Your Medicare and Employer Coverage Options at 65
When you turn 65, you have several choices regarding Medicare, especially if you are still working and have job-based health insurance. The path you take depends largely on the size of your employer and your overall financial and health situation. Understanding these options can help you avoid costly late enrollment penalties and ensure you have the best coverage for your needs.
If Your Employer Has 20 or More Employees
If you work for a large employer with 20 or more employees, your employer health plan is the primary payer of your medical bills. This means it pays your medical claims first, and Medicare pays second. In this scenario, you have flexibility with your Medicare enrollment.
- Delaying Medicare Parts A and B: You can delay enrolling in both Part A and Part B without facing a late enrollment penalty, as long as you have creditable coverage from your job. When your employment or job-based health coverage ends, you will have a Special Enrollment Period (SEP) to sign up.
- Enrolling in Premium-Free Part A: Many individuals choose to enroll in Medicare Part A at age 65 because it is typically premium-free if you or your spouse paid Medicare taxes for at least 10 years. Part A can act as secondary coverage to your employer's plan, helping to cover some hospital costs.
- Important HSA Consideration: If you have a Health Savings Account (HSA) and want to continue making contributions, you should not enroll in any part of Medicare. Once you enroll, you are no longer able to contribute to your HSA, though you can continue to use the funds already in the account.
If Your Employer Has Fewer Than 20 Employees
For those working at smaller companies with fewer than 20 employees, the situation is different. In this case, Medicare becomes the primary payer once you turn 65, and your employer's plan is secondary.
- Mandatory Enrollment: To avoid gaps in coverage and potential penalties, you should enroll in both Part A and Part B during your Initial Enrollment Period (IEP), which begins three months before you turn 65 and ends three months after. If you miss this window, your employer's plan may not cover the services Medicare would have paid for, leaving you with higher costs.
- Enrollment Penalties: If you miss your IEP and don't qualify for a Special Enrollment Period, you may face late enrollment penalties for delaying Part B. This is a monthly premium increase for every year you could have had coverage but didn't sign up.
Navigating Other Types of Coverage
Coordination between Medicare and other types of insurance, such as COBRA or retiree benefits, also requires careful planning.
- COBRA: If your employment ends and you choose COBRA, your plan will be secondary to Medicare. It is crucial to enroll in Medicare Part B when your employment ends, not wait until COBRA expires, to avoid a late enrollment penalty.
- Retiree Coverage: If you have health coverage through a former employer, this is different from current employment coverage. Medicare typically pays first, and the retiree plan pays second. It is essential to contact your benefits administrator to understand how your specific retiree plan works with Medicare.
Comparing Medicare and Employer-Sponsored Health Plans
To make the best decision, consider the costs and coverage of both your employer plan and Medicare.
| Feature | Large Employer Plan (20+ Employees) | Small Employer Plan (< 20 Employees) | Medicare (with creditable employer coverage) |
|---|---|---|---|
| Primary Payer | Employer Plan | Medicare | Depends on employer size |
| Enrollment Decision | Optional to delay Part B without penalty | Required to enroll in Parts A & B to avoid coverage gaps | Optional if large employer, recommended for small employer |
| Late Enrollment Penalty | No penalty for Part B if covered by current employment | Yes, potential penalties for delayed Part B | No penalty for Part B if covered by creditable employer insurance |
| HSA Contributions | Can continue contributions if delaying all Medicare parts | Must stop contributing to HSA if enrolling in Medicare | Must stop contributions to HSA once enrolled |
| Premium Cost | Varies by employer plan | Varies by employer plan | Part A is usually free; Part B has a monthly premium |
| Coordination | Employer plan pays first, Medicare second | Medicare pays first, employer plan second | Varies, can lead to overlapping coverage |
Making Your Enrollment Decisions
- Talk to Your HR Department: This is the single most important step. Your benefits administrator can confirm if your plan is considered creditable coverage and how it coordinates with Medicare. They can also provide details on any changes to your coverage if you enroll in Medicare.
- Compare Costs: Look closely at the total costs, including premiums, deductibles, and out-of-pocket maximums. For some, a premium-free Part A combined with a robust employer plan might be the most cost-effective solution. For others, switching entirely to Medicare and a supplemental Medigap plan may be cheaper.
- Consider Your Family: If you have dependents on your employer's plan, remember that Medicare does not cover them. If you drop your employer coverage, they will lose their insurance and will need a separate policy.
- Understand Your Special Enrollment Period (SEP): If you are delaying enrollment due to creditable coverage from your job, you have an 8-month SEP to sign up for Medicare Parts A and B without penalty after your employment or group coverage ends. However, if you want a Medicare Advantage (Part C) or Part D plan, you only have the first two months of your SEP to enroll without a late penalty.
Conclusion
Yes, you can get Medicare at 65 and keep working. However, making an informed choice requires understanding how your employer's size impacts your primary coverage and enrollment options. By carefully evaluating your personal situation, comparing costs, and coordinating with your HR department, you can avoid costly mistakes and ensure a smooth transition to Medicare when the time is right. For official government information, visit the Medicare website.
