Table of Contents:

  1. If Your Employer Has 20 or More Employees
  2. If Your Employer Has Fewer than 20 Employees
  3. After You Retire
  4. Automatic Enrollment
  5. If You Have Employer-Sponsored Retiree Insurance
  6. Returning to Work After Receiving Medicare Benefits

If you are turning 65 and for that reason first becoming eligible for Medicare, it is extremely important that you understand if and when you’re eligible to delay enrolling for Medicare coverage without incurring additional costs. If you are not able to postpone, failing to sign up during your Initial Enrollment Period (IEP) can result in penalties that, over the course of your lifetime, could cost you thousands of dollars. Under certain circumstances, however, you are not required to enroll in Medicare, nor subject to late-enrollment penalties when you otherwise first become eligible. These include instances where you are still employed and covered by a viable form of group health insurance.

The Centers for Medicare and Medicaid Services (CMS) do not consider all forms of employer-offered health insurance to be forms of primary insurance that allow you to delay. For this reason and because the penalties you incur due to late enrollment can be very costly, it is critical to understand whether your employment benefits are sufficient to permit you to postpone Medicare enrollment without sanction when you first become eligible.

If Your Employer Has 20 or More Employees

If you are covered by group plan health insurance (insurance meeting certain requirements set by the IRS), you may be able to defer your Medicare enrollment without incurring any penalties. Once your employment ends (or if you no longer receive acceptable coverage through your employer), a Special Enrollment Period (SEP) will begin. During this window (which lasts for a total of 8 months), you can enroll in Medicare without incurring any penalties.

If Your Employer Has Fewer than 20 Employees

The Medicare rules treat employers with fewer than 20 employees differently. You will have to enroll in Medicare when you initially become eligible to avoid late enrollment penalties. You can retain your employer-offered health insurance in conjunction with Medicare. Medicare will pay before your other coverage. For more information on this, check out Medicare’s page on obtaining coverage while employed.

After You Retire

Retiring or losing access to an employer-sponsored group health plan triggers an eight-month SEP. It begins on the first day of your first month without coverage.

Automatic Enrollment

According to Medicare.gov, “you automatically get Part A and Part B after you get disability benefits from Social Security or certain disability benefits from the Railroad Retirement Board (RRB) for 24 months. If you’re automatically enrolled, you’ll get your Medicare card in the mail 3 months before your 65th birthday or your 25th month of disability.” Essentially, this means that you will automatically be enrolled in Medicare Parts A and B on the first day of the month of your 65th birthday if you already receive Social Security or RRB benefits.

If you wish to defer your enrollment in Medicare, you can either follow the instructions on the back of your Medicare card, or you can follow these instructions and postpone through the Social Security Administration. Keep in mind that you may be subject to significant penalties if and when you sign up after you initially become eligible. In most cases, it is a wise decision to enroll when you are first eligible.

If You Have Employer-Sponsored Retiree Insurance

It is highly advisable to enroll in Medicare within 8 months of your termination date. If you do not enroll during this SEP, it is likely that you will incur late enrollment penalties. If your employer-sponsored retirement benefits include health insurance, you are welcome to utilize these benefits. Medicare will actually pay before your other coverage.

Returning to Work After Receiving Medicare Benefits

If you are retired, have Medicare, and choose to re-enter the workforce, your choice about whether or not you remain enrolled in Medicare should take into consideration the insurance offered by your employer. If your employer offers viable group insurance that is acceptable as primary coverage, you can de-enroll from Medicare while employed and then re-enroll once you retire without facing any penalties.

It is important to confirm that your employer-offered health insurance might be right for you as primary coverage before making this decision. It is also wise to determine if dropping Medicare as a secondary form of health insurance will actually save you money over the course of the year, as Medicare can operate as a secondary payer (meaning that it will cover some costs that your employer coverage does not after your employer-sponsored coverage has paid).

Additionally, you can retain your Medicare coverage as a primary payer while utilizing your employer-sponsored coverage as a secondary payer. This could potentially save you money compared to simply having Medicare and no other form of coverage.

Information adapted from the Centers for Medicare and Medicaid Services, Medicare.gov, and USA.gov