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Medicare and Working Past 65 – The bbg65Plus Rules of the Road

1.)  IF YOU ARE COVERED BY AN EMPLOYER-SPONSORED HEALTH PLAN, BECOMING ELIGIBLE FOR MEDICARE AT AGE 65 MAY NOT MEAN THAT YOU ARE REQUIRED TO ENROLL IN MEDICARE AT AGE 65.  SEVERAL FACTORS DICTATE WHETHER OR NOT YOU NEED TO ENROLL IN MEDICARE RIGHT AWAY WHEN YOU ARE COVERED BY AN EMPLOYER PLAN.  HERE’S HOW TO KNOW THE DIFFERENCE:

  • You may have the option to delay your Medicare enrollment altogether or to partially enroll (i.e., enroll in Part A; delay Part B) in Medicare without a penalty if:
    • You (or your spouse) are actively employed, covered under an employer plan, and the employer sponsoring your coverage has 20 or more employees (“Medicare Secondary”), AND
    • Your employer coverage, including prescription drug coverage, is considered “creditable coverage.”*
      • *It’s important to note here that neither employer-sponsored pre-65 retirement plans nor Cobra coverage count as creditable coverage.

  • To avoid costly penalties, you must enroll in Medicare at age 65 if:
    • The employer sponsoring your coverage has fewer than 20 employees (“Medicare Primary”), OR
    • Your coverage, including the prescription drug coverage, is NOT considered “creditable coverage.”  To avoid the potential for paying a lifetime MedicarePart B or Part D (Prescription Drug Coverage) penalty, remember to verify that both your medical coverage AND your prescription drug coverage are both considered “creditable”, OR
    • You are covered under a new type of employer-sponsored group health benefit known as an ICHRA (Individual Coverage Health Reimbursement Arrangement).  If your employer plan is an ICHRA, regulations related to the Individual Under 65 Plans that are used in conjunction with ICHRA coverage require you to transition to full Medicare coverage when you become eligible at age 65.  If you are covered under an ICHRA, your employer plan can reimburse you for the cost of your Medicare coverage.

2.)  IF YOU ARE COVERED BY AN EMPLOYER-SPONSORED HEALTH PLAN, ENROLLING IN MEDICARE PART A WHILE YOU’RE STILL ENROLLED IN THE EMPLOYER PLAN MAY PROVIDE YOU WITH EXTRA HOSPITAL COVERAGE.  FOR MOST PEOPLE, THERE’S NO COST FOR PART A ($0 PREMIUM). 

  • Enrolling in Part A may provide you with some additional hospital coverage on a secondary basis without costing you anything for the additional coverage.  Consider enrolling in Part A and delaying Part B until you need it when you leave your employer coverage.

  • It’s important to note that if you have a Health Savings Account (HSA), once you enroll in any part of Medicare you can no longer continue to make contributions (including any employer contributions) to your HSA.  You can, however, continue to use the accumulated funds in the HSA account to pay for qualified medical expenses, including some Medicare monthly costs of coverage.  So, if you want to continue contributing to your Health Savings Account, don’t enroll in any part of Medicare.

3.)  WHEN YOU DECIDE TO DROP YOUR EMPLOYER COVERAGE, YOU WILL QUALIFY FOR A SPECIAL ENROLLMENT PERIOD (SEP).  THE SEP PAVES THE WAY FOR YOU TO ENROLL IN FULL MEDICARE COVERAGE AT THAT TIME WITHOUT THE RISK OF A PENALTY.

