Can You Continue Receiving Private Insurance Once You Are Eligible for Medicare?

Most Americans enroll in Medicare at 65, but private insurance may offer more benefits. Medicare-eligible individuals covered by generous employer-sponsored private plans have options and may opt for continuing current coverage. In addition, private insurance plans play a major role in the Medicare supplemental insurance market.

Definition

• Private medical insurance refers to plans funded in the private sector and includes private employer-sponsored group plans and plans purchased from insurance companies by individuals. Medicare is a federally sponsored medical insurance program primarily for citizens over 65 years, but it also covers some individuals under 65 with defined conditions that include certain disabilities. Another insurance plan type often referred to as Medicare supplemental insurance is also private insurance and designed to pay any charges not covered by Medicare.

Private Group Insurance Benefits After 65

• Actively employed persons enrolled in employer-sponsored group insurance plans continue to receive the same private coverage even if they are eligible for Medicare as long as the firm employs 20 or more workers. The group coverage remains their primary insurance. Such individuals may also enroll in premium-free Medicare Part A. Medicare then becomes the secondary insurance carrier and may pay any amount not covered under the private plan. The "coordination of benefits" between private insurance and Medicare is referred to as "Medicare second payer," or MSP. Employers who offer group coverage to employees under 65 may not discontinue it for employees who become eligible for Medicare and must also provide it for Medicare-eligible newly hired individuals.

Medicare Supplemental Insurance

• Medicare supplemental insurance provides coverage when Medicare is the primary insurer. Medicare clearly outlines limits of coverage. Supplemental policies begin to pay when these limits are exceeded. Individuals pay a premium based on the extended coverage. Policies normally cover deductibles, co-payments, skilled nursing care and extended hospital stays. They do not cover long-term care in nursing homes. Insurance companies selling these policies must follow federal guidelines and clearly state coverage limits.

Considerations

• Companies who offer group coverage to early retirees, who are under 65, are not required to continue this coverage once the recipient becomes Medicare eligible at 65. Some companies may then contribute to Medicare supplemental coverage, while others may drop all insurance funding. While federal regulations require companies to offer group coverage to active workers over 65 if provided to other employees, an employee may elect to decline the private coverage and opt for Medicare. In this case, Medicare becomes the primary insurer. Additionally, those who receive COBRA benefits while unemployed lose these benefits once eligible for Medicare.