Working and Medicare

Many of us would like to believe that by the time we hit 65 and are eligible for Medicare that we’ll be retired, but the reality of the situation is that many of us will still be employed when we hit that magical number. With more than 10,000 people turning 65 every day in the USA, and many of those still working, there are numerous questions about what type of insurance they need to use when they are still employed.

Although eligible to receive Medicare, many delay their Medicare enrollment during their Initial Enrollment Period (IEP) because they or their spouse are still working and they have an Employer Sponsored Health plan that provides creditable coverage. The IEP lasts for a total of 7 months. It begins three months before your 65th birthday and ends three months after your 65th birthday.

If you or your spouse are still working and you receive health insurance from your employer, the insurance is Primary if there are 20 or more employees at the company where you or your spouse work. If there are less than 20 employees, Medicare becomes your Primary insurance.

If you have creditable coverage and the group size is greater than 20, no action is required to enroll in Medicare. If you have an HSA and you enroll in any Part of Medicare you will no longer be eligible to make HSA contributions to your plan. You will need to check with your employer when you become eligible for Medicare to see how your employer insurance will work with Medicare.

To qualify for Medicare you need to have worked for 10 years (40 quarters) under Medicare-covered employment and paid Medicare taxes during that time. If your spouse worked for 40 quarters and is over the age of 62, you can qualify for premium-free Medicare Part A based on their work history. The final requirement is that you need to be an American citizen or permanent legal resident of at least 5 continuous years. If you don’t sign up for Medicare when you’re first eligible and don’t have coverage based on current employment or a dependent of creditable coverage, you could be required to pay a late-enrollment penalty when you do enroll.

Once you stop working or your employer coverage ends (whichever happens first), you have an 8-month Special Enrollment Period to sign up for Medicare Part B. If you choose COBRA after you stop working, do not wait until your coverage ends to sign up for Medicare. If you delay enrolling in Medicare Part B after your special Enrollment Period ends, you’ll have to wait until the next General Enrollment Period (January 1 to March 31 every year), making your Part B effective date July 1st. Remember you may have to pay a late-enrollment penalty for Part B if you don’t have creditable coverage.

Remember, you can always enroll in Medicare at any time that you are still working and have employer-based coverage. Your Part B premium is based on earnings 2 years prior to getting on Medicare. Higher income earners will pay more for Part B & D premiums. This is known as the Income Related Monthly Adjustment Amount (IRMMA).

There are several reasons not to take social security or Medicare while you’re still working. A lagging spouse who still needs coverage. Or continuing to work until maximum retirement age at 70 to maximize your Social Security benefits, including contributing to your HSA. For many it may be beneficial to stay on an employer group plan based on prescription drug usage or health status.