Still working at 65 with insurance through your job: do you need Medicare now?

It mostly depends on how big your employer is

If you are 65, still working and covered by your employer's group plan, whether you need Medicare now depends mainly on the size of the employer. Medicare.gov explains that if the employer has 20 or more employees, the group plan pays first and Medicare pays second, and many people in that situation can delay Part B without a penalty. If the employer has fewer than 20 employees, Medicare pays first, and your job-based plan may not pay for much unless you have both Part A and Part B. Ask your employer's benefits contact which applies to you before your 65th birthday month.

I am Rex Slover, and I help people around Murphy, Plano and Dallas sort out Medicare and employer coverage, both as a benefits broker for companies and as a Medicare advisor for individuals. This is one of the questions where a wrong guess can cost you money for the rest of your life, so it is worth getting right. What follows is general information, and the final answer for your situation should come from your plan and from Medicare.

Your first window opens three months before your birthday month

Medicare.gov describes the Initial Enrollment Period as seven months long: it starts three months before the month you turn 65 and ends three months after it. Coverage always starts on the first of a month, and when Part B begins depends on which month you sign up.

If you are not yet collecting Social Security, you are generally not enrolled automatically, so this window does not announce itself. People who keep working tend to assume their job coverage settles the matter. Sometimes it does. The point of this guide is to help you find out which camp you are in while the window is still open.

A practical habit: put the first day of that seven-month window on your calendar a year ahead, along with a note to call your benefits contact. Most of the expensive mistakes I see were not bad decisions. They were decisions nobody made because the window opened and closed during a busy season at work.

Employer with 20 or more employees: what usually happens

When your coverage comes from current employment at a company with 20 or more employees, Medicare.gov says the group health plan pays first and Medicare pays second. In that case, Medicare's working-past-65 guidance says you can wait until you or your spouse stop working to sign up for Part B without a late enrollment penalty.

Many people in this position still sign up for Part A, since most people do not pay a premium for it, and it can act as secondary coverage for hospital stays. There is one important exception to think about first. If you contribute to a health savings account, IRS Publication 969 says you cannot contribute once you are enrolled in Medicare. Medicare.gov goes further and advises that you and your employer stop contributing to your HSA six months before you retire, to avoid a tax penalty. If your HSA matters to you, talk to your benefits administrator and your tax advisor before you enroll in anything.

Employer with fewer than 20 employees: why waiting is risky

At a small employer, the order flips. Medicare.gov says that when the employer has fewer than 20 employees, Medicare pays first and the group plan pays second. That means the group plan expects Medicare to pick up its share of each claim, and if you have not enrolled in Part B, nobody pays that share.

Medicare's guidance specifically warns that your job-based coverage might not pay for services if you do not have both Part A and Part B. For people at small companies, enrolling at 65 is usually the safer course. I see this mistake most often with long-time employees of small businesses who assume their coverage works the way it did at 64.

Five questions to put to your employer this month

Your benefits contact, or the employer's broker, should be able to answer these in writing. Keep the answers with your Medicare papers, because you may need proof of group coverage when you enroll later.

• How many employees does the company have for Medicare purposes, and is the plan primary or secondary to Medicare for me?
• Does the plan require me to enroll in Part A, Part B or both at 65?
• Is the plan's prescription drug coverage creditable for Medicare Part D?
• If I have an HSA, when should contributions stop?
• If I retire or leave, what happens to my spouse's coverage under this plan?

If the coverage comes through your spouse's job

The same logic applies when you are covered as a dependent on a working spouse's employer plan. Medicare's guidance refers to waiting until you or your spouse stop working, so the coverage has to be tied to someone's current employment, and the employer size rule still decides which plan pays first.

Where couples get caught is when the working spouse retires. The dependent spouse loses the group coverage at the same moment, sometimes with little warning. If one of you is 65 or older and the other is still working, plan the retirement date and the Medicare enrollment together.

The penalties that make this worth getting right

Medicare.gov states that the Part B late enrollment penalty adds 10% for each full year you could have had Part B but did not, and that the penalty usually lasts as long as you have Part B, which for most people means for life. That is the cost of guessing wrong at a small employer, or of letting the special window after retirement slip by.

Drug coverage has its own rule. Medicare.gov says you can face a Part D penalty if you go 63 days or more without creditable drug coverage, which means coverage similar in value to Part D, and that penalty also stays for as long as you have Medicare drug coverage. Your employer's plan should be able to tell you whether its drug coverage is creditable. Keep that confirmation.

• Part B: 10% added for each full year you could have enrolled and did not
• Part D: a penalty if you go 63 days or more without creditable drug coverage
• Both: usually charged for as long as you have that coverage

Three situations I see often, worked through

A manager at a large Dallas employer turns 65, plans to work three more years and has no HSA. The group plan pays first. A common approach is to take Part A, which most people get without a premium, delay Part B, confirm the drug coverage is creditable, and set a reminder to enroll in Part B a couple of months before the planned retirement date so there is no gap.

An office manager at a twelve-person firm turns 65 and stays on the company plan. Because the employer has fewer than 20 employees, Medicare pays first. Here the usual course is to enroll in Parts A and B during the Initial Enrollment Period, then look at whether the group plan, a Medicare Supplement or a Medicare Advantage plan works best alongside Medicare, since paying for two full plans rarely makes sense.

A 66-year-old has been delaying Part B with good group coverage and contributes to an HSA, and now wants to retire in the spring. The steps run backward from the retirement date: stop HSA contributions in line with Medicare's six-month guidance, line up Part B to start when the group plan ends, and choose drug coverage within 63 days. Each of these people needed a different answer, which is exactly why a single rule of thumb fails.

When you finally stop working

Medicare.gov explains that once your employment or group coverage ends, whichever comes first, you get an eight-month Special Enrollment Period to sign up for Part B without a penalty. Two details catch people. First, COBRA does not extend that window, because Medicare does not count COBRA as group coverage based on current employment. Second, the eight months start when the job or coverage ends, not when COBRA runs out.

If you are leaving a job unexpectedly, the order of decisions matters even more, and I cover it in what to do about health insurance after losing a job. Keep in mind as well that your Medigap Open Enrollment Period starts the month you are 65 or older and enrolled in Part B, so the date you choose for Part B also starts that clock. I explain why that matters in Medicare Advantage or a Medicare Supplement.

How I help people sort this out

Most of the people I talk with about this are in one of three places: turning 65 soon with coverage at work, planning a retirement date, or already past 65 and suddenly losing group coverage. In each case I start with the same facts: your birth month, your employer's size, what your current plan covers, your prescriptions and the doctors you want to keep.

From there I explain the options in plain language, tell you what I would watch for, and, when it is time, compare Medicare Advantage, Medicare Supplement and Part D plans across carriers. My services cost you nothing, because carriers pay the broker. Once you are on Medicare, the work continues each fall, and I outline that in the yearly coverage checkup before open enrollment. For the final word on your eligibility and dates, Medicare and Social Security remain the authorities, and I am glad to help you get those answers too.

Questions people ask me