It can be confusing navigating Medicare supplements and plans, especially if you’re still working when you turn 65. Reaching age 65 is like crossing a finish line for some. Supposedly, it’s the magical number where you can finally retire and enjoy life at a different pace. But for those that aren’t quite ready to make the leap into retirement and will continue working, turning 65 brings questions, particularly when it comes to Medicare.
At age 65, you’re eligible to enroll in Medicare. But what if you or a spouse is still working and you have employer-sponsored coverage — do you still need to enroll in Medicare?
The answer is different for each individual. Here are a few points to consider to help you make an informed decision:
What are Medicare Parts A and B?
Medicare is the government-sponsored healthcare and consists of two parts: hospital care (Part A) and medical care (Part B). Medicare Part A will cover inpatient needs in a hospital, nursing home, and in some cases, at home. Medicare Part B provides coverage for doctor’s visits, medical supplies, and medical services that do not require inpatient care.
Once you turn 65 years old, you are eligible to enroll in Medicare Parts A and B. Under certain conditions, you can enroll in Medicare Part A without a fee (because you’ve been paying in for your whole working life).
Medicare vs. Your Company’s Health Insurance Plan
If you plan on working past age 65 and have insurance through an employer, it might not seem logical to enroll in Medicare, too. However, for many individuals, enrolling can save money.
Part A with a Company Insurance Plan
Typically, Medicare Part A usually doesn’t have a premium and will cover 80% of some of the largest medical expenses you might incur, such as hospitalization. Even with a good private insurance plan, you may find that Part A provides plenty of incentive to enroll. The downside is that you can no longer contribute to a Health Savings Account if you’re enrolled in Medicare.
Part B with a Company Insurance Plan
Part B is a different story. If you enroll in Part B, you will pay a monthly premium that is subject to change each year ($144.60 for 2020). You can see the decision comes to whether you should enroll in Part B.
Medicare Enrollment Rules Vary with Company Size
There is an exception to this for people who are working beyond age 65. If you are employed by
a company with 20 or more employees, you do not need to enroll in Part B because your employer will be the primary insurer. You can also avoid the penalty for up to eight months after leaving your job (see below).
However, if you work for an employer with fewer than 20 employees, you should enroll in Medicare Part B because Medicare will become the primary insurer (that is, Medicare pays out first for health claims). This is a major benefit because Medicare may cover items that your private health insurance would not, which can help you reduce out-of-pocket costs.
At 417 Insurance & Investments, we work with Medicare-eligible people who are trying to figure out their options on a daily basis. Here are some questions about Medicare we get:
What are the qualifications for enrolling in Part A and Part B?
For both Part A and and Part B, you must be a U.S. citizen or permanent resident who has been residing within the country for five or more years.
When do I need to sign up for Medicare Part A if I’m still working?
The good news is that you are automatically enrolled in Medicare if you have a qualifying work history. If you’ve paid into the system for at least 10 years (figured by contributions in at least 40 quarters) and are drawing Social Security, you will be automatically enrolled when you turn 65. Otherwise, you will need to enroll at your local Social Security office or online at ssa.gov.
Can I qualify for Part A if my husband or wife worked outside the home and I didn’t?
You sure can. Your spouse simply needs to meet the 10 year/40 quarter threshold. That’s great news for stay-at-home-moms and other caregivers.
Do I have to sign up for Medicare if I’m covered by my spouse’s insurance?
The rules are the same whether you’re covered by your own or your spouse’s health insurance. Read over the answers to the other questions- they’ll apply to you too!
How can I qualify for Part A if I’m working at 65, but don’t have 10 years of work history?
You can pay for Part A coverage, but you may not want to because it can be quite expensive if you do have to pay for it. You can choose to wait to enroll if you have coverage through your work.
When do I need to sign up for Medicare Part B if I’m still working?
If you’re happy with your company’s health plan, you can wait to sign up for Part B, if your employer has more than 20 employees. Since Part B always has a premium to pay, this could be a good choice for you, depending on your circumstances.
An example of circumstances where you might want Part B alongside your group plan is if your group plan doesn’t cover all of your doctor’s visits or medical supplies. If those costs exceed the monthly premium, you’ll save money by signing up for Part B.
Once your coverage ends, be sure to sign up for Medicare within 8 months of your coverage (or job) ending. If you don’t, you’ll have to pay a 10% premium penalty for each year you’re late.
What if I don’t sign up for Medicare when I turn 65?
If you’re still working, you can delay as long as you have employer health coverage (not including COBRA).
How does COBRA affect Medicare enrollment?
You’ll want to plan ahead if you will have COBRA coverage after you stop working. For the sake of figuring out your next steps with Medicare, pretend your COBRA coverage does not exist. You still have to enroll in Medicare within 8 months of your job or group insurance ending. Consider COBRA a “bonus” and take the steps to enroll in Medicare now. If you don’t, you may have to wait until the General Enrollment Period, meaning you could be without coverage. Unfortunately, Medicare does not consider COBRA credible coverage and will still penalize you. Don’t let this happen!
What if I quit working but still have group coverage after age 65?
You must be working and have coverage to be exempt from Medicare rules. If you are working, but coverage ends, you must sign up for Medicare. If you are no longer working, but still have coverage, you must sign up for Medicare. Additionally, your time frame for getting coverage (8 months) begins when just one of these things ends- your job or coverage.
How does part-time work affect Medicare status if I’m over 65?
If your employer offers group coverage while you work part time, then all of the other advice applies to you. Rules are the same if you work full or part-time.
Choosing whether to sign up for Medicare while you’re still working isn’t a decision to take lightly. There are plenty of reasons to move forward with enrollment as soon as you’re eligible, especially if it means avoiding hefty penalties that can kill your retirement savings.
Good planning can help you make the right decisions the first time so you can sit back and enjoy your retirement.