What Is a Medicare Carve Out?
A Medicare carve out plan is supplemental insurance companies provide retirees that pays the difference between the insurance payouts the company provides employees and what Medicare pays. If a given procedure would warrant a smaller payment from Medicare than it would from the company's insurance, the company pays the difference.
Medicare carve out plans are designed to provide retirees with the same level of health insurance they had before retiring while reducing the cost of that health care to the company. For every procedure, the company compares its benefits to Medicare and makes the appropriate payments. The end result is that the retiree should see no difference in the amount covered by insurance after retirement.
In some cases, Medicare carve out plans may have their own deductible and co-insurance standards. Subscribers should check their benefit booklets to understand exactly what rules apply to various medical services.
Companies may also offer additional plans that interface with Medicare. A Medicare bridge plan provides early retirees with health care until they reach the age of eligibility for Medicare coverage. Medicare wrap-around plans offer additional benefits above and beyond those provided by Medicare, such as reduced co-payments and deductibles for service. In many ways, wrap-around plans are similar to Medicare Advantage plans, but they are administered to retirees by the company rather than chosen by individuals.