You may receive health insurance as a retirement benefit from your, your spouse's or a family member's former employer or union. Benefits and costs vary widely by plan, but prescription drug coverage is included in most plans.
When you have Medicare, it is your primary coverage; your retiree benefits will pay after Medicare. Some retiree plans cover costs that are not covered by Medicare, such as dental and vision benefits. Others have large deductibles that must be met before any benefits will be paid. While these benefits are coordinated with Medicare benefits, retiree plans are not considered Medigap plans.
Note: If you retire before becoming eligible for Medicare, your retiree plan benefits will usually change when you become eligible for Medicare.
Employers can change their retiree plan's benefits, cost sharing or premiums, or drop the plan at any time. Retirees can also lose all of their health benefits if their former employer files for bankruptcy. For more information, see Your Rights to Buy a Medigap Policy.
Employers, unions and companies usually notify members of plan changes prior to an open enrollment period. This typically lasts for one month each year. In general, this is the time when you can switch to another plan, if you have that option.
Retiree plans are different than employer group health plans (GHPs), which offer benefits due to your, your spouse's or other family member's active employment. See Coverage WhileYou and/or Your Spouse Works for more information.
If you are a retired veteran, you may be eligible for health coverage under TRICARE or Veterans Affairs. Learn more about TRICARE or Veterans Affairs.
Topics on this page:
- Variations in Retiree Plans
- Types of Retiree Plans
- How Retiree Plans Coordinate with Medicare
- Drug Coverage & Retiree Plans
- Questions to Ask about Your Retiree Plan
Retiree plans vary widely because they are offered at the employer's discretion. For example, certain retiree plans:
- Provide comprehensive health benefits with little out-of-pocket expense.
- Require annual deductibles and copayments when using covered services.
- Include an annual out-of-pocket limit; after it is reached, the plan pays a higher percentage of covered costs.
- Contain the same benefits as those for active employees. When someone has Medicare, those payments are simply subtracted from the retiree plan benefits.
- Have employer-paid premiums or require the retiree to pay for some or all of the premium.
- Only offer one health care plan for all retirees while other plans may offer several choices.
2. Types of Retiree Plans
There are generally 3 types of retiree plans: Fee-for-Service plans; Non-Medicare Managed Care plans, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs); and Medicare Advantage (MA) plans, such as Medicare HMOs, PPOs and Private Fee-For-Service (PFFS) plans.
If you have a fee-for-service retiree plan, it will act as your secondary coverage and pay only after Medicare has paid. Some of these plans will not pay for any services until the plan's annual out-of-pocket limit or deductible is met. Other plans pay a percentage of your health care expenses, after taking into account what Medicare has paid.
Managed care plans, such as HMOs and PPOs, often contract directly with employers or unions to provide health care services through a network of providers. These plans are not Medicare plans and are not required to pay for Medicare-covered services. Members of these plans pay a monthly premium and make the required copayments when using services within the network. Retirees may be able to choose from several plans or may be limited to one.
- HMOs generally require you to use the providers in their network (except for emergency care and urgent care received outside your service area). You may also be required to obtain approval from the plan before you can see a specialist. If you go outside the HMO network or fail to meet other requirements, the plan may not pay for your care.
- PPOs encourage you to use doctors and other providers in their network. If you go outside the network for covered services, you will usually be required to pay a higher copayment. Some PPOs may have a deductible that must be met before the plan will pay for your care.
Note: Certain employer plans offered through HMOs allow you to use your Medicare benefits through the traditional fee-for-service Medicare program and your retiree benefits through the plan's HMO. With this increasingly rare combination, you may be able to receive Medicare-covered services outside your retiree HMO, but the HMO will not pay your Medicare deductibles and copayments. Be sure to contact the plan to learn how it works before you use your benefits outside the HMO network.
Some employers and unions may provide their retiree benefits through Medicare Advantage (MA) plans. These types of plans are available to people who are enrolled in Medicare Parts A and B. For more information, see Overview of Medicare Advantage Plans.
Note: The government agency that administers Medicare is called the Centers for Medicare and Medicaid Services (CMS). It has no authority over the health benefits offered by employers or unions, regardless of whether they are offered through fee-for-service plans, non-Medicare managed care plans or MA plans, although an MA plan must provide the required Medicare-covered benefits. Employers and unions are free to negotiate their own contracts and benefit designs with any health plan or company, including MA plans.
Note: If you have a Health Savings Account, Medical Savings Account or other consumer-directed health plan through an employer, be sure to check with your benefits administrator to determine if you can continue to use that plan when you become eligible for Medicare.
A retiree plan may provide traditional fee-for-service coverage or cover you through a Medicare Advantage plan, such as an HMO or PPO. Certain retiree plans automatically supplement what Medicare pays. Others may apply a deductible or pay little or nothing toward medical expenses that are partially covered by Medicare. Contact your benefits administrator each year to be sure you understand how your plan works with Medicare and if any changes have been made from the previous year.
4. Drug Coverage & Retiree Plans
Most retiree plans include prescription drug coverage. If your retiree plan has creditable coverage, you generally don't need to enroll in a Medicare Part D prescription drug plan. Retiree plans that provide drug coverage must send their Medicare-eligible members a written form each year to notify them of the credibility of the plan's prescription drug coverage. For more information, see Medicare Part D: An Overview.
Some retiree plans with prescription drug benefits have their own arrangement with Medicare and warn their members not to enroll in a separate Part D plan. If they do, they risk losing all their retiree health benefits. Check with your plan to be sure you know its rules for Medicare Part D prescription drug coverage.
5. Questions to Ask about Your Retiree Plan
It is important to know what benefits your plan provides and how it works with Medicare. Here, we list questions to ask your employer, the administrator of your health plan or a union representative. Be sure to find out who you should call if your benefits change or if you have problems getting benefits paid.
- How does this plan coordinate with Medicare?
- Do I have a choice of retiree plans or is there only one plan? If I have a choice, when can I exercise it?
- Do I need a Part D plan for prescription drugs or is that benefit included in my retiree plan? If it is included, is the plan's prescription drug benefit creditable?
- Do I need to meet any deductibles before benefits will be paid? If so, does a deductible apply to some or all of the plan's benefits?
- Will the plan pay differently after I have paid a certain amount of out-of-pocket expenses each year?
- Does the plan pay for services Medicare does not cover, such as dental care, eyeglasses and hearing aids?
- Is there an annual or lifetime dollar limit on the benefits the plan will pay?
- Will the plan pay for my care if I move out of the geographic area where I live now?
- If I move, will I be required to change plans or is it optional?
- If I change plans after I move, how much time do I have to do so?
- Will my spouse be covered under this plan if I leave the plan, even if he/she is younger than age 65?
- Will my spouse still be covered if I die? If so, for how long?