Your options for delaying Medicare enrollment
Turning 65 often prompts consideration of Medicare enrollment. However, in specific situations, delaying enrollment in some or all parts of Medicare may be possible without penalty. Understanding the rules is key to making informed decisions about your healthcare and financial future.
If you are still actively working at age 65
If you have group health insurance through current employment, your options for delaying Medicare Part B depend on the employer's size.
- Large employer (20+ employees): With coverage from a large employer, you can typically delay Medicare Part B enrollment without penalty. Premium-free Medicare Part A enrollment is often still recommended.
- Small employer (fewer than 20 employees): If your employer has fewer than 20 employees, Medicare usually becomes your primary insurance at age 65. To maintain comprehensive coverage and avoid penalties, enrolling in both Part A and Part B is generally necessary.
If you have coverage through COBRA
COBRA continuation coverage is not considered creditable coverage for delaying Medicare. Your Special Enrollment Period (SEP) begins when your employment ends, and you must enroll in Medicare during this time to avoid penalties.
Using the Health Insurance Marketplace instead
For most individuals turning 65, enrolling in a Health Insurance Marketplace plan instead of Medicare is not advantageous. Eligibility for premium-free Part A eliminates eligibility for Marketplace subsidies and tax credits. Choosing a Marketplace plan could also lead to permanent late enrollment penalties if you later decide to enroll in Medicare Parts B and D. There are exceptions, but the decision requires careful evaluation.
What are the consequences of delaying enrollment?
Delaying Medicare enrollment when you don't have other creditable coverage can result in significant, lifelong penalties. The Part B penalty is a permanent addition of 10% to your monthly premium for every full 12-month period you were eligible but not enrolled. A Part A penalty may apply if you pay a premium for Part A and delay enrollment. There can also be a penalty for delaying Part D if you go 63 days or more without creditable drug coverage. More details on penalties are available on {Link: KFF.org https://www.kff.org/faqs/medicare-open-enrollment-faqs/enrollment-information-for-people-new-to-medicare/im-turning-65-soon-but-i-like-my-current-insurance-do-i-have-to-enroll-in-medicare-will-there-be-penalties-if-i-dont/}.
Making the right choice at 65
Choosing the best healthcare path at 65 depends on your situation. Here's a comparison of common options:
Comparison of health insurance options at 65
| Feature | Delaying Medicare with Employer Coverage | Opting for Marketplace Coverage | Enrolling in Medicare |
|---|---|---|---|
| Eligibility | Must have creditable employer-based coverage from a company of 20+ employees. | Can enroll if not eligible for premium-free Part A or before Medicare begins. | Typically eligible at 65, or after receiving disability benefits for 24 months. |
| Cost | Costs and coverage determined by the employer plan. Premium-free Part A is often a good addition. | May qualify for subsidies based on income, but generally lose them once Medicare Part A eligible. | Part A is usually premium-free. Part B, C, and D have premiums that may be higher for late enrollees. |
| HSA Contributions | Can continue contributing to a Health Savings Account (HSA) if you have an eligible high-deductible health plan. | Can continue HSA contributions, but enrollment in Medicare ends them. | Must stop HSA contributions once you enroll in any part of Medicare, including premium-free Part A. |
| Coverage Gaps | No gaps if you enroll in Medicare during your Special Enrollment Period after employer coverage ends. | Significant risk of coverage gaps and penalties if not managed correctly at Medicare eligibility. | Coverage is generally seamless if you enroll during your Initial Enrollment Period. |
| Penalties | Avoids late enrollment penalties for Part B if enrollment occurs during Special Enrollment Period. | Risks incurring permanent, monthly late enrollment penalties for Part B and D. | Penalties are avoided by enrolling on time during your Initial or Special Enrollment Period. |
The crucial role of Special Enrollment Periods
If you have creditable employer coverage at 65, a Special Enrollment Period (SEP) allows you to enroll in Medicare without penalty. This 8-month period starts the month after your employment or group health plan coverage ends. COBRA does not count as creditable coverage for this purpose.
The relationship between HSAs and Medicare
Medicare enrollment impacts Health Savings Account (HSA) contributions. Once you enroll in any part of Medicare, including premium-free Part A, you and your employer must cease new contributions to your HSA. Since Part A can be retroactive up to 6 months, it's advised to stop HSA contributions at least 6 months before your planned Medicare start date to avoid tax penalties. However, you can still use existing HSA funds for qualified medical expenses, including premiums for Medicare Parts B, C, and D.
Conclusion
While it is possible to be 65 and not have Medicare, this is generally only advisable for those with creditable employer-based health insurance from a large company. For individuals without such coverage, delaying enrollment poses a significant risk of incurring substantial and potentially lifelong financial penalties. Understanding the rules for Special Enrollment Periods and the impact on HSA contributions is vital. Consulting with your employer's benefits administrator or the Social Security Administration can help determine the best enrollment strategy for your specific situation. Enrolling at the correct time is crucial, and waiting too long without a valid reason can be a costly error.
