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Medicare and Turning 65: I Plan to Keep Working, So What Are My Options?

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There are many questions you’ll face when you’re eligible for Medicare and turning 65.

And, a study by United Income reports 20 percent of Americans 65 or older continue to work, the highest in 57 years and double the percentage in 1985. That scenario introduces a whole new set of questions. You have three basic options when becoming eligible for Medicare and turning 65, all with considerations you’ll want to weigh carefully to make the right decision for you.

Option 1: Keep Your Employer’s Group Health Plan and Delay Medicare Enrollment

This option may make sense if you have a decent group plan through your employer. Here are some key factors to consider before making a final decision.

Understand What Enrollment Means

Original Medicare includes Parts A and B. It’s important to understand what each covers and your enrollment options if you continue to work past 65. Read on to find out why, in most cases, it makes sense to enroll in Medicare Part A but you may delay enrolling in Medicare Part B under specific circumstances.

Medicare Part A covers inpatient hospital and skilled nursing care. It’s free to anyone eligible to receive Social Security benefits. If you’ve been working and making payroll deductions for at least 40 quarters, you should automatically be enrolled in Part A. When you’re eligible for Medicare and turning 65, it’s a good idea to make sure you’re enrolled in Medicare Part A regardless of whether or not you continue to work. Part A will supplement your employer-provided group coverage and may pay for expenses your group coverage won’t. One important note, if you have a health savings account (HSA), you must be enrolled in a high-deductible health plan and not any other health insurance plan, including Medicare, to be able to contribute without owing income tax on the contribution as well as an excise tax. You may continue to make withdrawals from your HSA regardless. Be aware that Medicare coverage is retroactive for up to six months if you enroll in Part A after your 65th birthday, so you may want to discontinue HSA contributions at least six months before leaving your job.

Medicare Part B covers outpatient services, such as doctor visits. Part B typically requires a monthly premium based on your income. While individuals eligible for Medicare and turning 65 that choose to retire have to enroll in Medicare Part B within their seven-month Initial Enrollment Period (that spans three months before their 65th birthday through three months after) to avoid penalties, you can postpone enrollment if you’ll continue to be covered by group health insurance through your current, or a spouse’s current, employer. The caveat is it must be “creditable and current” insurance. If you’re eligible for Social Security, you’ll automatically be enrolled in Part B, so if you want to opt out while you’re employed, you’ll need to notify Social Security.

Make Sure Your Coverage Is Creditable and Current

Coverage is creditable if the employer has at least 20 employees. Current means coverage is being provided through your active employment, not by a former employer or retiree health benefit program, such as COBRA. If you’re not sure, ask your employer if their health coverage is considered creditable. If your employer doesn’t provide group coverage, or it doesn’t qualify as creditable and current, you should enroll for Parts A and B during your Initial Enrollment Period. Medicare will serve as your primary coverage. Enroll as early as you can, beginning three months before your 65th birthday, to ensure no gaps in your coverage.

Identify Your Medicare Special Enrollment Period

If your coverage is both creditable and current, you’ll get a Medicare Special Enrollment Period of up to eight months after your group coverage ends to enroll in Medicare Part B. If you stop working and don’t enroll within your Medicare Special Enrollment Period, you’ll have to wait until the Medicare Annual Enrollment Period that occurs from October 15 through December 7 every year. Enrolling within your specified window is also important to avoid a penalty of 10% of your Part B premium for every 12 months you were eligible and didn’t enroll.

Don’t Forget Prescription Drug Coverage

If your employer group coverage is creditable and includes prescription drug coverage that’s at least comparable to what you’d receive by enrolling in a Medicare Part D Plan, you can also delay enrolling in a Prescription Drug Plan until you stop working. If your employer coverage isn’t creditable, you’ll pay a penalty when you try to enroll in a Prescription Drug Plan after you leave your job, so it’s a good idea to enroll in a standalone plan during your Initial Enrollment Period. Be aware that premiums are tied to income.

If you choose to delay enrollment in Medicare, including Part D, until you quit working you’ll have several options when you leave. During your Medicare Special Enrollment Period, you may enroll in Original Medicare and a standalone Prescription Drug Plan, you may get a Medicare Supplement to help pay for Medicare Parts A and B out-of-pocket expenses, or you may enroll in an alternative to original Medicare, that is a Medicare Advantage Plan, that covers everything included in Medicare Parts A and B, and many other important benefits, in one convenient plan. Additional benefits may include vision, dental, hearing, even prescription drug coverage. Some Medicare Advantage Plans have $0 premiums, $0 deductibles, and $0 copays.

Option 2: Cancel Your Employer Group Coverage and Rely on Medicare

Many individuals who are becoming eligible for Medicare and turning 65 don’t realize that Medicare Parts A and B don’t cover everything. Specifically, they don’t include important benefits such as vision, dental, hearing or prescription drug coverage. If you need any of these services, you’ll want to look at alternatives that can cover this care. Also, be aware you’ll pay a penalty if you don’t have prescription drug coverage for 63 days or more after your Medicare Initial Enrollment Period.

Medicare Advantage Plans are offered by private insurance companies and are an affordable alternative to Original Medicare. They include everything Parts A and B cover, as well as major benefits not included in Original Medicare. Additional benefits may include vision, dental, hearing, and prescription drug coverage. Some Medicare Advantage Plans offer premiums, deductibles, and copays as low as $0. The Medicare Online Enrollment Portal makes it easy to find, compare, and enroll in Medicare Advantage online.

Option 3: Keep Your Employer’s Group Coverage and Enroll in Medicare Parts A and B

Before deciding to enroll in Medicare Parts A and B, as well as keep your existing employer-provided group coverage, there are a few things to know. If your group coverage isn’t great, it might be a good move since your employer coverage will be your primary and Medicare may pay for services it includes that your group plan doesn’t cover. On the flip side, if you have a great plan through your employer, you may end up paying monthly Medicare premiums for little to no benefits.

Another important thing to be aware of is that, once you enroll in Medicare, you can no longer contribute to a health savings account. One final important point to consider is that enrolling in Part B while keeping your group coverage may impact your ability to buy a Medicare Supplement, or require you pay a higher premium, once you quit working. You’re typically only eligible to enroll in a Medicare Supplement Plan within six months of enrolling in Medicare Part B.

You Don’t Have to Face Medicare and Turning 65 Alone

As you can see, there are many considerations when becoming eligible for Medicare and turning 65, especially if you plan to continue working. Our Medicare Advocates are happy to assist you. Call for your personalized, no-cost consultation at 1-800-991-4407 / TTY 711, 10 a.m. to 9 p.m. Eastern Time, Monday through Friday. You can also find, compare, and enroll in plans quickly and easily on the Medicare Online Enrollment Portal.