Medicare When Working Past 65

In 2024, 13 million Americans aged 65 and older are expected to still be in the labor force. As Americans continue to work longer, find out if you can keep your employer’s health coverage while still employed.
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Introduction

For most Americans, eligibility for Medicare will start on their 65th birthday.  However, as more Americans continue to stay in the workforce past the traditional Medicare eligibility age of 65, many may consider keeping the health insurance provided by their employer (or their spouse’s employer) and whether they should enroll in Medicare while working.  So, let’s find out if you are allowed to keep your employer’s insurance.

Why do I need to care about Medicare while working?

It’s important to make sure you understand your options as it relates to Medicare enrollment when you turn 65 as you may incur Late Enrollment Penalties if you do not enroll in Medicare Part A (Hospital Insurance), Part B (Medical Insurance) and Part D (Prescription Drugs) when you are first eligible to enroll.

Penalties are generally tied to the length of time you could have signed up for Medicare but did not and you may have to pay this penalty for as long you have Medicare.

Do I have to enroll in Medicare if I have Employer Coverage?

If you are over 65 and receiving health insurance coverage through your (or your spouse’s) employer, whether you need to enroll in Medicare when you are first eligible is determined by the size of the employer:

  • If the employer has 20 or more employees, you are eligible to:
    • (1) defer Medicare enrollment and stay on employer coverage
    • (2) replace your employer coverage with Medicare; or
    • (3) have both Medicare and employer coverage.  In this situation, your employer coverage is the primary payor, while Medicare will be a secondary payor for any Medicare-covered services and will supplement your group plan benefits.
  • If the employer has fewer than 20 employees:  you will need to enroll in Medicare when you are first eligible during your Initial Enrollment Period.

If you are receiving coverage through your spouse, you should also double-check with the plan administrator to see if the plan requires you to get Medicare in order to remain on the plan as a dependent.

Initial Enrollment Period

If you decide to enroll in Medicare when you are first eligible, your Initial Enrollment Period is the 7-month period that begins 3 months before the month of your 65th birthday and ends 3 months after the month of your 65th birthday.

Should I delay Medicare when working past 65?

Medicare Parts A (Hospital Insurance)

Most people are eligible for Medicare Part A premium-free if they (or their spouse) have paid Medicare taxes for at least 10 years (40 quarters).  In this situation, it may be beneficial to enroll in Medicare Part A even if you are eligible to defer enrollment because Part A may work alongside employer group insurance to lower your costs if you have a hospital stay.  Plus, it’s free!

However, if you are deciding to enroll, make sure to note that if you are currently on a high deductible health plan (HDHP) and have a Health Savings Account (HSA) you cannot continue to make any contributions to your HSA once you enroll in Medicare.

Medicare Part B (Medical Insurance)

If you are eligible to defer enrollment in Medicare, you may decide to defer Medicare Part B if you feel that your employer’s coverage provides sufficient medical insurance coverage.

If you want to enroll in Medicare Part B, you will need to pay the Part B premium of $148.50 per month.  This amount may also be higher depending on your income level.

Medicare Part D (Prescription Drugs)

Before delaying enrollment in Part D, you should also make sure you have ‘creditable drug coverage’.  If you do not have ‘creditable drug coverage’ you will need to enroll in a standalone Part D plan (also known as a Prescription Drug Plan or ‘PDP’) during your Initial Enrollment Period to avoid the Part D late enrollment penalty.

‘Creditable drug coverage’ means prescription drug coverage that is expected to pay, on average, as much as Medicare’s standard prescription drug coverage.  If you are on your employer’s health plan, you should receive a notice from your employer or plan around September of each year, informing you if your drug coverage is creditable. If you have not received this notice, you should contact your employer’s human resources department, drug plan, or benefits manager to check.

Do I need to notify Medicare if I delay enrollment?

You typically do not need to do anything when you are delaying Medicare enrollment.  The only exception is if you are already receiving Social Security or Railroad Retirement Board benefits.  If you are receiving either, you will automatically be enrolled in both Medicare Parts A and B.  If you receive Social Security benefits you are required to at least enroll in Medicare Part A.  If you want to defer Medicare Part B, you will need to notify Social Security.

What should I do when I retire or lose Employer Coverage?

If you are eligible to defer your Medicare enrollment and choose to do so, you must enroll in Medicare as soon as you lose employer coverage in order to avoid Late Enrollment Penalties:

  • Medicare Part A and B: If you delay Part A and/or B, you must enroll in Medicare during your Special Enrollment Period.  The Special Enrollment Period is defined as the 8-month period that begins after you lose your (or your spouse’s) employer coverage.
  • Medicare Part C: If you delayed enrollment into Part A and/or B you only have a 2 month period after the month your coverage ends to enroll in a Medicare Advantage plan
  • Medicare Part D: If you delay enrollment in Part D coverage, you must enroll in a standalone Part D plan (or Medicare Advantage plan with prescription drug coverage) within 63 days of losing your ‘creditable drug coverage’.

If your employer provides retiree health coverage, you should contact your plan’s benefits administrator to learn how the employer coverage may work alongside Medicare. Typically once you retire, any employer-provided coverage (such as COBRA) becomes a secondary payor behind Medicare.

Medicare Late Enrollment Penalties

If you are not eligible to defer Medicare enrollment and do not enroll when you are first eligible or if you are eligible to defer but do not enroll during your Special Enrollment Period.  Late Enrollment Penalties can last for as long as you have Medicare coverage and the way penalties are calculated differently depending on whether it is for Part A, Part B, or Part D.

To understand more about the penalty amounts, read our article on it here.

Final Words

As more Americans remain in the workforce for longer, many may consider keeping their employer insurance as they work past the age of 65.  As you reach the Medicare eligibility age, it is important to check whether your employer’s insurance makes you eligible to defer enrollment in Medicare.  Late Enrollment Penalties can last for as long as you have Medicare coverage so the penalties can add up.

At CoverRight, we’re here to help you find the right coverage that you deserve.   Reach out today and start finding the best Medicare plan for you.

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