Turning 65 does not always mean you need to enroll in every part of Medicare right away. Many people are still working, covered by an employer health plan, or covered through a spouse’s job.
In some situations, you may be able to delay Medicare enrollment without a late penalty. In other situations, waiting can create coverage gaps or higher costs later. The right choice often depends on the size of the employer, the type of health plan, and whether you contribute to a Health Savings Account, also called an HSA.
Can You Delay Medicare If You Are Still Working?
You may be able to delay Medicare Part B if you have health coverage from your current job or your spouse’s current job. Part B is the part of Medicare that generally covers doctor visits, outpatient care, preventive services, and medical equipment.
The key word is current. Coverage based on active employment is treated differently than retiree coverage, COBRA, or individual insurance purchased on your own.
If you or your spouse works for an employer with 20 or more employees, the employer plan may generally remain your primary coverage after age 65. In that case, some people consider delaying Part B while they keep the employer plan.
If the employer has fewer than 20 employees, Medicare may generally become the primary payer at age 65. Even if you stay on the employer health plan, you may need Medicare Part A and Part B to help avoid unpaid medical bills. Small-employer rules can vary, so it is wise to ask the benefits office how the plan coordinates with Medicare.
What Happens If You Delay Medicare Part B?
Many people who have qualifying employer coverage can use a Special Enrollment Period when the job or health coverage ends. This may allow you to enroll in Part B without the usual late-enrollment penalty.
This enrollment window generally lasts for eight months after the employment ends or the group health coverage ends, whichever happens first. Waiting until the end of that window may leave you without coverage for a period of time, so it can help to begin the process before your employer plan ends.
Your employer may need to complete a form confirming your active group health coverage. Keeping records of your coverage can make enrollment easier later.
It is important to understand that COBRA usually does not count as active employer coverage for delaying Part B. Retiree health plans also may not protect you from a Part B late-enrollment penalty. If you elect COBRA after leaving work, you may still need to enroll in Part B promptly.
Should You Enroll in Medicare Part A While Working?
Part A generally helps cover inpatient hospital care, skilled nursing facility care after a qualifying hospital stay, hospice care, and limited home health services. Many people do not pay a monthly Part A premium because they or a spouse paid Medicare taxes for enough working quarters.
Because Part A may have no monthly premium for many people, enrolling can sound simple. However, there is an important exception for people who contribute to an HSA.
Once you enroll in any part of Medicare, you generally can no longer contribute to an HSA. This includes Medicare Part A. If you are 65 or older and want to continue making HSA contributions through an employer plan, you may need to delay both Part A and Part B.
There can also be a timing issue when you apply for Medicare after age 65. Part A coverage may sometimes be retroactive for up to six months, although it generally cannot begin before the month you turned 65. To help avoid excess HSA contributions, many people consider stopping HSA contributions at least six months before applying for Medicare. A tax professional can help you understand how this rule may apply to your situation.
What About Medicare Part D for Prescription Drugs?
Medicare Part D is optional prescription drug coverage. If you have prescription coverage through your employer or spouse’s employer, you may be able to delay Part D as well.
Before delaying, ask the employer plan whether its drug coverage is creditable. Creditable coverage means the plan is expected to pay, on average, at least as much as standard Medicare Part D coverage. Employers generally send a notice each year telling you whether the coverage is creditable.
Save that notice. If you later enroll in Part D, it may help show that you had qualifying drug coverage and may help you avoid a late-enrollment penalty.
COBRA drug coverage and retiree drug coverage can be complicated. Even if the prescription coverage seems strong, it may not work the same way as active employer coverage for Medicare enrollment purposes. Consider checking your choices before leaving work.
How Does Employer Coverage Affect Medicare Supplement Plans?
A Medicare Supplement plan, also called Medigap, works with Original Medicare. It may help pay some of the deductibles, coinsurance, and copayments left by Medicare Parts A and B.
You generally need to be enrolled in both Part A and Part B before a Medicare Supplement plan can begin. Your one-time Medigap Open Enrollment Period generally starts when you are age 65 or older and enrolled in Part B. It lasts six months.
For someone working past 65, delaying Part B may also delay the start of this Medigap enrollment period. During that six-month period, you may generally have strong consumer protections when buying a Medicare Supplement plan. After it ends, you may be asked health questions in many states, and acceptance may depend on medical underwriting unless you qualify for another guaranteed-issue right.
Medicare Supplement benefits are standardized in most states, but plan availability, premiums, and underwriting rules can vary by carrier and state.
A Simple Checklist Before You Delay Medicare
- Ask your employer benefits office whether the plan is based on active employment.
- Ask how many employees the company has and whether Medicare would be primary or secondary.
- Find out whether the prescription plan is creditable for Medicare Part D.
- Consider whether you or your employer contributes to an HSA.
- Compare the employer plan’s costs and provider access with the Medicare choices available to you.
- Keep letters and forms showing your health coverage dates.
- Start planning before retirement or before employer coverage ends.
Medicare enrollment while working can feel confusing, but a little planning may help you avoid rushed decisions. If you would like free, no-pressure help understanding how Medicare Supplement coverage may fit after you leave employer insurance, reach out to Eric for guidance tailored to your situation.