More than 20 percent of people 65 to 69 are still working. Many of them keep insurance through their job. Medicare and employer coverage can get confusing in this situation. The rules depend on your company size, and getting them wrong can cost you for life. Here is what you need to know.
The basic rule
At 65, you become eligible for Medicare. But if you have insurance through a job, you might not need to sign up right away. The rule depends on how big the company is.
If the company has 20 or more employees
You can usually delay Medicare without a penalty. Your employer plan is the main insurance. Medicare would be second if you signed up.
Most people in this case delay Part B and Part D. Part B costs over 200 dollars a month, and your employer plan already covers what Part B covers. Why pay twice?
When you do eventually retire and lose the employer coverage, you have eight months to sign up for Part B without a penalty. This is called a Special Enrollment Period.
If the company has fewer than 20 employees
The rule flips. Medicare becomes the main insurance the day you turn 65. The employer plan becomes second.
In this case, you need to sign up for Medicare at 65. If you do not, your employer plan can refuse to pay claims, since Medicare should have been first.
Many small business workers do not know this. They keep their employer insurance, skip Medicare, and find out years later their employer plan was paying things it should not have. That can lead to back bills.
What about Part A?
Part A is the hospital part. For most people, it is free at 65. If it is free, you can sign up and there is no downside. Most people do.
There is one exception. If you have a Health Savings Account through your employer, signing up for any part of Medicare ends your ability to put money into the HSA. If you want to keep adding to your HSA, you cannot sign up for Medicare at 65.
What about Part D?
If your employer plan includes prescription drug coverage that is at least as good as Medicare's drug coverage, you can delay Part D. Your plan will send you a letter every year that says whether your coverage is creditable. Keep those letters.
If your employer drug coverage is not creditable, you should sign up for Part D at 65, even if you keep the rest of the employer plan. Otherwise, you owe a late penalty for life.
What about my spouse?
If your spouse is on your employer plan and turns 65, the same rules apply to them. Their age matters, not yours. If you keep working and the company has 20 plus employees, your spouse can delay too. If the company is small, your spouse needs Medicare at 65.
COBRA does not count
This trips a lot of people up. COBRA is not active employer coverage. If you retire at 65 and go on COBRA, you do not get extra time to sign up for Medicare. The clock starts when you stop working, not when COBRA ends.
If you are on COBRA at 65, sign up for Medicare during your Initial Enrollment Period. Do not wait.
The retiree health plan question
Some employers offer health insurance to retirees. These plans almost always require you to be on Medicare at 65. The retiree plan becomes secondary to Medicare. If you do not sign up for Medicare on time, the retiree plan may not pay claims.
Check with your benefits person before retiring. Ask them: "When I retire, do I have to be on Medicare to use this retiree plan?"
A simple summary
If your company has 20 or more workers, and you keep working past 65, you can usually delay Medicare safely. Sign up for free Part A if you want. Skip Part B and Part D until you retire.
If your company has fewer than 20 workers, you need to sign up for Medicare at 65. Period.
When in doubt, ask your benefits manager. The key question is: "Is your plan the primary insurance for me after I turn 65?"