Working Past 65 and Medicare: How Employer Coverage Works

If you're working past 65 and you or your spouse have group health coverage through that current job, you can usually wait to sign up for Medicare Part B without a late enrollment penalty. Once the job or the coverage ends, whichever comes first, you have 8 months to sign up. This guide covers who pays first based on employer size, whether to take Part A, what to do about a Health Savings Account (HSA), and how to enroll when the job ends.

Key takeaways

• You can delay Part B without a penalty while you or your spouse have group coverage from a current job, then sign up within 8 months after the job or coverage ends. The coverage must be group health insurance available to everyone at the company. COBRA and retiree coverage don't count.
• Employer size matters. At employers with 20 or more employees, the group plan generally pays first. At smaller employers, Medicare usually pays first, unless the employer is part of a qualifying multi-employer group.
• Most people don't pay a Part A premium. If you don't, you can sign up for Part A at 65 or any time later. If you contribute to an HSA, talk about timing before you take any part of Medicare.
• Your 8-month Special Enrollment Period starts when work stops or the coverage ends, even if you choose COBRA.
• Medicare.gov suggests signing up about a month before your job coverage ends to help avoid a gap.

Do you have to sign up for Medicare at 65 if you're still working?

Not always. Medicare.gov says that if you or your spouse are still working and have group health insurance through that job that is available to everyone at the company, you can wait to sign up for Part B. You can wait until you or your spouse stop working or lose that coverage, whichever comes first. You won't pay a late enrollment penalty for waiting.

A spouse's coverage counts the same as your own. Say you're 66 and retired, and your spouse is 60 and still works with family coverage. You can stay on that plan and delay Part B until your spouse stops working or the coverage ends.

The catch is employer size. The rules below decide whether your job's plan or Medicare pays first, and that can change whether waiting makes sense.

Does it matter how many employees your company has?

Yes. Who pays first decides how much your job's plan actually pays.

Employers with 20 or more employees must offer workers 65 and older the same health benefits, under the same conditions, that they offer younger workers. The same goes for spouses 65 and older if the employer covers spouses.

The small-employer rule, stated correctly

The official sources say that Medicare pays first at an employer with fewer than 20 employees that isn't part of a qualifying multi-employer group. If your group plan pays second, you may need to sign up for Part B before it will pay.

If you don't sign up for Part A and Part B, your job-based insurance might not cover the costs for services you get. Ask your benefits administrator in writing how the plan pays for people who are eligible for Medicare.

Should you take Part A only and delay Part B?

Medicare.gov says most people don't pay a premium for Part A. If you don't have to pay one, you can sign up at 65 or any time later.

If you have coverage from a current job, you can take premium-free Part A and wait on Part B without a penalty. Ask your employer whether you need to sign up for Part A and Part B, because your job-based insurance might not cover costs if you don't. Part B has a monthly premium. Check Medicare.gov for the current amount, which changes every year. Taking Part A has one big trade-off if you have an HSA.

HSA contributions and Medicare

Medicare.gov says you and your employer should stop putting money into your HSA 6 months before you retire or apply for Social Security (or Railroad Retirement Board) benefits. This helps you avoid a tax penalty.

Here's why. SSA says that if you're over 65, Part A coverage starts up to 6 months before the month you apply. Putting money into an HSA after Medicare starts may bring extra taxes. IRS Publication 969 has the details. A tax professional can help with your own situation.

For example, if you're over 65 and plan to apply in July, Part A could start as far back as January. Contributions made in those months could be a problem.

What doesn't count as coverage from a current job?

To delay Part B without a penalty, the coverage has to be tied to work you or your spouse are still doing. These don't count the same way:

• COBRA. The 8-month Special Enrollment Period starts when you stop working or lose coverage, even if you take COBRA. COBRA doesn't give you more time. If you're eligible for Medicare but haven't enrolled, COBRA may pay only a small part of your care. If you got Medicare first because of age or disability, Medicare pays first and COBRA pays second (unless you have End-Stage Renal Disease).
• Retiree coverage. Medicare pays first. Retiree coverage might not pay for any time you were eligible for Medicare but didn't sign up, so you may need both Part A and Part B to get full retiree benefits.
• Marketplace plans. If you keep a Marketplace plan after Medicare starts, any premium tax credits end once your Part A begins, and Medicare pays first. It's against the law for someone who knows you have Medicare to sell you a Marketplace policy.
• VA care. Medicare and the VA can't pay for the same service. Medicare doesn't pay for care at a VA facility.

Our guide to health insurance after losing a job compares COBRA with other options.

How does the 8-month Special Enrollment Period work?

SSA lists three times you can use the Special Enrollment Period if you or your spouse have coverage from a job:

1. Any time while you're working and still covered by the group health plan.
2. Within 8 months of the day you or your spouse stop working, even if the group plan keeps going for a while.
3. Within 8 months of the group plan ending while you or your spouse keep working.

SSA says coverage under this period usually starts the month after you sign up. In some cases it can start sooner, or up to three months later.

What if you miss the 8 months?

You'll have to wait for the General Enrollment Period, January 1 to March 31. Coverage starts the month after you sign up. That can leave you with a gap in coverage and may bring a Part B late enrollment penalty that lasts for life. See how that works in our guide to the Part B late enrollment penalty.

How do you sign up for Part B when your job ends?

Medicare.gov's advice is to find out when your job coverage ends and sign up about a month before that date. Your coverage starts the month after Social Security (or the Railroad Retirement Board) processes your completed form.

