You’re eligible for Medicare. Now, how can you cover your family?

When you turn 65 and transition to Medicare, what sort of health coverage is available for your family? You’re not the first person to have this question.

Most Americans are accustomed to family health coverage – often provided by an employer – that covers the whole family under one policy. But Medicare only provides individual coverage. (Even if two spouses are both enrolled in Medicare, they each have their own individual plan.)

That means your family will need separate coverage, as you can’t add them to your Medicare policy. The good news is that coverage is available to meet your family’s needs, and they’ll be able to transition to new plans, if necessary.

Continuing to work after you’re eligible?

If you’re continuing to work after you turn 65 and your employer-sponsored health insurance plan covers your family, you won’t need to make any changes to their coverage until you retire or lose access to the employer-sponsored plan. Depending on the circumstances, you’ll likely be enrolling in at least Medicare Part A (or possibly Part A and Part B) in addition to your employer’s plan.

(The decision there hinges on the size of the employer: If the employer has 20 or more employees, the group plan will be your primary coverage and Medicare will be secondary. Most people in this situation choose to delay Part B until they stop working. But if the employer has fewer than 20 employees, Medicare will provide primary coverage and employees need to enroll in both Part A and Part B when they’re initially eligible.)

But if and when your family no longer has access to the same coverage they had before you transitioned to Medicare, there are several options to keep in mind:

Individual/family health coverage

If you’re retiring and will no longer have access to an employer’s health plan, your family will have the option to obtain their own health insurance in the individual/family market. They can buy a plan in your state’s marketplace/exchange – or directly from an insurance company, but financial assistance is not available for plans purchased outside the exchange.

There’s an annual open enrollment period for individual/family health coverage, but if your retirement means that your family will lose coverage that was provided by your employer, they’ll be eligible for a special enrollment period. (In 2021, there’s an extended enrollment opportunity that runs through August 15 in most states, due to the COVID pandemic.)

Plan availability in the health insurance marketplace varies from one area to another. You might see 10 or 20 options, or you might see several dozen choices. There are local assisters who can provide plan information and help you choose coverage, but we’ve also got an explainer with the main points to keep in mind when you’re comparing various plan options.

Depending on the availability of other employer-sponsored coverage (which we’ll get to in a moment), your household’s income, your zip code, and the age of the family members who will need to purchase coverage, premium tax credits (premium subsidies) may be available – and those tax credits are larger and more widely available in 2021 and 2022, as a result of the American Rescue Plan. In addition, if the household’s income doesn’t exceed 250% of the poverty level, cost-sharing reductions will also be included on some of the available plans.

You can use our subsidy calculator to quickly estimate how much your household’s subsidy will be, based on income, enrollees’ ages, and zip code. It’s useful to understand what counts as income under the Affordable Care Act (ACA), since it’s a specific version of modified adjusted gross income that isn’t used for other purposes.

Keep in mind that the whole household’s income is taken into consideration, including any income earned by the family member who is transitioning to Medicare. This is also important to understand if your family already has a plan through the marketplace and they will remain on it after you transition to Medicare. The dynamics of how premium subsidies change in this circumstance are illustrated in this example.

Coverage through your spouse’s employer-sponsored plan

If your spouse’s employer offers health benefits and your family will be losing the coverage you had through your employer, transitioning them to your spouse’s employer-sponsored health plan is an option to consider. As is the case for individual/family coverage, there will be a special enrollment period due to the loss of other coverage.

If coverage is available through your spouse’s employer and it’s considered affordable and provides minimum value, premium tax credits would not be available to offset the cost of individual/family coverage purchased in the marketplace. It’s important to understand that affordability determinations are only based on the cost of the employee’s coverage; the cost to add dependents is not taken into consideration.

Retiree health benefits from your former employer

If your former employer offers retiree health benefits that include family coverage, that may be a good option for your family. You’ll want to consider the cost and the benefits and compare them with the cost and benefits of plans that are available in your state’s individual/family marketplace.

Unlike an offer of coverage from a current employer, an offer of retiree health benefits does not make a household ineligible for premium tax credits in the individual marketplace, regardless of the cost of the retiree health benefits. So if your household would be eligible for premium tax credits in the marketplace, you can compare the retiree health benefits with the subsidized cost of individual/family coverage when you’re considering the options.

Temporary coverage through COBRA

If COBRA or state continuation is an option, it may work well as temporary coverage for your family members once you transition to Medicare. COBRA coverage is normally available for up to 18 months, although state continuation rules vary from one state to another.

If you’re retiring and you became eligible for Medicare no more than 18 months ago, your spouse and dependents can potentially use COBRA coverage for up to 36 months from the time you became eligible for Medicare (this is only applicable if you became eligible for Medicare before retiring; if your retirement date and COBRA eligibility date are the same, your spouse and dependents will only have access to the normal 18 months of COBRA).

Electing COBRA or state continuation means that your family will not have to deal with changing to a new health plan, at least for the time being. This can be beneficial in situations where a person is in the middle of a course of treatment, or has already spent a considerable amount of money towards their out-of-pocket costs for the year.

COBRA and state continuation require you to pay the full cost of the premiums, including the portion that your employer was previously paying, plus an administrative fee (2% for COBRA, although it varies for state continuation). The American Rescue Plan’s COBRA/state continuation subsidy is only available to people who experience an involuntary job loss or involuntary reduction in hours, so it would not apply in a voluntary retirement scenario.

Medicaid or CHIP

Depending on your household’s income, your family members may be eligible for Medicaid or CHIP. In the majority of the states, adults under the age of 65 are eligible for Medicaid if the total household income doesn’t exceed 138% of the poverty level; for a household of three in the continental U.S., that amounts to about $2,525 in monthly income in 2021. For dependents up to the age of 18, Medicaid and CHIP eligibility extends to higher income levels.

The short story? Your family will be able to maintain health coverage after you transition to Medicare. Depending on the circumstances, they might have multiple options from which to choose. And help is available too, from your employer’s HR department or broker, or from a broker or navigator who can help you figure out the best individual/family plan to fit your needs.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

Tags: CHIP, employer-sponsored health insurance, individual health insurance, Medicaid, retirement