What You Need to Know
If you’re still working when you become Medicare-eligible, you have options about when to enroll in Medicare coverage. However, the rules are complex and there are penalties for not following them carefully, such as higher Part B and Part D premiums for life.
When You Become Eligible for Medicare
When you turn age 65 — whether or not you’re still working — you become eligible to enroll in Medicare, the federal program that provides older adults and those with disabilities or permanent kidney failure with secure access to medical care.
If you’re still working when you turn age 65 (or become Medicare-eligible), you can wait to enroll in Medicare and stay covered in your UC medical plan for non-Medicare members. However, most employees enroll in Medicare Part A (which covers hospitalization) since there is typically no cost. Medicare Part A will be secondary to your UC active employee medical plan.
There are specific rules for the timing of when you must enroll in Medicare Part B, which has a monthly premium. Generally, you can delay enrolling in Part B if you are still working and have coverage through your employer. However, the rules are complex and there are penalties associated with not following them carefully, such as higher Part B and Part D premiums for life. You can find more information at medicare.gov. You might also want to discuss your personal situation with Medicare directly at (800)-MEDICARE (800-633-4227).
UC Retiree Coverage Coordinates With Medicare
Generally, each UC non-Medicare medical plan has a corresponding Medicare option offered to eligible retirees after they enroll in Medicare. However, the Medicare versions of the non-Medicare plans often have different costs, benefits, doctors, service areas and behavioral health providers.
Once you enroll in Medicare and complete a UC Medicare form, you’re automatically enrolled in the UC retiree Medicare plan that corresponds to your current medical plan. If you’d prefer a different Medicare plan, you can make that change during the next Open Enrollment period.
Under UC retiree coverage, if some family members are eligible for and enrolled in Medicare and others are not, you’re considered a split-Medicare family.
- During the Open Enrollment period before you enroll in Medicare, take a look at the Medicare version of your current plan so that you understand your plan’s corresponding Medicare plan. Open Enrollment is the time to make changes if you want to transition to a different plan when you enroll in Medicare.
- If you transition to Medicare mid-year and were enrolled in a UC non-Medicare PPO plan, you may be eligible for a credit for any out-of-pocket medical costs you paid in 2023 while covered by a non-Medicare Anthem PPO plan (UC Care, UC Health Savings Plan, or CORE). For example, the amount you’ve paid toward the medical plan’s deductible and out-of-pocket maximum may be applied to the Medicare Supplement PPO plan you enroll in. For more information, contact Anthem Health Guide at (844) 437-0486 after you enroll in Medicare. (This credit does not apply to out-of-pocket pharmacy costs.)
When You Must Enroll in Medicare
If you are retired when you turn age 65, or you are retiring after age 65, you must enroll in Medicare.
If you are eligible for premium-free Part A and you don’t enroll in Parts A and B when first eligible or at retirement, you could lose your UC-sponsored medical coverage and be charged lifelong penalties by Medicare. Ninety (90) days before you turn 65, or when you are retiring, RASC will send you the Medicare forms you’ll need to fill out, along with the date UC needs you to enroll in Medicare and return the forms.
If you’re receiving Social Security benefits.
You’ll automatically be enrolled in Medicare Parts A and B when eligible, and you’re required by the Social Security Administration (SSA) to accept Part A. If you are still covered by UC active employee coverage, you can contact the SSA to opt out of Part B. When you later transition to UC retiree coverage, you will be able to enroll in Part B during a Medicare Special Enrollment Period.
Medicare Part A (hospital and facility coverage) is usually offered at no premium cost. There is a monthly premium for Part B (doctor and outpatient services) and Part D (prescription drugs) based on your income. Medicare premiums are in addition to any premium you pay UC for your UC medical coverage.
What Happens to Your UC Coverage When You Enroll in Medicare
Once you enroll in Medicare, you can still stay enrolled in UC medical benefits. However, as a UC retiree, you’ll need to transition to a UC plan for Medicare members. (Note: If you’re enrolled in the Health Savings Plan as an active employee and want to continue receiving Health Savings Account contributions from UC — and continue making your own — you should not enroll in Medicare. The IRS does not allow Medicare participants to receive or make contributions to a Health Savings Account.)
Under UC retiree coverage, Medicare (not the UC medical plan) becomes your primary insurance, meaning Medicare will pay for Medicare-covered expenses first. Your UC plan then covers many of the remaining costs. This could be either a percentage of the eligible expenses left over after Medicare pays its share, or expenses that Medicare doesn’t cover and the UC plan does, such as services outside the U.S., hearing aids, and some behavioral health care with non-Medicare providers.
To get the highest level of benefits, make sure your doctors and other providers accept Medicare for services covered by Medicare. For services covered by the UC plan but not Medicare, such as hearing aids and some behavioral health, it is best to use providers that are in the UC plan network.
