Millions of people find themselves in a position where they are still working yet have turned 65 years old.  Americans are eligible for Medicare when they turn 65, but if you are working and still covered on your employer’s health insurance plan, does it make sense to sign up for Medicare?  Doing so may reduce the cost of Medicare services down the road.  Medicare is a complicated system, so here is some help navigating the system.  The following information is applicable to a spouse covered on a working spouse’s health insurance plan.  

Cost Evaluation: 

Will Medicare save you money?  If the health insurance provided by your (or your spouse’s) employer requires you to pay a large portion of the premium, then Medicare could save you money.  You have to compare your current out-of-pocket expenses for the services you need, and the coverage offered by Medicare to determine which insurance coverage benefits you the most financially.   

Medicare Part A

It’s free, why not?  If you have worked a total of 10 years during your lifetime and are 65 years of age or older, you are entitled to Medicare Part A at no cost to you.  The benefit of signing up for Medicare Part A when you are still working is that it may cover costs that your employer-provided insurance does not.  There are many caveats and exceptions, so you will again want to compare the coverages you have and can get from Medicare Part A as you make your decision.  Before considering delaying enrolling in Medicare Part A, consult with your benefits administrator to ensure that you understand the employer health plan will cover you without Medicare Part A.  

If your employer has 20 or more employees, you do not have to sign up for Medicare at age 65.  However, Medicare Part A is free to most people, so it is a no harm, no foul decision.  If your employer has fewer than 20 employees and the health coverage is not part of a multiemployer group plan, then at age 65, you must enroll in Medicare Part A.  Medicare Part A will then be your primary insurance coverage – meaning Medicare pays before your employer-provided plan.  

What about your Health Savings Account (HSA)? 

If you want to keep contributing to your HSA then you cannot sign up for Medicare Part A or Part B as Medicare enrollees cannot contribute to an HSA.  In order to avoid a potential tax penalty, you should stop contributing to your HSA 6 months prior to the time that you plan to retire.  

Penalties? 

If you do not signup for Medicare Part A at age 65 or within 8 months of stopping work or losing employer health coverage – the first of those to occur- you may have to pay a penalty.  Regardless you should sign up for Medicare Part A coverage before your employer’s health coverage ends to avoid a gap in health insurance coverage.  

Medicare Part B

If you are over 65 and have employer-provided health coverage you most likely want to delay applying for Medicare Part B.  Medicare Part B pays for doctor visits and many other outpatient services.  (Medicare Part A covers hospitalization costs.) The delay is a benefit to you as nearly all Part B enrollees pay a premium for this coverage.  

If your employer has more than 20 employees and a group health plan you are not required to sign up for Medicare at age 65.  However, once you lose your employer-provided coverage or stop working there is a window in which you must enroll to avoid penalties.  An example is that you must sign up for Medicare Part B within 8 months of stopping work or losing your employer-provided health coverage.  If you do not, then you will be paying the penalty for the rest of your life.  Another penalty is that should you miss the window to sign up you could have to wait until the next open enrollment period which can result in a gap in health insurance coverage.  

If your employer has fewer than 20 employees and the health coverage is not part of a multiemployer group plan, then at age 65 you must enroll in Medicare Part B and it will be your primary insurance.  As always when deciding to enroll in Medicare Part B consult your benefits administrator so that you understand their coverage and the coverage offered by Medicare.

 Special Situations

If you have health insurance from a previous employer such as COBRA or retiree health coverage you must sign up for Medicare Part A and Part B when you turn 65 years of age.  

If you have benefits as a military service member or veteran, such as TRICARE or CHAMPVA, you should consult those programs to determine when to enroll in Medicare.  

As always, gather as much information as you can from Medicare before you make your decision regarding enrollment. 

Excerpted from the Plain Dealer Business section June 6, 2021.