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Medicare Benefits After an Employment Termination

The age for receiving our full Social Security benefits keeps increasing, which means more and more of us are already on Medicare when we retire. Fortunately, Medicare beneficiaries have a number of health insurance options available when their employment terminates, including continuing employer-sponsored coverage. Terminating employment won't effect your Medicare negatively, but you may want to sign up for additional coverage when or if your access to employer-sponsored ends.

  1. Medicare

    • Medicare is federally funded health insurance for those 65 or older and the disabled. Part A of Medicare covers hospitalization, hospice and skilled nursing care. Part B provides doctor care, lab tests and durable medical equipment like wheelchairs. Medicare provides significant coverage, but there are out-of-pocket costs. When you're hospitalized under Part A, for instance, there is a deductible of over $1,000. Part B has a calendar year deductible of over $100 and a 20 percent co-pay for all covered expenses after that. Part B also has a monthly premium of over $100, so many wait until they've exhausted their employer-sponsored coverage to start it. There is no penalty for enrolling into Part B late as long as you've had continuous coverage.

    COBRA

    • COBRA stands for Consolidated Omnibus Budget Reconciliation Act, which was passed into law in 1986 and allows people to continue their employer-sponsored health insurance for a period of time after terminating employment. Medicare beneficiaries who retire can use COBRA to continue their employer-sponsored insurance. While you're on COBRA, Medicare is your primary insurance and the employer-sponsored coverage is your secondary coverage, which will cover many of the out-of-pocket costs associated with having Medicare alone.

    Special Enrollment Periods

    • When your coverage ends, whether due to COBRA ending or your group coverage ending, you have special enrollment periods. You have up to eight months from when coverage ends to enroll into Part B if you haven't already. Once you have a start date for Part B, you have an open enrollment period (three months before your Part B starts and three months after) during which you can enroll into a Medigap (Medicare Supplement Plan). You have two full months to enroll into a Medicare Advantage Plan and/or a Part D prescription plan.

    Supplemental Plans

    • Medicare Advantage Plans are also known as Part C of Medicare. These plans combine hospitalization, medical and prescription coverage, and may offer additional benefits like vision or dental. These plans take the place of Medicare, but you still have your rights as a Medicare beneficiary. These plans are the most like employer sponsored plans. Medigap plans are secondary to Medicare, and also cover Medicare's out-of-pocket costs. Unlike Medicare Advantage plans, Medigap plans don't have a network and don't include prescription coverage (see Resources).

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