People can get Medicare while they are working. However, they may want to consider several factors, including eligibility, and their employer’s group coverage.
This article describes the circumstances in which a working person may want to consider signing up for Medicare, some limitations, and possible penalties. It also discusses the different parts of Medicare and the enrollment periods.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
According to Medicare, most people should enroll in Medicare Part A, which is hospital insurance, when they first become eligible, which is generally when a person turns 65. Most people do not pay a premium for Part A because they paid sufficient taxes.
If a working person has group health insurance through their employer, they can delay enrolling in Medicare Part B. However, an individual might consider getting Part B to cover some costs not included in the group health plan.
The decision to enroll, or not, in Medicare parts A and B depends on several factors as shown below. This online tool may also help a person make a decision whether or not to enroll.
A person can initially check with their employer to learn how the group insurance works with Medicare. Then, their decision may be influenced by the number of employees in the company.
Company with fewer than 20 employees
If a person works in a company with fewer than 20 employees, Medicare advises they may want to enroll in parts A and B when they first become eligible, which is generally when they turn 65 years of age. If a person chooses not to enroll in Part B, they may pay higher premiums at a later time.
Company with more than 20 employees
If the company employs more than 20 people, and the working person has group health plan coverage, they can delay enrolling in Medicare, both Part A and Part B. In this case, if they enroll later, they will not face a lifetime late enrollment penalty.
If a person enrolls while working, Medicare becomes their primary insurance, which means it pays before the employer’s insurance pays.
If a person with a group health plan is not eligible for premium-free Part A, it is possible to delay enrollment until after their employment stops or health coverage ends.
A person may not be eligible because they did not pay enough taxes to qualify for premium-free Part A. In this case, an individual will not have to pay a late enrollment penalty as long as they enroll within 8 months of stopping work.
Delay enrolling in Part B
If a person has a group health plan, they can delay signing up for Medicare Part B. When their employment stops or their coverage ends, a person will be able to enroll in Part B. Medicare will not charge them a late enrollment penalty if they enroll within the following 8 months.
Some individuals who work for a company of 20 or more people may have both a high-deductible health plan and a Health Savings Account (HSA). After a person enrolls in any part of Medicare, they are not permitted to contribute to their HSA.
If someone wishes to continue contributing to a HSA, they may delay enrolling in parts A and B until employment stops or their coverage ends. If they enroll within 8 months of either of those events, they won’t have to pay a late enrollment penalty.
In addition, premium-free Part A coverage begins 6 months prior to the date a person applies for Medicare, but no earlier than the first month they were eligible. To avoid a tax penalty, a person should stop contributing to their HSA 6 months before they apply for Medicare.
In most cases, after a person’s employment ends, they may continue to receive coverage from their group health plan for 18 months. This continued coverage is called COBRA. The premiums of the plan may cost more during this period.
To avoid a Medicare penalty, an individual must enroll in Part B within 8 months after their employment ends. This is a requirement whether or not someone is receiving COBRA.
Once a working person enrolls in original Medicare, parts A and B, they are eligible to join two other Medicare programs to get additional coverage: Part D, which provides prescription drug coverage, and Medigap, which is Medicare supplement insurance.
Medigap helps pays 50–100% of parts A and B out-of-pocket costs less deductibles and premiums.
Someone with original Medicare may also choose to switch to Medicare Advantage (Part C), which is the alternative to parts A and B.
Advantage plans provide the hospital and medical insurance of original Medicare, but many also include prescription drug coverage. Some plans offer extra benefits, such as dental and vision care.
Medicare has several periods in which a person may enroll in original Medicare parts A and B:
- Initial Enrollment Period (IEP) is 7 months. It begins 3 months before someone turns 65 and extends 3 months after their 65th birthday. If an individual does not receive automatic enrollment, they may sign up during this time.
- Special Enrollment Period (SEP) is an 8-month window to enroll that begins after a person’s employment ends or they lose their group plan health insurance.
- General Enrollment Period (GEP) is from January 1 to March 31 every year. If a person misses the initial enrollment and does not qualify for the special enrollment, they may enroll during this period, but they may have to pay a late enrollment penalty in the form of higher parts A and B premiums.
Once a person enrolls in original Medicare, they may add a Part D plan or switch to Part C during the IEP. A person may also do either during the Open Enrollment Period (OEP) for Medicare Advantage and Medicare prescription drug coverage, which runs from October 15 to December 7 each year.
The best time to enroll in Part D is during the IEP. If someone waits until open enrollment, they may have a penalty in the form of a higher Part D plan premium.
The 6-month Medigap open enrollment period begins the month someone turns 65 and enrolls in Part B.
If a person does not enroll during the OEP, they may find they cannot purchase a plan at a later date. If a company does decide to sell them a policy, it may cost more due to any health conditions.
In contrast, if someone buys a Medigap plan during the OEP, the company cannot charge them more than it would charge a person who does not have any health conditions.
If someone has group health insurance through their employer or union, Medigap OEP will start when the individual signs up for Part B.
In many cases, people should enroll in parts A and B when they first become eligible. However, a working person with health insurance from an employer with 20 or more employees may want to delay enrolling in either Part A, or Part B, or both, for these reasons:
- They are not eligible for premium-free Part A.
- They do not want to pay the Part B premiums.
- They want to continue contributing to their HSA.
If a person delays enrolling in parts A or B until their employment or health insurance ends, they must enroll during the following 8 months to avoid penalties.