
  • Limited coverage options: Your employer may only be able to afford limited options for group coverage, especially as an organization of 20 employees or less.

When Should I Choose Medicare Over Employer Health Insurance?

Individuals who become eligible for Medicare may choose this coverage over group benefits. Original Medicare offers medical and hospital coverage to individuals once they turn 65 or have a qualifying disability or medical condition. Medicare serves workers approaching retirement age who would lose their group benefits when they leave their job.  

Many individuals choose to enroll in Medicare for financial reasons since Original Medicare offers set annual rates for Part B premiums, and most beneficiaries pay $0 for Part A. The following benefits and drawbacks may impact your decision to enroll in Medicare.

Pros
  • Broad coverage network
  • Automatic elegibility
  • Affordable premiums
  • Remains after retirement
Cons
  • Individual coverage only
  • Late enrollment penalty
  • Limited benefits
  • High out-of-pocket costs

Advantages

  • Broad coverage network: Nearly 100% of medical practitioners and hospitals in the U.S. accept Medicare benefits, which means broader care options for beneficiaries.
  • Automatic eligibility: Generally, you are eligible for Medicare when you turn 65 or have a qualifying disability or medical condition such as end-stage renal disease or ALS.  
  • Affordable premiums: Medicare sets the cost of the Part B premium for all beneficiaries each year. Individuals on Medicare eligible for social security benefits pay $0 for Part A. 
  • Remains after retirement: While employer-based coverage is dependent on your work status, Medicare remains in effect even after you retire.

Disadvantages

  • Individual coverage only: Medicare comes with specific age and disability requirements, so it only covers single beneficiaries, not spouses or dependents.
  • Late enrollment penalty: You must enroll in Medicare at your first eligibility opportunity (immediately upon turning 65) or pay a penalty for late enrollment, which means delaying your decision to enroll in Medicare is both costly and could disrupt benefits. 
  • Limited benefits: Original Medicare only covers basic medical and hospital expenses, which means you must purchase additional coverage for “extras” like vision, hearing, and dental care and prescription drug benefits.  
  • Potentially high out-of-pocket costs: While Part B premiums are set for the year, you may spend more in out-of-pocket costs like copays and coinsurance unless you purchase a Medicare Advantage plan with an out-of-pocket maximum or a Medigap plan.

When Should I Choose Both Employer Health and Medicare?

You may choose to enroll in both group health insurance and Medicare. This may suit employees who do not plan to retire in the near future but do not want to delay Medicare enrollment or simply prefer the combination of benefits a group plan and Medicare can provide.

Depending on how many people work for your employer, your group plan and Medicare must coordinate benefits. Employers with 20 or more employees are the primary payers, followed by Medicare, while employers with fewer than 20 employees pay expenses leftover from Medicare. 

Employees paid a median amount of $103 per month for single group coverage in 2022, while the Part B premium cost $165 per month in 2023.

Pros
  • Comprehensive coverage
  • Pre and post retirement coverage
  • No late penalty
  • Eligibility for retirement insurance
Cons
  • Paying two premiums
  • Limitations and restrictions
  • Excessive paperwork

Advantages

  • Comprehensive coverage: Choosing to hold both types of health insurance simultaneously can help cover any gaps in coverage, especially when it comes to vision, dental, and hearing care and prescription drug services.
  • Pre- and post-retirement security: Employer benefits cover you for as long as you remain a full-time employee while enrolling in Medicare during the initial enrollment period facilitates a seamless transition to Part A and Part B benefits when you retire.
  • No late penalty: Even if you work for a large company or do not need to use your Medicare benefits right away, enrolling at your first opportunity (when you turn 65) enables you to avoid paying the penalty for signing up later. 
  • Eligibility for retiree insurance: While retiree insurance options through employers are rare, this coverage typically requires enrollment in Medicare.

Disadvantages

  • Paying two premiums: While monthly employee contributions to a group plan tend to cost less than Part B premiums, you must pay both premiums to keep both types of coverage.
  • Limitations and restrictions: For the most part, group health insurance and Medicare coordinate benefits to provide more comprehensive coverage; however, some restrictions exist. For example, employers cannot contribute to an employee’s health savings plan if the employee has Medicare, and Medicare, as the primary payer, does not offer spousal or family benefits. 
  • Too much paperwork: Some people find it overwhelming to keep track of deadlines and documents for both types of insurance, plus—in some cases—add-ons like Medigap, Medicare Advantage, and/or a Part D plan.  

Can You Enroll in Medicare Later?

Generally, Medicare imposes a penalty on individuals who enroll in Part A and B after their initial enrollment window, which is a 7-month period before and after their 65th birthday. Penalties include a 10% Part A premium increase, required for twice the number of years you delayed enrollment. You could also owe a 10% higher Part B premium for each year you delayed joining after the initial enrollment period. 

While Medicare recommends enrolling during your initial enrollment period, some scenarios allow individuals who enroll later to avoid paying a penalty. You may qualify for a special enrollment period or opt-in to only one part of Medicare at a time if you have group benefits.

Are You Eligible for an SEP?

Yes, you can avoid penalties if you delay signing up for Medicare but have group health insurance since this qualifies you for a special enrollment period (SEP). You have eight months after your group coverage or employment ends, whichever happens first, to enroll in Medicare if you skipped your initial enrollment period. COBRA does not count as group plan benefits.

Medicare offers SEPs for some other scenarios in which your ability to enroll may have been limited due to circumstances beyond your control. For example, Medicare allows SEPs for situations including your employer giving misleading information about group insurance benefits, losing Medicaid coverage, or a natural disaster or emergency impacting your family.

Can You Enroll in Medicare Advantage Later?

Technically, you can enroll in Medicare Advantage as soon as you are eligible for Original Medicare or later, during several special MA enrollment periods throughout the year. You must enroll in Parts A and B to purchase a Medicare Advantage plan. 

Since Medicare Advantage enrollment is optional and occurs during specific enrollment periods, delaying MA benefits does not incur its own penalty; however, you will owe late penalties for Part A and/or Part B enrollment if you have not completed the necessary step of signing up for Original Medicare yet.

Putting It All Together

Enrolling in both Medicare and employer insurance at the same time is not only possible but beneficial to many people over the age of 65. Employer plans and Medicare coordinate coverage to determine a primary and secondary payer system, depending on whether your employer has more or less than 20 full time employees. 

You may enjoy the comprehensive medical benefits of dual health insurance policies. Many employer plans include the dental, vision, and hearing coverage that Original Medicare lacks, while Medicare allows you to keep your coverage regardless of your work status and count on a set annual Part B premium rate. If you’re confused about which choice may be right for you, speak with a trusted Medicare or health insurance agent to learn more.

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