If you’re 65 or older, still working, and are covered by employer health insurance — yours or a spouse's — it can make sense to sign up for Medicare now. Enrollment might reduce your out-of-pocket costs.
Millions find themselves in this situation. The proportion of Americans ages 65 to 74 who are working is projected to reach 30.2% in 2026, according to the U.S. Bureau of Labor Statistics.
But Medicare is complicated, and there are a lot of caveats and some surprise expenses to be avoided. So for working people 65 or older, here’s help with figuring out when to enroll in Medicare and how to avoid costly late-enrollment penalties and gaps in coverage.
A note for married couples where one spouse is covered by the other’s employer insurance: The information provided here also applies to you when you turn 65.
The cost equation: Will Medicare save you money?
If your employer (or your spouse’s employer) requires you to pay a large portion of the premium on your group health insurance, you may find Medicare cheaper and the coverage adequate. So compare your current coverage and out-of-pocket expenses — including premiums, deductibles, copays and coinsurance — with your costs and benefits under Medicare, which may also pay some expenses not covered by your group plan.
If you reach 65 and you’ve worked a total of approximately 10 years over your career, you’re entitled to premium-free Medicare Part A, which is your hospital insurance. Medicare Part B, which pays for doctor visits and many other outpatient services, starts at $164.90 per month (2023). Medicare Part D is prescription drug coverage, and the average cost is $31.50 per month (2023). All premiums are based on your prior 2 years average income.
If your employer has 20 or more employees
If you or your spouse's employer has 20 or more employees and a group health plan, you don't have to sign up for Medicare at 65 — but if you get Medicare Part A for free, you should sign up. (After all, it’s free.) In some cases, Medicare Part A may cover what your employer plan doesn’t. If you have to buy Part A, you can delay until you stop working or lose employer health insurance.
You will probably want to delay enrolling in Medicare Part B unless the coverage is better and cheaper than what you’re receiving through employer insurance. Unlike Medicare Part A, everyone pays a premium for Part B, so it’s never a free add-on. But the clock starts ticking once you stop working or lose your employer coverage (see below), so don't miss your window. And you’ll want to sign up for Medicare at least a month before you stop work or lose employer coverage.
You can also delay enrolling in Medicare Part D as long as you have creditable coverage from your employer (or another policy). But there are penalties if you go too long without drug coverage, so when you or your spouse stop working or lose coverage, you’ll want to sign up for Part D.
If you have a high-deductible health plan with an HSA
If you're saving to a health savings account and wish to keep doing so, you must delay enrollment in Medicare Part A (and Part B), because Medicare enrollees can't contribute to an HSA. In fact, to avoid a tax penalty, you should plan to stop making HSA contributions at least six months before signing up for Medicare.
If your employer has fewer than 20 employees
If your or your spouse's employer has fewer than 20 employees and health coverage isn't part of a multi-employer group plan, at age 65 you must enroll in Medicare Part A and Part B, which will act as your primary insurance. “Primary” means that Medicare pays first, then the employer insurance kicks in to pay whatever might be covered under that policy but wasn't covered by Part A.
If the employer is part of a multi-employer group plan (you’ll have to ask your benefits advisor whether this is the case), that group health plan would be your primary insurance, meaning it would pay first. In this case, you can wait to sign up for Medicare Part B until you or your spouse stops working or loses coverage. (Since Part A is typically free, there’s no need to delay signing up.)
You can wait to sign up for Medicare Part D as long as you have acceptable drug coverage through your employer or elsewhere. Going too long without drug coverage can lead to permanent penalties once you do sign up.
Medicare Part A
There are only penalties associated with Medicare Part A if you have to pay premiums. In that case, if you don’t enroll in Medicare Part A at age 65 and neglect to sign up within eight months of stopping work or losing employer coverage (whichever comes first), you may have to pay a penalty. For Part A, your monthly premium could go up 10% for twice the number of years you could have had Part A (but didn’t). In any case, you should sign up for Part A before your employer coverage ends to avoid a gap in your health coverage.
Medicare Part B
You must sign up for Medicare Part B within eight months of stopping work or losing employer coverage. Failing to do this will result in a permanent penalty — a 10% bump in your monthly premium for every 12-month period you could have had Part B but didn’t. In addition, you may have to wait to enroll in Medicare, resulting in a risky gap in health care coverage.
Medicare Part D
Once you’ve passed your initial enrollment period — which typically includes your 65th birthday month, plus the three months before and after it — you may pay a permanent late enrollment fee for Medicare Part D if you go 63 or more days in a row without Part D or other creditable drug coverage. This will be an amount added to your premium each month based on how long you went without coverage.
Before delaying Medicare, consult with your or your spouse’s benefits administrator to be sure you understand how your group plan will cover you at age 65 and beyond.
Medicare Advantage (Part C) and Supplement Plans (Part G)
Medicare has no out-of-pocket spending caps for Parts A and B. Therefore, most people bundle a Medicare Advantage Plan (Part C) or a Medicare Supplement / Medigap (Part G) program when they sign up for Medicare. These plans are in addition to your Part B costs, and help cover and pay for most out of pocket expenses and deductibles that you would normally be required to pay with standard Medicare coverage.
There are some big differences between each of these programs. We should have a conversation to discuss the differences, determine which type of program is best for you, and what the program costs are.
Special situations: Previous employers, military, and vets
If you have health insurance from a previous employer, such as your or your spouse’s COBRA or retiree health coverage, you need to enroll in Medicare Parts A and B when you turn 65.
If you have health benefits as a military service member or veteran, such as TRICARE or CHAMPVA, you should consult with those programs to determine when to enroll in Medicare.
It’s complicated, so get all the advice you need.
Medicare processes and rules are complex and rife with exceptions; if you overlook something in the enrollment rules, you may pay a high price in terms of both penalties and gaps in coverage. Consult with Medicare and with the benefits administrator for your employer coverage — before you enroll or decide to delay enrollment.
Or contact us and let us walk you through the process and help you find the best solution that meets your needs.
Click this link to download a PDF version of this article: Medicare - When to Sign Up If Still Working