What You Need To Know If You Plan On Working Past Age 65

Michael T. Braden, August 28, 2024 GENERAL MEDICARE

7 Things You Need To Know If You Plan On Working Past 65.

SHOULD YOU ENROLL IN MEDICARE OR KEEP YOUR GROUP INSURANCE AT 65?

Here at Braden Medicare Insurance, we are licensed, independent Medicare Brokers. We work with people contemplating retirement every day. We always enjoy hearing about a person's career and helping to set them up for their next role as the CEO of Golden Years Inc.

1. If you’re 65 or older, you are eligible for Medicare. You may elect employer coverage instead of Medicare if you or your spouse is actively employed and your employer offers creditable coverage. Generally, if your employer has more than 20 employees, Medicare considers its Group Health Plan creditable. But, if your employer has fewer than 20 employees, then Medicare does not regard your Group Health Plan as creditable. In this case, you should consider dropping your Group Health Plan and enrolling in Medicare at 65.

2. When you have both Medicare and employer health benefits, your employer coverage often becomes the primary payer, covering your healthcare costs first, while Medicare pays second (becomes a secondary payer).

3. Medicare Part A (hospital insurance) is premium-free if you or your spouse worked and paid Medicare taxes for at least 10 years (40 quarters), so it makes sense to sign up for Medicare Part A even if you still have employer coverage.

4. While we cannot predict when we may be injured or ill, statistics show that as we age, the odds of an incident increase dramatically. For this reason, at Braden Medicare, we consistently recommend that our clients enroll in Medicare Part B while they have creditable employer coverage. We reason that enrolling in Part B starts your 180-day Medicare Supplement Initial Enrollment Period. In most states, this is the only time you can apply for a Medicare supplement without required medical underwriting and the possibility of being denied coverage. And, most Group Employer Health Plans have much higher deductibles than Medicare, especially when paired with a Medicare Supplement policy.

5. Medicare Part B (Outpatient Insurance) has a monthly premium of $174.70 for the 2024 Plan Year. But you can choose to delay Medicare enrollment without incurring any late enrollment penalties if you have "creditable coverage" through other insurance, such as your group employer plan.

6. Delaying Part B without creditable coverage can result in a significant late enrollment penalty. When you retire or whenever your employer coverage ends (voluntarily or involuntarily), you have an 8-month Special Enrollment Period to sign up for Medicare Part B without penalties.

7. You are not permitted to have both a Medicare supplement and an employer group health plan simultaneously. This is the main reason the vast majority of people who research their options prefer to enroll in Medicare at age 65 rather than stay with their Employer's Group Health Plan.

IS IT BETTER TO ENROLL IN MEDICARE WHEN I TURN 65? EVEN IF I AM STILL WORKING?

If your employer has 20 or more employees, your employer coverage is often creditable and primary. You may choose to delay enrolling in Medicare Part B without penalties. Medicare Part A is typically premium-free for most people eligible for Medicare, so enrolling in Part A during your Initial Enrollment Period is a no-brainer. Medicare Part A benefits can provide additional coverage for hospital care without any cost to you. Even if you have employer coverage, it may make sense to enroll in Medicare Part A to use your employer benefits and Medicare together.

If you contribute to a Health Savings Account (HSA), be aware that enrolling in any part of Medicare (including Part A) will affect your ability to make HSA contributions without penalty.

IS IT LEGAL TO HAVE BOTH MEDICARE AND INSURANCE THROUGH MY EMPLOYER AT THE SAME TIME?

Is it possible to have Medicare and employer coverage at the same time? It is possible, but not advisable.

If you are still employed and have creditable group health insurance through your employer, you may delay enrolling in Medicare Part A and/or Part B without facing late enrollment penalties.

If you are age 65 or older, your employer must have 20 or more employees for the group health insurance to be creditable. If you are under age 65, your employer needs at least 100 employees for the health plan to be creditable.