Part D Late Enrollment Penalty
Most people become Medicare-eligible when they turn 65. If you have recently become eligible for Medicare or will in the near future, be aware that to avoid the Medicare Part D late enrollment penalty, you must enroll in an employee, retiree, COBRA or individual medical plan with CMS creditable prescription drug coverage from age 65 on. This applies whether you are still working or are retired when you become eligible for Medicare.
The Medicare Part D late enrollment penalty is a permanent 1% penalty charged by Medicare when their records indicate that a Medicare-eligible person has more than 63 days without creditable Part D prescription drug coverage. It starts on day 64 without Part D creditable coverage. The 1% penalty is calculated based on the number of full months that you were eligible and didn’t enroll in Medicare or other creditable prescription drug coverage.
To avoid a late enrollment penalty, make sure to keep continuous CMS creditable coverage once you turn 65 or become eligible for Medicare, and keep your records of this coverage as proof in case Medicare requires it.
CMS Creditable Prescription Drug Coverage Includes:
- A Medicare drug plan (Part D).
- A Medicare Advantage Plan (Part C), such as an HMO or PPO.
- A Medicare Supplement (Medigap) plan that includes prescription drug coverage.
- Prescription drug coverage through an employer or individual plan that meets or exceeds the Centers for Medicare & Medicaid Services (CMS) standard Medicare Part D prescription drug plan.
If you’re already enrolled in Medicare, under CMS rules, you need to maintain continuous creditable prescription drug coverage, whether you have a Part D or a Medicare Advantage plan.
If you anticipate you will have a gap of more than 63 days between UC non-Medicare plan coverage and your Medicare effective date, you can enroll in COBRA to maintain creditable coverage and avoid the late enrollment penalty. Contact UCPATH or the Retirement Administration Service Center (RASC) for more information.
If You Have a Lapse in Coverage of More Than 63 Days
Enroll in a plan with creditable prescription drug coverage as soon as possible to minimize the coverage gap. You can fulfill Medicare’s requirement with coverage in a non-Medicare, Medicare, COBRA or individual plan.
If Medicare’s records show that you owe a late enrollment penalty, you will receive a letter from the U.S. Department of Health and Human Services at CMS.
- If you did have prescription drug coverage during the time period noted, you may be able to avoid the penalty by following the instructions in the letter and completing the Declaration of Prior Prescription Drug Coverage form or by calling the Customer Service number listed in the letter. Your immediate response is required.
- If you do not complete the Declaration or call Customer Service promptly, in order to clear your penalty, you will be required to complete the Part D Late Enrollment Penalty Reconsideration Form, which will require submission of the following required documentation:
- Proof of your prescription drug coverage (UC employee/retiree checks showing insurance deductions during the gap, or a confirmation of coverage if you purchased an individual plan, or a letter from your former employer attesting to your insurance start and end dates and who was covered, or, depending on the gap dates, a letter or insurance record from your former UC location, UCPATH and/or RASC).
- A copy of your plan’s creditable coverage notice, found on UCnet for UC’s medical plans.
You will receive a response to your reconsideration within 90 days; however, it may be as early as 45 days.
- If the late enrollment penalty is correct or you do not take action to clear the penalty, you will be billed directly by your current insurance carrier every month. You’ll generally have to pay this penalty for as long as you have Medicare.
- For more details about late enrollment penalties, visit medicare.gov.
Choose a link below to learn more about the UC Medicare-coordinated medical plans:
If You Have a Health Savings Account (HSA)
If you have a Health Savings Account (HSA) funded by UC, Medicare has specific rules about when and how you can contribute money to your account.
Before you enroll in Medicare: If you are Medicare-eligible, meaning you’ve met all the requirements to qualify for Medicare Part A, but have not yet applied, you can continue to contribute to your HSA as long as you have not applied for Social Security payments or Medicare benefits.
The IRS and Medicare recommend that you stop contributing to your HSA six months before you plan to enroll in Medicare benefits to avoid any tax penalties for excess contributions. This is because the IRS may consider your Medicare eligibility date to be six months before your actual coverage start date.
Unless you postpone your enrollment, Medicare coverage begins on the first day of the month before your 65th birthday. For example, if your birthday is October 15, your effective date of Medicare coverage is October 1. Following IRS recommendations, this means you may want to stop contributing to your HSA before April 1. Contact UCPath to stop your contributions.
Once you enroll in any part of Medicare: You can use the money in your HSA to pay for qualified medical expenses. After age 65, you can also use the money in your account to pay for non-medical expenses; however, if after age 65 you’re not using your HSA funds for qualified medical expenses, the money you use is taxed as regular income.