You can choose to enroll in Medicare once you become eligible, even if you are turning 65 and still working. This situation may apply to you if you still have access to health insurance through your job or your spouse’s job once you turn 65.
Seniors over 65 can decide to initiate or delay Medicare while still working. You may sign up for Medicare, to be used in conjunction with your group/employee benefits, during the initial enrollment period, enroll in Part A (hospital benefits) only and delay Part B (medical benefits), or delay both Part A and Part B coverage.
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When Do You Normally Accept Medicare?
Generally, signing up for Medicare during your initial enrollment period is the only surefire way to avoid a late enrollment penalty; however, you may sign up during one of these three enrollment periods:
Initial Enrollment Period (IEP)
- Eligibility requirements: Must be turning 65
- When does it occur? Over seven months, starting three months before your 65th birthday and ending three months after your birthday month
- Associated penalties: None
Special Enrollment Period (SEP)
- Eligibility requirements: Aged 65 or older with active employer coverage, recently terminated employer coverage while you or your spouse are still working, or recently terminated employment with existing temporary health coverage
- When does it occur? Any time you are still working with active employer coverage or within eight months of the termination of your or your spouse’s employment or employer coverage
- Associated penalties: None
General Enrollment Period (GEP)
- Eligibility requirements: Anyone over age 65 who does not have other coverage (such as employer benefits) and missed other enrollment periods
- When does it occur? January 1–March 31
- Associated penalties: 10% premium increase for Part A (though most people qualify for $0 Part A premiums) for twice the number of years you delayed enrollment after turning 65; 10% increase for Part B for each year you delayed enrollment
How Does Medicare Work When You’re Employed?
Your insurers can coordinate your employer and Medicare benefits while you are still working, or you can delay Medicare enrollment, often penalty-free in this scenario.
Who Can Delay Medicare Enrollment?
You can delay Medicare enrollment if you receive benefits through your employer since this qualifies you for a special enrollment period when you retire, or your employer coverage ends. Since people who worked for at least ten years and paid social security taxes enjoy $0 Part A premiums, many workers enroll in Part A but delay Part B, which requires a monthly premium.
Will You Be Charged a Penalty?
If you delay Medicare while still working (if you have employer coverage), you can avoid paying a penalty for waiting to enroll if you sign up during the eight-month Special Enrollment Period following the termination of your group benefits. If you miss your IEP and SEP after losing employer coverage, you’ll pay higher premiums for Parts A and B for the rest of your life.
Can You Have Employer Healthcare and Medicare Simultaneously?
Yes, you can use Medicare and employer coverage simultaneously; however, depending on the size of your employer, the decision may not be up to you. Larger companies with more than 20 employees may offer more flexibility, while smaller companies often require you to sign up for Medicare when first you’re eligible. Also, you may not contribute to a health savings account once you enroll in Medicare.
Coordination of Benefits
Coordination of benefits (COB) is the process by which insurance providers decide who pays first in a dual-enrollment situation. For employees enrolled in both group benefits and Medicare, COB determines whether your group insurer or Medicare is the primary or secondary payer of medical expenses. Medicare typically pays first at small employers with less than 20 employees and second at larger ones.
How Your Employment Circumstances Affect Medicare Enrollment
Depending on the size of your employer and your existing group benefits, you may decide to defer or delay Medicare enrollment.
You’re Working For a Large Company
- The law requires companies that employ 20 people or more to offer you the same group benefits as your younger coworkers.
- You will not be penalized for deferring to employer coverage and delaying Medicare enrollment.
- You may choose to enroll in Medicare Part A during the IEP and delay Part B benefits or delay both Parts A and B.
- Your provider cannot mandate that you select Medicare in this situation; you can choose to keep your group coverage and delay Medicare, decline group coverage and enroll in Medicare instead, or use Medicare in tandem with your group plan.
You’re Working For a Small Company
- Small companies of less than 20 employees are not required by law to extend the same group coverage options to Medicare-eligible employees.
- You may not incur a penalty for delaying Medicare enrollment since you likely qualify for an SEP if you have employer coverage, but you could experience a lapse in benefits.
- Since most workers can get Part A for “free,” some delay Part B benefits, but the most foolproof way to guarantee coverage is to enroll in Parts A and B during your IEP.
- At a small company, your employer makes the choice for you, and most small employers require you to enroll in Medicare when you turn 65.
You Have Insurance From a Different Source
- Alternate (non-employer) coverage includes state-based Medicaid and Affordable Care Act (ACA) plans.
- You may have Medicaid and Medicare with group coverage; however, the coordination of benefits dictates that Medicaid always pays last. By law, you may not hold Medicare and ACA coverage at the same time.
- You may incur a late enrollment penalty if you miss the initial enrollment window and do not qualify for an SEP.
- To be dual-eligible for both Medicare and Medicaid, you must qualify for Parts A and B, while the prospect of delaying just Part A or Part B is null if you have an ACA plan since the two types of coverage cannot coexist.
- Your employer cannot decide for you; however, if you decline the group benefits offered to you at work and enroll in an ACA plan instead, you will likely lose your eligibility for financial assistance through the Marketplace.
You Have COBRA
- The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to temporarily extend your employer coverage even if you involuntarily lose your job.
- If you have COBRA before you turn 65, your COBRA coverage may end once you sign up for Medicare, or if it continues, you may only pay a small portion of your medical costs.
- You may owe a penalty if you wait to sign up for Part B during general enrollment.
- You may choose to only enroll in one Medicare part but may incur penalties for doing so.
- Your provider cannot mandate you to enroll in Medicare if you have COBRA; however, it is in your best interest since Medicare is the primary payer in this scenario and will keep you covered even after COBRA ends.