As you turn age 65, you have an Initial Enrollment Period during which you can sign up for Medicare Parts A and B. This period starts 3 months before your 65th birthday month, includes your birthday month, and continues for 3 months afterward. Use our Medicare Enrollment Period Calculator to identify your initial enrollment period. If you are actively working and covered by your employer’s group health insurance plan at this time (or your spouse’s employer’s plan), you may choose to delay enrolling in Part B without incurring late penalties if the employer plan is creditable coverage.

You can also sign up for Medicare Part B without penalties during a Special Enrollment Period, which lasts for 8 months after your employment ends.

SHOULD MY SPOUSE ENROLL IN MEDICARE?

Enrolling your spouse in Medicare is often more cost-effective than keeping them on your employer's health insurance plan.

You may find that Medicare coverage is better health insurance at a lower price than employer insurance options. Plus, employer health insurance benefits change every year. Original Medicare coverage and supplement benefits never change. It’s much easier to predict and budget your medical costs during retirement when you have Original Medicare and a supplement.

BRADEN MEDICARE INSURANCE BELIEVES THAT SINCE MEDICARE PART A IS FREE, EVERYONE SHOULD ENROLL IN PART A AT AGE 65. IT'S JUST GOOD COMMON SENSE

Whether or not you should enroll in Medicare Part A (hospital insurance) when you are still employed and have employer coverage depends on your specific circumstances.

If you are eligible for premium-free Medicare Part A, it may be a good idea to enroll even if you are still employed and have other health insurance coverage like a group health plan.

Most people become eligible for premium-free Part A at age 65 if they or their spouse have paid Medicare taxes for a specific period (usually 10 years or 40 quarters). In this case, there is generally no downside to enrolling in Part A, no matter what your employer coverage pays.

If you ever need hospital care, having Medicare Part A can reduce your expenses. For example, enrolling in Medicare Part A for a lower deductible than your employer group health plan would be a practical choice.

Keep in mind that if you are contributing to a Health Savings Account (HSA) and want to continue doing so, enrolling in any part of Medicare Part A will affect your ability to make HSA contributions.

IF I HAVE ACCESS TO MY employer's GROUP HEALTH PLAN, SHOULD I STILL ENROLL IN MEDICARE PART B?

If you have creditable coverage (are actively employed and insured through a company with 20 or more employees), then you can delay enrolling in Part B (medical insurance) without facing the expensive late penalties.

Medicare does not consider all health insurance coverage creditable; there are rules and exceptions. Our Creditable Coverage cheat sheet can help you identify if your coverage is creditable.

The most important factor when deciding to enroll in Medicare Part B when you have employer coverage is the fact that doing so starts your 180-day Medicare supplement Initial Enrollment Period. This is the period when you can get a Medicare supplement without concern for pre-existing conditions or your health history. After this enrollment period, an insurance company can deny your Medicare supplement application. We strongly advise people not to enroll in Part B if they will continue employer coverage, to preserve their Medicare supplement Initial Enrollment Period.

Your employer health insurance plan is required to send you a Notice of Creditable Coverage once per year. You should keep these notices in case they are needed later. When you finally enroll in Medicare Part B, your employer will need to sign a form attesting that you had creditable coverage since you turned age 65. If you have difficulty getting your former employer to sign this form, those letters of Creditable Coverage you saved will come in handy. And remember that enrolling in any Part of Medicare can affect your HSA contributions.

HOW DO YOU DELAY ENROLLING IN MEDICARE PART B WHEN YOU RETIRE?

After retiring and no longer actively working, your employer-sponsored health insurance is no longer considered creditable coverage for Medicare. Some employers extend health insurance for some time after you stop working. However, once you stop being an active employee, your health insurance is no longer creditable. You have eight months from the date you stop working to enroll in Medicare.

Don’t delay Medicare enrollment in Part B once you retire. This is a common mistake that can be costly. The late penalty for not enrolling in Part B when you are supposed to be 10% of the Part B premium for every 12 months of your delayed enrollment. This penalty is paid every month for the rest of your life.