  • If you have creditable coverage and choose to delay Medicare enrollment, whenever you decide to end your employer coverage, you will qualify for a Special Enrollment Period, enabling you to enroll in full Medicare coverage at that time. 
  • Upon leaving the employer coverage, you’ll have a defined window of time (i.e., Part B lasts 8 months; Part D ends after 63 days) in which to enroll in full Medicare coverage without risk of penalty.  The clock starts ticking when you stop working or lose employer coverage. 
  • To avoid any gap in your medical coverage, consider signing up for Medicare a month or so before losing your employer coverage.  By doing so, your new Medicare coverage will start when your employer coverage ends, leaving no gap or interruption in your health coverage.
  • When you enroll via a Special Enrollment Period (SEP) due to loss of employer coverage, you will need to take the extra step of submitting a completed Employer Form with your enrollment.  This demonstrates to Medicare that you have been covered by an employer plan for the duration of the time that you’ve been eligible for Medicare coverage (i.e., your 65th birthday).  Failure to submit a signed Employer Form or its equivalent may delay your opportunity to enroll in Medicare and/or subject you to the possibility of lifetime financial penalties.

4.)  RECOGNIZE THAT MEDICARE CAN BE COMPLEX AND SPECIAL SITUATIONS OFTEN ABOUND.  OVERLOOKING THEM COULD RESULT IN DELAYS, GAPS IN COVERAGE, HIGHER-THAN-EXPECTED COSTS, AND/OR LIFETIME FINANCIAL PENALTIES.  HERE ARE A FEW EXAMPLES OF SITUATIONS THAT MAY REQUIRE ADDITIONAL HOMEWORK AND/OR EXTRA CONSIDERATION ON YOUR PART:

  • Cobra and pre-65 retirement coverage.  Remember that neither Cobra nor retirement coverage qualifies as “creditable coverage.” 
  • Dependent coverage.  Medicare does not cover anyone but you.  Consider how any dependents will be covered.
  • Veterans Benefits.  Check with your TRICARE, CHAMPVA, and/or VA benefits administrator to determine how those benefits interact and are impacted by Medicare.
  • Pre-65 Social Security Benefits.  If you are already receiving Social Security benefits when you turn 65, you will be automatically enrolled in Medicare.  If you are not ready to enroll yet because you have employer coverage, notify Social Security that you want to delay your Medicare enrollment.  Otherwise, you could end up paying for both types of coverage.  Unwinding the Medicare enrollment and recouping any premiums already deducted from your Social Security check can be an uphill battle.
  • Medicare Income-Related Monthly Adjustment Amounts (IRMAA) for Part B and Part D.  The IRMAA is an amount you may pay in addition to your Part B or Part D premium if your modified adjusted gross income (MAGI) exceeds a certain level.  The IRMAA is a sliding scale (earn more, pay more) that is indexed and adjusted annually.  Medicare determines if you owe an IRMAA based on the income you reported on your IRS tax return from two years prior (e.g., 2024 IRMAA based on 2022 tax return, 2025 IRMAA based on 2023 tax return, etc.).  These Income-Related Adjustment Amounts affect roughly 7% of people on Medicare.

5.)  IF YOU HAVE A CHOICE BETWEEN EMPLOYER-SPONSORED COVERAGE AND MEDICARE, DON’T ASSUME ONE IS BETTER THAN THE OTHER.  DO YOUR HOMEWORK.  DETERMINE WHICH COVERAGE IS BEST FOR YOU.   

Compare the costs and benefits of your employer-sponsored health plan with the Medicare options that are available to you to choose from. 

Consider key factors such as:

  • Cost of your coverage per month (e.g., monthly premium, payroll deduction, etc),
  • deductibles,
  • coinsurance,
  • copays,
  • maximum out-of-pocket costs,
  • provider networks and access to your preferred doctors, hospitals, and other healthcare providers,
  • prescription drug coverage,
  • extra benefits (especially those often included in Medicare Advantage Plans such as dental, vision, hearing aids, over-the-counter allowances, gym memberships, etc.).

KNOW THE DIFFERENCE.  AFTER ALL, ALL HEALTH COVERAGE IS PERSONAL.

For more information, refer to this FACT SHEET from the Centers for Medicare & Medicaid Services.

FACT SHEET:  Deciding Whether to Enroll in Medicare Part A and Part B  When You Turn 65

If there are specific topics you’d like us to address in future issues please drop us a line at 65plus@bbginc.net with your suggestions.