- COBRA does not extend the amount of time available to enroll in Medicare.
Your Job Provides a Healthcare Stipend
- Some small employers pay employees a healthcare stipend or a fixed, taxable “allowance” to be used toward private insurance when the employer cannot afford group coverage.
- Medicare generally supersedes stipend-funded coverage and pays first under the coordination of benefits.
- You may incur a penalty for declining enrollment in Medicare when you first become eligible.
- You may enroll in just one part of Medicare; however, you can only achieve maximum protection by signing up for Parts A and B.
- Your private insurance provider may require you to enroll in Medicare once you turn 65 and reduce or deny benefits if you defer Medicare enrollment once you are eligible.
How Employment Affects…
You may opt to purchase additional coverage for medical services or prescription drugs or to help with out-of-pocket expenses.
If you are turning 65 and still working, you can enroll in Medicare Advantage and keep your employer coverage at the same time. You must enroll in Original Medicare (Parts A and B) to qualify for a Medicare Advantage plan. Your initial opportunity to enroll in Medicare Advantage begins when you start receiving Part B benefits; otherwise, you must wait until open enrollment.
Medicare Advantage plans are purchased separately through private insurers and come with an additional premium. Since Medicare Advantage typically offers extra benefits, including vision, hearing, dental, and prescription drug coverage, you may prefer this option if you require but do not receive these services through your existing group plan.
Medicare Part D
Medicare Part D can offer health savings to seniors needing prescription drug coverage, which is not included in Original Medicare. Many Medicare Advantage plans now also include prescription drug benefits. While you can enroll in Medicare Part D and employer coverage concurrently, you cannot hold standalone Part D and Medicare Advantage coverage at the same time.
Since you must enroll in Original Medicare to purchase a standalone Part D plan, you can sign up for Part D during your IEP or wait until the next open enrollment period, which lasts from October 15–December 7 each year. You may need to purchase a Part D plan if your employer coverage does not include adequate prescription drug benefits.
Medigap helps pay for out-of-pocket expenses like deductibles, copays, and coinsurance. You are eligible for Medigap, or Medicare Supplement Insurance, if you continue to work and receive employer benefits past retirement age. The ideal time to enroll in Medigap is within six months of signing up for Original Medicare when you first turn 65.
During your one-time, six-month Medigap Open Enrollment Period, you can buy a Medigap policy regardless of any preexisting health conditions. Buying or switching Medigap coverage after your open enrollment period ends requires a medical underwriting process. Some employer coverage already includes similar options to reduce out-of-pocket costs.
Evaluating Your Options
You should consider whether Medicare benefits, employer coverage, or dual enrollment best serves your specific healthcare needs and fits your budget.
Choose Medicare If…
- You work for a company that employs less than 20 people. Smaller companies tend to assign Medicare as the primary payer under COB; group insurers of small companies typically require employees to sign up for Medicare when they become eligible.
- You do not need coverage for your spouse or family. Medicare only offers individual benefits, ideal if another insurer covers your spouse and/or dependents.
- Your employer health insurance plan lacks the services you need. If your employer does not offer comprehensive coverage, you may find Medicare offers broader add-on options, including Medicare Advantage, Part D prescription drug coverage, and Medigap.
- You want to avoid penalties and keep long-term options open. The surest way to avoid penalties and lapses in coverage is to enroll in Medicare Parts A and B during your IEP, provided you can afford to pay your monthly premiums indefinitely. IEP enrollment also enables you to add or change additional coverage, such as Medigap, more freely.
Choose Employer Health Insurance If…
- You work for a company that employs more than 20 people. Larger companies take care of the majority of your medical expenses as the first payer under COB, and they also tend to offer broader coverage and plan options than a small business.
- Your plan also covers your spouse and/or dependents. One of the most appealing benefits of a group plan is that it can extend benefits to your spouse and family, unlike Medicare insurance.
- Your employer coverage is tailored to your preferences. Keep your plan if it includes services you would have to pay extra for on Medicare, such as vision, dental, hearing, prescription drugs, and gap coverage for out-of-pocket costs.
- You want to avoid paying additional premiums for the time being. Many people qualify for “free” Part A benefits but delay enrolling in Part B to spare the monthly expense. If your employer coverage meets your needs for now, you can save money by waiting to enroll later during your SEP.
Choose Dual Enrollment If…
- You plan to retire soon. The best time to enroll in Medicare is during your IEP, even if you plan to retire (and give up your employer coverage) later. Dual enrollment in this scenario allows you to seamlessly transition to Medicare when the time comes.
- Your plan requires you to enroll in Medicare. Enrollment once you turn 65 is mandatory in many small companies. In most cases, your employer cannot deny group coverage but can require dual enrollment once you become eligible for Medicare.
- You have complex medical needs. Dual enrollment is ideal for workers with new or existing medical conditions and frequent healthcare requirements since COB ensures you get the widespread care you need and many expenses paid for.
- You are unsure about the sustainability of your benefits in the long term. If you receive benefits through your employer or your spouse’s employer but are uncertain about the longevity of your provider or plan, you may want to reinforce your coverage with Medicare insurance.
Putting It All Together
If you are still working when you turn 65 and become eligible for Medicare, you can use employer coverage, Medicare, or both through dual enrollment. Choose to delay enrolling in one or both parts of Original Medicare. You can avoid paying a lifelong penalty if you sign up within eight months of losing your group benefits during your SEP.
Many factors affect when to sign up for Medicare if you are still working, including coordination of benefits. Large companies tend to offer more flexibility around choosing your preferred insurance arrangement, while smaller companies often require workers to enroll in Medicare when they turn 65. Consider which type of benefits best suit your medical and financial needs.