DOES IT MATTER WHO PAYS FIRST AND WHO PAYS SECOND?

If your employer offers a retiree program that allows you to maintain employer health benefits, enrolling in Medicare Part B can help you avoid the late enrollment penalty, although this is not advisable.

Upon retirement, if you decide to retain both Medicare and employer coverage, Medicare Part B will take on the primary role, making your employer plan a secondary payer of medical bills or secondary insurance.

However, many retirees find it more useful to discontinue their employer coverage and opt for Original Medicare plus a Medicare Supplement plan. It’s frequently more affordable health insurance as well.

SHOULD I ENROLL IN MEDICARE PART D IF I AM KEEPING MY EMPLOYER'S GROUP HEALTH INSURANCE?

Your employer’s group health plan usually includes creditable prescription drug coverage. That gives you the option to postpone enrolling in Medicare Part D without facing any late penalties. If you have prescription drug benefits through your employer group health plan, having Medicare coverage may not provide significant advantages because the coverage does not typically complement each other.

If your employer's group health plan prescription benefits are lacking, you can enroll in Medicare Part D as long as you qualify for Medicare Part A. You do not need to have Medicare Part B to sign up for Medicare Part D.

Make sure to compare your employer’s group insurance with the benefits and costs associated with Original Medicare plus a Medicare Supplement (Medigap) plan, and Medicare Part D. Call us if you need help choosing the best healthcare coverage for your needs.

Often, it proves to be more cost-effective and advantageous to transition away from group health insurance insurance and enroll in Medicare, while also adding a Medicare Supplement plan and a Medicare Part D plan to your health coverage. This way, a Medigap plan from a private insurance company will become your secondary payer and cover most of the gaps, deductibles, co-pays, and coinsurance of Original Medicare.

If you don’t have creditable health coverage for Part D through your employer plan and you delay enrolling in Medicare Part D when you are eligible, you may face late enrollment penalties if you later decide to enroll. These penalties will increase your Part D prescription drug coverage premiums.

It also makes sense to evaluate your medication needs. If you have a chronic condition or take prescription drugs regularly, double-check that your current coverage meets your needs. Medicare Part D plans vary in the drugs they cover and their cost-sharing structures.

Remember that you can enroll in or disenroll from Medicare Part D during specific enrollment periods. You can enroll during your Initial Enrollment Period when you first become eligible for Medicare and during the Annual Open Enrollment Period (October 15 to December 7) each year. This provides some flexibility to adjust your health insurance coverage as needed.

IF I AM STILL WORKING AND ENROLL IN MEDICARE, WILL MEDICARE BE MY PRIMARY OR SECONDARY COVERAGE?

WHETHER MEDICARE PAYS FIRST OR SECOND DEPENDS ON THE SIZE OF YOUR EMPLOYER

If you reach the age of 65 and meet the eligibility criteria for Medicare while employed by a company employing 20 or more individuals, your employer group health plan will become your primary payer, and Medicare will act as a secondary payer. In this case, your employer’s plan pays first, and Medicare covers some of the costs that your employer’s plan doesn’t.

If your employer has fewer than 20 employees, Medicare becomes your primary health insurance, and your employer’s plan is a secondary payer.

With small group insurance, it’s highly recommended to enroll in both Medicare Part A and Part B as soon as you are eligible. If you do not enroll in Medicare once you qualify, your employer coverage may refuse to pay your claims. That’s why enrolling in Medicare Part B is essential to avoid any gaps in coverage.

Remember that failing to enroll in Medicare Part B when you become eligible for Medicare will also result in a hefty late penalty, as your small employer’s group health coverage will not qualify as creditable coverage for Medicare.

When it comes to Part D, this Medicare plan usually doesn’t coordinate well with the employer’s drug plan, so we don’t advise keeping that insurance and Medicare.

