If you’re 65 or older, still working, and covered by employer’s health insurance, it may be a good idea to sign up for Medicare now. Registration can reduce your personal expenses.
Millions of people find themselves in this situation. The proportion of Americans aged 65 to 74 who are working is expected to reach 30.2% by 2026, according to the Bureau of Labor Statistics.
But Medicare is complicated, and there are a lot of caveats and some surprise expenses to avoid. So, for active people 65 or older, here’s some help determining when to register for Medicare and how to avoid costly late registration penalties and gaps in coverage.
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) forces you to pay a large portion of your group health insurance premium, you may find Medicare cheaper and adequate coverage. So compare your current coverage and out-of-pocket expenses – including premiums, deductibles, copayments and coinsurance – with your health insurance costs and benefits, which may also cover some expenses not covered by your health insurance. group plan.
Medicare Part A: If it’s free, why not take it?
If by the time you turn 65 you have worked a total of about 10 years in your career, you are entitled to Health insurance part A, which pays for hospital costs and more.
Why buy more hospitalization insurance when an employer plan already offers you good coverage at low cost? Because in some cases Medicare Part A may cover what your employer plan does not.
But as with many aspects of Medicare, there are caveats, exceptions, and potential pitfalls.
If the employer has 20 or more employees: If your employer or your spouse’s employer has 20 or more employees and a group health plan, you don’t have to enroll in Medicare at age 65 if it doesn’t make financial sense. (However, a reminder: Part A is free for most people.)
If the employer has less than 20 employees: If your employer or your spouse’s employer has fewer than 20 employees and health coverage is not part of a multi-employer group plan, at age 65 you must enroll in Medicare Part A, which will be your primary insurance. “Primary” means Medicare pays first, then employer’s insurance kicks in to pay for anything that might be covered by that policy but was not covered by Part A.
If you have an HSA and want to continue contributing: If you are saving to a health savings account and want to continue to do so, you must delay enrollment in Medicare Part A (or Medicare Part B) because people enrolled in Medicare cannot 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.
Potential sanctions: If you don’t enroll in Medicare Part A by age 65 and fail to enroll within eight months of stopping work or losing employer coverage (whichever comes first) , you may have to pay a penalty. In all cases, you must register for Part A before your employer coverage ends to avoid a gap in your health coverage.
Before delaying Part A: Before delaying Medicare, check with your or your spouse’s benefit administrator to make sure you understand how your group plan will cover you without Part A when you turn 65.
Medicare Part B: Delay to avoid premiums
If you are 65 or older and you or your spouse still have employer-sponsored health insurance, you will probably want to delay enrollment in Health insurance part B, which pays for doctor’s visits and many other outpatient services. Why? Because unlike Medicare Part A, everyone pays a premium for Part B, so it’s never a free add-on.
As with Part A, your particular situation can influence your decision, and there are pitfalls to avoid:
If the employer has 20 or more employees: If your employer or your spouse’s employer has 20 or more employees and a group health plan, you are not required to enroll in Medicare at age 65. But the countdown begins once you stop working or lose your employer coverage (see below), so don’t miss your window.
If the employer has less than 20 employees: If your employer or your spouse’s employer has fewer than 20 employees and health coverage is not part of a multi-employer group plan, at age 65 you must enroll in Medicare Part B, which will be your primary insurance.
If you have an HSA and want to continue contributing: If you have an HSA and want to continue contributing to it, you must delay your enrollment in Medicare Part B. Stop contributing to your HSA at least six months before enrolling in Part B. And you will want to enroll for Medicare. at least one month before stopping work or losing employer coverage.
Potential sanctions: You must enroll in Medicare Part B within eight months of stopping work or losing employer coverage. Otherwise, your premiums may include a penalty – for the rest of your life. Additionally, you may have to wait to enroll in Medicare, which will lead to a risky gap in health care coverage.
Before delaying Part B: Before deciding to defer enrollment in Medicare Part B, consult with your or your spouse’s benefits administrator about how your group policy will cover you at age 65 and beyond.
Special situations: previous employers, military personnel, veterinarians
If you have health insurance from a previous employer, such as COBRA or your spouse’s retiree health coverage, you must enroll in Medicare Parts A and B when you turn 65.
If you receive health benefits as a member of the military or veteran service, such as TRICARE or CHAMPVA, you should consult these 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 have many exceptions; if you forget something in the membership rules, you may end up paying a high price in terms of penalties and gaps in coverage. You should therefore consult with Medicare and your employer’s benefit coverage administrator – before enrolling or deciding to delay enrollment.
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John Rossheim writes for NerdWallet. Email: [email protected]
The article Should you enroll in Medicare if you are 65 and still working? originally appeared on NerdWallet.