If you’re over 65 and still working, and you are currently covered by an employer health insurance plan (through you or your spouse), it may make sense to sign up for Medicare now. But, as long as you are actively employed, you can also delay enrollment in Medicare without paying a late enrollment penalty, and your spouse can also remain on your employer plan past age 65. Although enrollment could reduce your out-of-pocket costs and gaps in coverage, it’s best to look at all the potential mistakes you could make before deciding.
Let's not sugarcoat it; these decisions are complicated and a Government program is never easy to understand. However, it's best to get a sense of all of your options before you sign up for Medicare during open enrollment, delay coverage in favor of an employer plan or opt for coverage from both Medicare and an employer plan. You should also keep track of changes coming to Medicare that could disqualify your private plan.
Medicare open enrollment began on October 15 this year.
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If you (or your spouse) have group health insurance
Since the mid-1980s, the number of people over the age of 65 who are still working has nearly quadrupled, reaching about 11 million, according to Pew Research. The question of when you should enroll in Medicare becomes a bit more complicated if you’re still on your employer’s healthcare insurance.
If you are 65 and you or your spouse are still working, you can delay signing up for Medicare without paying a late enrollment penalty. If you don’t have to pay a Part A premium, you can choose to sign up when you turn 65 or anytime after that. You can also wait until you or your spouse leave your job(s) or lose employer coverage to sign up for Part B, which covers doctor visits and other outpatient services, and you won’t pay a late enrollment penalty.
However, when you do stop working, or your coverage ends, you have an eight-month Special Enrollment Period (SEP) when you can sign up for Medicare or add Part B to existing Part A coverage, according to Medicare. This special enrollment period begins once you stop working, even if you have COBRA or other non-Medicare coverage.
If you don’t sign up for Medicare Part A and Part B, your employer insurance might not cover your medical expenses. You may also pay less in medical expenses if you sign up for Medicare while still on the job, especially if your portion of the group health insurance premium is expensive or if your group plan doesn't cover out-of-pocket costs like deductibles, copays and coinsurance.
It’s also possible to delay enrolling in Medicare Part D (prescription coverage) as long as you have coverage from your employer. Just keep in mind that you’ll want to sign up for Part D as soon as possible after you or your spouse stop working to avoid any permanent penalties.
If your employer has fewer than 20 employees and no group plan
At age 65, you must enroll in Medicare Part A and Part B, which becomes your primary insurance and pays first) if you or your spouse's employer has 20 or fewer employees and no group plan. You can wait to sign up for Part D, prescription coverage, as long as you have coverage through your employer or elsewhere. However, you’ll want to sign up for Part D as soon as possible after you or your spouse stop working to avoid any penalties.
If you're self-employed or not covered by group health insurance
If you are not enrolled in an employer’s group health plan or you’re self-employed, sign up for Medicare when you turn 65 to avoid a Part B late enrollment penalty. Also, if your previous job offered retiree coverage, it may not pay for your medical expenses if you don’t have both Medicare Part A and Part B, so check with your benefits manager.
If you have a high-deductible health plan with an HSA
Medicare enrollees cannot contribute to a health savings account (HSA). So, if you want to continue saving to an HSA, you must delay enrolling in Medicare Part A and Part B. What’s more, you should stop saving to your HSA at least six months before signing up for Medicare to avoid a tax penalty.
Warning: there are potential penalties
Medicare Part A
You become eligible for Medicare when you turn 65, which includes Part A. However, if you have health insurance through your or your spouse's employer, there are specific considerations regarding how Medicare Part A works with your employment.
Most individuals qualify for premium-free Medicare Part A if you or your spouse has paid Medicare taxes for at least ten years. If you are working and covered by your employer’s group health plan, which has 20 or more employees, you can choose to delay enrolling in Medicare Part A without facing any penalties. You can also sign up for Part A anytime while you’re still employed. If your employer has fewer than 20 employees, you may want to enroll in Medicare when you turn 65 to avoid potential gaps in coverage.
If you decide to delay enrolling in Part A because you are still employed, once you stop working or lose your employer health insurance, you will have an eight-month Special Enrollment Period (SEP) to sign up for Medicare Part A without incurring a late enrollment penalty.
Medicare Part B
If you are employed and have health insurance through you or your spouse’s employer, you may not need to enroll in Medicare Part B immediately. However, if your employer has fewer than 20 employees, you must enroll in Medicare Part B when you turn 65. In this case, Medicare becomes your primary insurance, and your employer’s plan will be secondary. If you are covered by a spouse’s employer plan that requires dependents to enroll in Medicare upon reaching age 65, then you must also sign up for Part B.
In both of these situations, failing to enroll in Part B could result in significant gaps in coverage and potentially high out-of-pocket costs. Also, if you delay enrolling in Medicare Part B because you are currently covered by your employer, you can't use a Special Enrollment Period (SEP). This allows you to sign up for Part B without facing a late enrollment penalty. The SEP lasts for eight months, starting from the month after either your employment or your group health insurance ends.
You’ll need to complete Medicare form CMS-L564 when you enroll in Part B and submit this form with your Medicare application. This will protect you from late penalties by verifying that you had employer coverage at age 65. If you’re unsure about how enrolling in Medicare will affect your current health insurance benefits or costs, it’s advisable to consult with your benefits administrator at work or contact the Social Security Administration for guidance.
Medicare Part D
When you are still employed and on your employer’s health insurance plan, understanding how Medicare Part D is important to avoid penalties and ensure you have adequate coverage.
If you have health insurance through your or your spouse's employer, the first step is to determine whether your current plan includes prescription drug coverage that is considered “creditable.” Creditable coverage means that the plan’s benefits are at least as good as those offered by a standard Medicare Part D plan.
If your employer’s drug coverage is creditable, you can choose to delay enrolling in a Medicare Part D plan without facing any late enrollment penalties. However, if the employer's Part D coverage is not creditable, it’s advisable to enroll in a Medicare Part D plan during your Initial Enrollment Period or Special Enrollment Period (SEP) after you leave your job or your health insurance ends. Failing to enroll in a Part D plan when required can result in a late enrollment penalty, which increases your monthly premium for every month you delay enrollment after becoming eligible.
This fee — equal to 1% of the national base beneficiary premium for each month of delay ($31.50 per month in 2024) — will be added to your monthly premium depending on how long you went without coverage. But, starting in 2025, no enrollee will be required to pay more than $2,000 out of pocket per year for perscriptions.
How to sign up for Medicare when you quit working
According to Medicare, how you sign up depends on whether you already have Part A or you are signing up for Part A and Part B. If you’re leaving your job or your employer's health insurance ends, sign up for Medicare about a month earlier to avoid a gap in coverage. If your employer's health insurance changes, find out if you’ll need to sign up for both Medicare Part A and Part B.
And, if you have an HSA, both you and your employer should stop contributing to the account at least six months before you quit your job or apply for Social Security benefits to avoid a tax penalty. That said, you can continue to make withdrawals from your HSA.
How to decide
If you're required to pay high premiums on your employer insurance, you may find Medicare a cheaper option. Compare all of your out-of-pocket costs, like deductibles and coinsurance, with the costs and benefits of Medicare. If you reach 65 and you’ve been employed for about ten years, you are entitled to premium-free Medicare Part A. Medicare Part B requires a monthly premium.
The exact figure for the 2025 Medicare Part B premium are not yet finalized, but early projections suggest a modest increase compared to previous years. In 2024, the monthly premium is $174.70. The average total monthly premium for Medicare Part D is $55.50 in 2024.
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