Your Medicare Options While Still Working
Navigating the world of Medicare can be confusing, and being employed past age 65 adds another layer of complexity. The key to making the right decision is understanding your options and the potential consequences of each path. The primary factors to consider are the size of your employer, whether your existing health plan qualifies as 'creditable coverage,' and how you'd like your coverage to be coordinated.
The Critical Role of Employer Size
Your employer's size is one of the most important factors determining your Medicare enrollment strategy. Federal law establishes different rules for employers based on the number of workers they employ.
Large Employers (20 or more employees)
- Delaying Medicare Part B: If your employer has 20 or more employees and you or your spouse is covered by their group health plan, you can generally delay enrolling in Medicare Part B without a late enrollment penalty. Because Part B comes with a monthly premium, many people choose this route to save money. Your employer's plan remains your primary insurance.
- Enrolling in Part A: Part A (hospital insurance) is premium-free for most people who have worked and paid Medicare taxes for at least 10 years. Because it typically costs nothing, many people choose to enroll in Part A at age 65. It can also act as secondary coverage for hospital costs not fully covered by your employer plan.
- HSA Considerations: A crucial detail for those with a Health Savings Account (HSA) is that once you enroll in any part of Medicare, you can no longer contribute to an HSA. This may be a reason to delay Part A enrollment as well, especially if you wish to continue making pre-tax contributions.
Small Employers (fewer than 20 employees)
- Medicare as Primary Payer: For employers with fewer than 20 employees, Medicare typically becomes the primary payer for your health care costs once you turn 65. This means you should enroll in both Medicare Parts A and B during your Initial Enrollment Period to avoid potential coverage gaps and late penalties. Your employer's plan would then become secondary.
- Penalties for Delay: If you delay Part B and your employer's plan isn't considered the primary payer, you could be subject to a late enrollment penalty. This penalty can be a significant cost added to your Part B premium for as long as you have Medicare.
Comparing Your Enrollment Paths
Understanding how your options play out is essential. The following table provides a quick comparison of potential scenarios for enrolling in Medicare while still working.
| Feature | Large Employer (20+ employees) | Small Employer (under 20 employees) |
|---|---|---|
| Part A Enrollment | Can enroll in premium-free Part A anytime. Must consider HSA contributions. | Most should enroll during Initial Enrollment Period to avoid coverage gaps. |
| Part B Enrollment | Can delay without penalty if covered by employer plan. Use Special Enrollment Period when job ends. | Must enroll during Initial Enrollment Period. Delaying can result in penalties. |
| Primary Payer | Employer Group Health Plan. | Medicare. |
| Secondary Payer | Medicare (if enrolled). | Employer Group Health Plan. |
| Late Penalties | No penalty for delaying Part B if covered by creditable employer insurance. | Potential late enrollment penalties if Part B is delayed. |
Your Initial and Special Enrollment Periods
When you turn 65, you enter your seven-month Initial Enrollment Period (IEP). This period begins three months before your 65th birthday, includes your birth month, and ends three months after. For those with large employer coverage, the Special Enrollment Period (SEP) is a crucial alternative.
The SEP allows you to delay Part B (and premium Part A) enrollment without penalty. This period is eight months long and begins after your employment or group health coverage ends (whichever comes first). It is important to remember that COBRA or retiree coverage does not count as active employer coverage that qualifies you for an SEP.
Actionable Steps for Working Seniors
Making the right decision requires careful planning. Here is a step-by-step guide to help you navigate the process:
- Talk to your HR Department: Before you do anything, speak with your employer's benefits administrator. Clarify the company's size, confirm if your health plan is creditable, and ask how the plan works with Medicare.
- Review your current coverage: Evaluate your employer's plan. What are the premiums, deductibles, and co-pays? How does this compare to the standard Part B premium and the out-of-pocket costs of Original Medicare?
- Consider an HSA: If you have a Health Savings Account and wish to continue making contributions, you must delay enrolling in all parts of Medicare, including premium-free Part A. Keep this in mind when timing your decisions.
- Enroll in premium-free Part A (if applicable): For most, enrolling in Part A at age 65 is a no-brainer, as it costs nothing and can add an extra layer of coverage. Just be mindful of the HSA rule.
- Strategize your Part B Enrollment: If you are at a large company, delaying Part B is often the best financial move. If you're at a small company or don't have creditable employer coverage, enroll in Part B during your IEP to avoid late penalties.
- Use Your Special Enrollment Period: When you eventually stop working or lose your employer coverage, use your 8-month SEP to enroll in Part B. Make sure to do so promptly to avoid gaps in coverage and potential late penalties.
- Review Coordination of Benefits: If you choose to have both Medicare and employer coverage, understand which plan pays first. For large employers, the employer plan pays first. For small employers, Medicare typically pays first.
Additional Considerations and Resources
For detailed information and guidance, it is highly recommended to consult the official source. The official website for the Centers for Medicare & Medicaid Services (CMS) is a comprehensive and reliable resource for all Medicare-related questions. You can find detailed information on eligibility, enrollment periods, and plan comparisons there. Checking with an independent insurance broker specializing in Medicare can also help you evaluate all your options, including Medicare Advantage plans, which offer an alternative to Original Medicare.
Conclusion
Your work status at age 65 does not prevent you from being eligible for Medicare, but it does mean you have important decisions to make regarding your enrollment. Taking the time to understand the implications for your specific situation—especially your employer's size—is critical to avoiding costly mistakes like late enrollment penalties or gaps in coverage. By following the steps outlined here and leveraging reliable resources, you can confidently navigate your options and secure the health insurance that best suits your needs while continuing your career.
