Medicare and Still
Working Past 65

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More and more Americans are still working past 65. You have three basic options when you turn 65 and are still working when you become eligible for Medicare. In short, you can transition from employer health insurance to Medicare, keep your employer insurance with Medicare, or keep your employer health insurance and delay Medicare enrollment.

Original Medicare includes Parts A and B. It’s important to understand what each covers and your enrollment options if you are still working past 65. When you turn 65, it makes sense to immediately enroll in Medicare Part A, but you may delay enrolling in Medicare Part B under specific circumstances.

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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 (10 years), 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 even if you’re still working past 65. Part A will supplement your employer health insurance 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. If you want to opt out while you’re employed, you’ll need to notify Social Security.

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When to Enroll in Medicare If Still Working Past 65

Option 1: Keep your employer’s health insurance plan and delay Medicare enrollment

This option may make sense if you have a decent group health insurance plan through your employer if you’re still working past 65. Here are some key factors to consider before making a final decision.

  • 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 General Enrollment Period, which runs from January 1 through March 31. If you enroll during the General Enrollment Period, your coverage will begin on the first of the next month. 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 until you quit working past 65, 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 alongside Original Medicare to help pay for Medicare Parts A and B out-of-pocket expenses, or you may enroll in a Medicare Advantage Plan. Additional benefits in Medicare Advantage plans may include vision, dental, hearing, even prescription drug coverage. Some Medicare Advantage Plans have $0 premiums, $0 deductibles, and $0 copays.

Option 2: Transition from Employer Health Insurance to 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 a great option to receive additional benefits, potentially without additional costs. They include everything Parts A and B cover, and typically offer 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.

Option 3: Keep Your Employer Health Insurance and Enroll in Medicare Parts A and B

Before deciding to enroll in Medicare Parts A and B, as well as keep your employer health insurance 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.

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