I LOVE MY HSA HOW DOES MEDICARE WORK WITH HEALTH SAVINGS ACCOUNTS?

Once you enroll in any part of Medicare (Part A or Part B), you can no longer contribute to your HSA. This includes not only new contributions but also any employer contributions.

So if your employer plan provides an HSA option while you have both Medicare and employer coverage, you typically won’t be eligible to choose it.

If you continue to make HSA contributions after enrolling in Medicare, you may incur tax consequences. While you can’t contribute to your HSA after enrolling in Medicare, you can still use the funds you’ve accumulated in your HSA to pay for qualified medical expenses, including Medicare premiums, deductibles, co-payments, and coinsurance, including Part B, Part D (prescription drug coverage), and Medicare Advantage premiums (if applicable). Using HSA funds for these expenses is tax-free.

If you plan to retire and transition from employer coverage to Medicare, make sure to coordinate the timing to avoid any gaps in coverage and to understand how the shift affects your HSA contributions and withdrawals. After your Medicare Initial Enrollment Period (IEP), when you sign up for Medicare, Part A coverage will start retroactive to your date of application. Part A will begin either 6 months before your application date or the first day you were eligible for Medicare, whichever is sooner. This can disrupt your health savings account contributions. If you are enrolling in Medicare after you have turned age 65, keep this in mind to stop your HSA contributions before the Medicare Part A start date.

If your spouse is covered by your group insurance and their Medicare coverage is not yet active, they can still make contributions to their Health Savings Account (HSA) as long as the contributions are made in their name.

IS IT POSSIBLE TO HAVE A MEDICARE ADVANTAGE PLAN WHILE KEEPING MY EMPLOYER INSURANCE

It is possible to have both Medicare Advantage and employer-provided insurance simultaneously, but this is not an efficient health care coverage option and presents essential considerations. When you have both a Medicare Advantage plan and employer insurance, Medicare Advantage typically becomes your primary insurance, and your employer coverage becomes secondary. Consider the costs versus the benefits of both options.

Make sure to explore our other posts on Medicare Advantage plans and why they may not be the best option for many people as a primary payer.

For example, a Medicare Advantage plan will have limited networks that may not be the same network as your employer plan. Plus, these networks change regularly. You may also need to wait for authorization to see a specialist or to proceed with specific procedures under a Medicare Advantage plan.

Beware that many Medicare Advantage plans include prescription drug coverage (Medicare Part D). If you have employer prescription drug coverage, you are not permitted to use both at the same time. There will be coordination-of-benefits issues that need clarification.

DO I REALLY NEED TO HAVE SUPPLEMENTAL INSURANCE IF I AM CHOOSING ORIGINAL MEDICARE?

Whether you need supplemental insurance with Medicare depends on your individual needs and financial situation. Medicare provides substantial coverage for many healthcare services, but it does not cover all costs, and there can be out-of-pocket costs.

For example, it doesn’t cover prescription drugs, routine vision and dental care, or long-term care. In those situations, you may need a secondary payer.

Medigap plans are offered by private insurance companies and designed to fill in the gaps in Original Medicare coverage. They can help cover deductibles, copayments, and coinsurance.

In this case, Original Medicare will be your primary payer, and Medigap will be your secondary payer.

WRAPPING THINGS UP

I hope this article, "7 Things You Need to Know About Working Past Age 65," was helpful. We enjoy hearing from readers of our articles, and we would be happy to answer any additional questions you may have about Medicare. Here at Braden Medicare Insurance, we are passionate about serving our clients. We listen, ask insightful questions, and present options for your consideration. At Braden Medicare Insurance, the client is always in control. Our job is to do all the heavy lifting and take the stress away from our clients. Medicare Insurance is essential and personal. This is why we believe that everyone approaching 65 should always work with an Independent Medicare Broker in their area. Please feel free to text or email me, or pick up the phone and give us a call whenever you have a few minutes to chat.