For those who are still working, you may have a variety of options available to you when you become eligible for or want to enroll in Medicare. For those who are working and turning 65 soon, consider checking in with your benefits administrator to see if you can concurrently keep your health benefits with Medicare enrollment. For those who are working after 65 and want to transition into Medicare, there are important dates to keep in mind to avoid paying a late enrollment penalty. And for those thinking about retiring before age 65, retiree health benefits (if available) can be an important source of health insurance.
There are many reasons why people may want to keep their current employer-sponsored healthcare insurance: familiarity with covered providers, premiums that are financially subsidized by the employer, lower deductibles, and out-of-pocket expenses, just to name a few. The number of employees your organization has will determine your enrollment options with Medicare.
Typically, employers with 20 employees or less may require you to enroll in Medicare Parts A and B when you turn 65. While you can still elect your employee benefits to access prescription drug coverage, your Medicare coverage will pay first and your employer coverage will pay as a secondary, or after Medicare has paid.
When an employer has more than 20 employees, you may be able to delay Medicare enrollment until you are no longer eligible for health benefits. In this circumstance, it may be beneficial to enroll in Medicare Part A since it is typically provided at no cost to you (if you have paid Medicare taxes for more than 40 working quarters). Part A would only apply if you are admitted to the hospital and will coordinate healthcare costs with your employer insurance. Medicare also gives you the option to see providers across the nation, leading to a wider network and less out-of-network costs. If you enroll in Part A, you will have your assigned Medicare number, which will make full Medicare enrollment easier when you do decide to complete enrollment in Part B, D, and a Medigap plan, if applicable. Your employer coverage would provide coverage for all outpatient healthcare, as well as prescription drug coverage.
Please Note: If you are or will be receiving Social Security benefits, please note that you will automatically be enrolled in Medicare Part A at 65. This waives your option to delay Medicare enrollment.
Alternatively, you may transition completely to Medicare from your employer coverage. This may suit those who prefer to pay Medicare or Medicare Advantage premiums over their current employer insurance. This may also be a more cost-effective option depending on your health utilization, but it may be helpful to complete a HealthPlanning Analysis to assess the financial considerations.
Check with your HR department and/or benefit plan administrator to confirm what options are available.
A gap in health insurance coverage is typically on most people’s minds when they retire before 65. In fact, the availability of health coverage is a driving factor in retirement timing.
Below are a few options to consider:
COBRA:
COBRA is essentially a continuation of your current coverage but at the full cost (aka without employer cost-sharing). It typically lasts up to 18 months but in some circumstances up to 36 months. This option may be suitable for those who want to keep their current in-network providers and services and have already accessed healthcare services that accrue to their annual deductible. This may also be a good option for those who are 64 to serve as a “bridge” to their Medicare eligibility.
Individual Marketplace:
You can look at your state Marketplace for a plan if your employer does not offer retiree health coverage or if you do not wish to enroll in COBRA. This may be a suitable option if your household’s income will decrease after you stop working because of premium tax credits or cost-sharing reductions that can lower the cost of these plans.
Spousal Benefits:
If your spouse will still be working and has employer healthcare benefits, the end of your employment and losing your coverage qualifies you to enroll in their plan. A HealthPlanning Analysis can help evaluate the financial implications of this choice as compared to other options.
Pre-65 Retiree Health Benefits:
Some companies offer pre-65 retiree health benefits that are either the same as, or similar to, their current employer's health insurance plan(s). This may be an attractive option because employers may continue to share plan costs. Deductibles in employer-sponsored plans are also commonly lower than those from Marketplace plans.
Most pre-65 retiree benefits end when you are eligible for Medicare. Make sure you keep track of these deadlines — if you miss the Medicare sign-up deadlines, you might incur a late enrollment penalty fee that is applied indefinitely.
Check with your benefits plan administrator for your full pre-65 retiree benefits information.
Keep track of your enrollment periods when you decide to end your employer coverage and start Medicare. If you decide to enroll in Medicare, your enrollment period for Medicare Part A and B is eight months following the month your employer coverage ends. Most people enroll in Part A when they turn 65 because Part A premiums are $0. Please note that the enrollment period for Medicare Part D (prescription drug plan) and Part C (Medicare Advantage) is only two months following the month your employer coverage ends.
Whether you enroll only in Part A or decide to delay full enrollment in Medicare when you turn 65, you will have to submit proof (Form CM L5645) completed by your employer(s) that you have had medical and prescription drug coverage since you turned 65. If you’re not able to provide this documentation, you will be assessed a late enrollment penalty (LEP), which will increase the costs of Medicare when you later enroll. An LEP will remain with you for the rest of your life. When you decide to end your employment, you must sign up for Medicare Part B and Part D, and a Medigap plan if you want to include that coverage, or a Medicare Advantage plan by the respective Special Enrollment Period deadlines (eight months after your employment ends for Part B and 60 days after your employment ends for Part D).
Special Note About HSAs:
If you currently have an HSA-eligible health plan, you must stop contributing to your HSA six months before you enroll in Medicare Part A. Some people delay Medicare enrollment to keep their HSA.
Last Revised September 9th, 2022
