Medicare and Employer Health Insurance

Still Working at 65? Do You Need to Sign Up for Medicare?

Turning 65 doesn’t necessarily mean you need to leave your employer health insurance and switch to Medicare.

If you’re still working and covered by an employer health plan, you may be able to delay some parts of Medicare without a penalty. But the rules can be confusing—and the size of your employer, your prescription coverage, and whether you contribute to an HSA can all make a difference.

Here are a few things to know.

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If Your Employer Has 20 or More Employees

If you’re actively working and covered by a qualifying employer group health plan, you may be able to delay Medicare Part B without a late-enrollment penalty.

That doesn’t automatically mean you should delay Medicare. It’s worth comparing what you currently pay for your employer coverage—including premiums, deductibles and copays—with what your costs and coverage might look like under Medicare.

Sometimes staying with the employer plan makes sense. Sometimes Medicare may be the better value.

If Your Employer Has Fewer Than 20 Employees

This is where you need to be especially careful.

With a small employer plan, Medicare is generally the primary payer once you're Medicare-eligible. The employer plan may pay secondary and may even require you to enroll in Medicare.

Simply assuming that your employer insurance means you can safely delay Medicare could create coverage problems.

What About Medicare Part A?

Most people qualify for premium-free Part A and enroll when they become eligible.

However, there is an important exception for people contributing to a Health Savings Account (HSA).

Once you enroll in any part of Medicare—including Part A—you can no longer contribute to an HSA. You can still use the money already in your HSA for eligible expenses.

If you have an HSA and plan to continue working past 65, this deserves special attention before enrolling.

Don't Forget About Prescription Coverage

You may also be able to delay Medicare Part D if your employer prescription coverage is considered creditable coverage—meaning it meets Medicare's standard for prescription drug coverage.

Your employer or health plan should be able to tell you whether your drug coverage is creditable. Keep the documentation you receive showing that you had creditable coverage. The SHIP guide notes that going without Part D or other creditable drug coverage can result in a late-enrollment penalty.

COBRA Is Different

One of the biggest Medicare mistakes is assuming COBRA works the same way as insurance from an active employer.

It doesn't.

COBRA is generally not considered coverage based on current employment for purposes of delaying Part B. The SHIP guide specifically warns that delaying Medicare while on COBRA can result in enrollment penalties.

So if you're approaching 65 and leaving your job, don't automatically elect COBRA without first understanding how it will interact with Medicare.

What If You Want a Medicare Supplement Later?

Timing matters here too.

Your Medicare Supplement (Medigap) Open Enrollment Period generally lasts six months beginning when you're 65 or older and enrolled in Medicare Part B. During this period, you have important protections when purchasing a Medicare Supplement policy.

This is another reason why the decision about when to start Part B deserves some thought.

So, Should You Stay With Employer Coverage or Move to Medicare?

There isn't one answer that works for everyone.

Before making the decision, I recommend looking at:

• How many employees your employer has

• Your monthly employer-plan premium

• Your deductible and maximum out-of-pocket costs

• Prescription drug coverage

• Whether you contribute to an HSA

• Whether a spouse or dependent needs your employer coverage

• What Medicare would cost you compared with your current plan

• How long you expect to continue working

Sometimes the best answer is to stay exactly where you are. Other times, moving to Medicare can provide better coverage or lower costs.

Not Sure Which Makes Sense?

This is exactly the kind of Medicare decision I help clients work through.

Rather than simply asking, “Can I delay Medicare?”, I think the better question is:

“Which option makes the most sense for my situation?”

We can compare your employer coverage with your Medicare options and help you understand the pros and cons before you make a change.

Medicare rules can vary based on individual circumstances. Always verify your employer coverage and eligibility before delaying Medicare.

Source: Louisiana Department of Insurance, Louisiana Senior Health Insurance Information Program (SHIP).