1. Ask HR the exact date your group coverage ends. Get it in writing.
2. Stop HSA contributions in time. Use the 6-month rule above.
3. Get Form CMS-L564 if you'll apply on paper. If you apply by fax or mail during the Special Enrollment Period, SSA asks you to include Form CMS-L564, the Request for Employment Information, with Form CMS-40B. Ask SSA or your employer how to complete it.
4. Apply about a month before coverage ends. You can apply online through SSA at any time of year. Or fax or mail Form CMS-40B, the Application for Enrollment in Medicare Part B, along with Form CMS-L564 to your local Social Security office.
5. Keep copies of everything you send and the date you sent it.
6. Decide on drug coverage and any added coverage using the sections below.

If you're turning 65 and haven't decided yet, our turning 65 Medicare checklist walks you through it month by month.

Do you need Part D if your employer has drug coverage?

You can wait to join a Medicare drug plan without a penalty if your employer's drug coverage is creditable and you don't go 63 or more days in a row without creditable coverage. Your employer or union must tell you each year whether your drug coverage is creditable. Keep each notice.

Check before adding Medicare drug coverage

Medicare.gov warns that if you have employer or union coverage and add Medicare drug coverage, you or your family may lose the employer or union benefits. You might not be able to get them back. Talk to your benefits administrator first.

How the Part D penalty is figured

The penalty is 1% of the "national base beneficiary premium" for each full month you went without Part D or other creditable coverage. It's added to your premium for as long as you have Medicare drug coverage. The base premium changes every year, so check Medicare.gov for the current figure.

Ask Medicare or a SHIP counselor when you can join a drug plan or Medicare Advantage Plan after your job coverage ends. Confirm your dates on Medicare.gov. Our guide on how to compare Medicare Part D plans explains how to choose a plan.

When can you buy a Medigap policy if you delayed Part B?

In Texas, you get a one-time, six-month Medicare supplement open enrollment period that starts when you enroll in Part B at 65 or older. Ask HICAP or TDI to confirm your exact dates. During those six months, companies must sell you any plan they offer in Texas, even if you have health problems. You need both Part A and Part B to buy a policy. This period is separate from the yearly Medicare open enrollment.

The Texas Department of Insurance (TDI) says you probably don't need Medicare supplement insurance while you still have health insurance through your job or your spouse's job. Waiting to take Part B also pushes back your Medigap open enrollment. See how the Medigap open enrollment period works.

Texas 63-day right after losing coverage

In Texas, a guaranteed issue right to buy certain Medicare supplement plans after losing some kinds of coverage lasts 63 days. The 63 days count from the date coverage ends or the date of the notice, whichever is later. TDI says that if you didn't buy a supplement during open enrollment, you can buy some plans within 63 days of losing COBRA coverage. You must show proof that you lost the coverage.

Does working income raise your Medicare premiums?

It can. Higher-income people pay an income-related monthly adjustment amount (IRMAA) on top of their Part B and Part D premiums. If a life-changing event lowers your household income, you can ask SSA to lower it. Loss of income counts, and Form SSA-44 lists work stoppage and work reduction as qualifying events. You can file online, by fax or mail, or by appointment.

The income levels change every year, so check SSA.gov for the current figures. Our guide to Medicare IRMAA explains how appeals work.

Special cases

• Disability under 65. The group plan pays first only at employers with 100 or more employees, or in a multi-employer group where at least one employer has 100 or more. Otherwise Medicare pays first.
• ESRD. Your group or retiree plan pays first for a 30-month coordination period, no matter the employer's size or whether you're working. After that, Medicare pays first.
• TRICARE. On active duty, TRICARE pays first. If you're not on active duty, Medicare pays first. You need both Part A and Part B to get TRICARE For Life.
• Self-employed. Medicare.gov says to ask your insurer whether your coverage counts as employer group health plan coverage under IRS rules. If it doesn't, sign up for Medicare at 65 to avoid a Part B late enrollment penalty.
• Texas public employees and retired teachers. Our sources don't cover how state employee or teacher retirement plans work with Medicare. Ask your plan administrator before you make a Medicare decision.

Common mistakes to avoid

• Waiting for COBRA to end. Your 8 months start when work stops or coverage ends, not when COBRA runs out.
• Thinking retiree coverage counts as coverage from a current job. Medicare pays first, and the retiree plan may not cover the gap.
• Throwing away the creditable coverage notice. It's your proof for Part D.
• Leaving HSA contributions running. Remember that Part A can start up to 6 months back.
• Adding Medicare drug coverage without asking HR. You or your family could lose employer benefits.
• Skipping Part B at a small employer. Your plan pays second and may not pay until you have Part B.

Where to get free help in Texas

• HICAP (Texas SHIP): A partnership of Texas HHSC, Texas Legal Services Center, and the Area Agencies on Aging. It offers free counseling on Medicare enrollment, Medigap, Medicare Advantage, and Part D. Call the Texas Medicare Help Line at 800-252-9240.
• Benefits Coordination & Recovery Center: For questions about who pays first or changes to your coverage, call 1-855-798-2627 (TTY 1-855-797-2627).
• TDI Help Line: Call 800-252-3439 to verify an agent's or company's license and check a company's complaint history. See how to verify a Texas insurance agent license.

What to do next

1. Ask HR how many employees your employer has and how the plan pays for people eligible for Medicare.
2. Find your creditable coverage notice and your coverage end date.
3. Plan your HSA stop date and your Part B application date.
4. Call HICAP or a licensed agent if your situation includes a small employer, COBRA, retiree coverage, or an HSA.

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