What your former employer’s retiree health plan actually covers

The benefits booklet from your old employer and the Medicare handbook will each describe a complete system of coverage. Read them separately and you would think you have two full policies. You do not. You have one, and a supplement, and the whole question is which is which.

Get that backwards and you find out at the pharmacy counter or, worse, in a hospital billing office nine months later.

Primary and secondary

One plan pays first. That plan is the primary payer. Whatever it does not cover goes to the second plan, which pays what it owes under its own rules, and anything left after that is yours.

Once you are 65 and enrolled in Medicare, and you are genuinely retired rather than still working, Medicare is almost always primary. Your retiree plan sits behind it.

The exception that matters is active employment. If you or your spouse are still working and covered by that employer's group plan, and the employer has twenty or more employees, the group plan is primary and Medicare is secondary. The day the employment ends, the order flips.

I sat in on a lot of exit interviews at the plant and this was the single thing I hammered on, because getting it wrong generates months of rejected claims that all have to be reprocessed by hand.

The Part B trap

Most retiree plans are written on the assumption that you will enrol in Medicare Part B as soon as you are eligible.

If you do not, the plan does not become your primary coverage. It keeps paying as though Medicare had already paid its share, and it leaves you holding the part Medicare would have covered. You are not underinsured on paper. You are underinsured in practice, by about eighty percent of every outpatient bill.

The standard Part B premium for 2026 is $202.90 a month, with an annual deductible of $283. People look at that premium, look at the retiree plan they already pay for, and decide to skip it. That decision costs far more than it saves, and on top of it there is a late enrolment penalty that attaches to your premium permanently.

Read your plan document for the words coordinates with Medicare or assumes enrolment in Parts A and B. If they are in there, the question is settled.

Drug coverage is its own argument

Retiree drug coverage is either creditable or it is not, and that single word decides whether you need Part D.

Creditable means the plan is expected to pay at least as much as standard Medicare drug coverage. Your employer is required to tell you in writing once a year which it is. That notice usually arrives in the autumn and it usually looks like junk mail.

Keep it. If your coverage is creditable, you can skip Part D without penalty. If it stops being creditable and you did not notice, the penalty accrues for every month you go without, and it never comes off.

What to actually go and check

Find the summary plan description, not the glossy brochure. Look for the coordination of benefits section and read it properly.

Then find out what happens to your coverage if you die before your spouse. A surviving spouse is sometimes carried and sometimes dropped, and there is no standard practice. If they are dropped, that is something to know now rather than then.

Then find out whether the employer can change or end the plan. For most private sector retiree plans the answer is yes, at any time, unless a union contract says otherwise. Retiree health is not a vested benefit the way a pension is. Companies have terminated these plans with a letter, and courts have generally let them.

That is an unpleasant thing to learn and I would rather you learned it from an article than from the post.

The one call worth making

Ring the plan administrator and ask three questions. Is Medicare primary for me. Is my drug coverage creditable. What happens to my spouse.

Get the answers, write down who said them and when, and keep that note with the plan documents. When a claim goes wrong two years from now, that note is the fastest route to getting it sorted, because the person you reach then will not be the person you spoke to now and the file will not remember the conversation.

None of this is complicated once it is laid out. It is just nowhere in one place, and the two organisations involved each assume the other one explained it.