If you're nearing retirement, you may be wondering how your health insurance will change. Many employers offer retiree health coverage, but it’s important to understand how this works once you become eligible for Medicare.

How Retiree Coverage Works with Medicare

When you or your spouse retires, your former employer may continue to offer health insurance benefits. But these benefits can change once you turn 65 and qualify for Medicare. To avoid gaps in your coverage or unexpected costs, talk to your employer’s benefits administrator. Ask questions like:

1. Will my retiree benefits change when I sign up for Medicare?
2. Is the drug coverage considered creditable by Medicare?
3. Does the plan offer supplemental coverage that works with Medicare?

Turning 65? Here’s What Happens

At age 65, most people become eligible for Medicare. To ensure you get the most from your retiree benefits, you’ll likely need to enroll in both Medicare Part A (Hospital Insurance) and Part B (Medical Insurance).

There’s a limited window to enroll in Medicare without paying a late penalty. If you delay, your retiree coverage may not cover medical costs during the time you were eligible but not enrolled.

Some retiree plans offer extra perks, such as additional hospital days, while others may only begin covering expenses after you reach a certain out-of-pocket maximum. The specifics vary, so it’s best to check directly with your plan administrator.

Typically, Medicare pays first when you have both Medicare and retiree coverage. Your retiree plan may then cover some or all of what Medicare doesn’t pay.

For details, you can:

1. Contact your former employer’s benefits office
2. Request a copy of the plan’s benefit booklet
3. Review the official plan summary provided by your employer or union

Medicare Drug Coverage and Retiree Plans

If you're considering joining a Medicare drug plan (Part D), first confirm whether your retiree drug coverage is creditable—meaning it’s as good as or better than Medicare’s standard drug coverage. Your plan is required to inform you each year if the coverage meets this standard.

If your retiree plan isn’t creditable and you delay joining a Medicare drug plan, you could face a late enrollment penalty.

Before signing up for a Medicare drug plan, check whether doing so could impact your retiree health coverage. In some cases, enrolling in Medicare drug coverage may cause you or your family members to lose other parts of your retiree insurance.

Medicare and Medicaid: What If You Have Both?

If you qualify for both Medicare and full Medicaid, you’ll automatically be enrolled in a Medicare drug plan unless you choose a plan yourself or opt out. Medicare will send a letter (CMS Product No. 11154 or 11429) explaining your options.

To decline enrollment or opt out permanently, call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048.

If your employer or union receives a Retiree Drug Subsidy (RDS) from Medicare, you won't be auto-enrolled. Instead, you’ll get a letter (CMS Product No. 11334) explaining your eligibility for Extra Help and your next steps.

Struggling With Prescription Costs? Extra Help Might Be Available

If your income and resources are limited, you may qualify for Extra Help with Medicare drug costs—even if you have retiree drug coverage. In some cases, your total drug costs under Medicare may be lower than those under your retiree plan.

Before making any changes, talk to your benefits administrator to compare your options.

Should You Consider a Medicare Supplement Plan?

If you already have retiree coverage, you may not need to buy additional Medicare Supplement Insurance (Medigap). Most retiree plans function similarly to Medigap by covering some of Medicare’s out-of-pocket costs like coinsurance and deductibles.

However, if you’re thinking about purchasing a Medigap policy, keep in mind that the best time to buy is during the 6-month period after you first enroll in Medicare Part A and Part B. After that, you may not be able to buy a policy—or you might have to pay more.