Still working at 65 — when to take Part B and when to wait

This is the question we get asked most often, and the one where a confident wrong answer does the most damage. If you are approaching 65 and still working with employer coverage, read this before you decline anything.

Why it is not a simple yes or no

Medicare Part A is usually premium-free if you or a spouse worked enough quarters, so taking it at 65 is often uncontroversial. Part B carries a monthly premium, so the question people actually ask is whether to take Part B or delay it while they still have employer coverage.

The answer depends on a fact about your employer that has nothing to do with you: how many people work there.

The size rule, in plain terms

Above a certain employer headcount, the employer group plan generally pays first and Medicare pays second. In that situation, delaying Part B is usually safe, and a Special Enrollment Period will let you take it later without a penalty when the employment or the coverage ends.

Below that headcount, Medicare generally pays first and the employer plan pays second. If you have not enrolled in Part B, there is no primary payer. The employer plan can process your claims as though Medicare had already paid its share — and refuse the part it expects Medicare to cover.

The result is claims that nobody pays, sometimes discovered months later and applied retroactively.

We are not printing the headcount threshold here, because thresholds change and a stale number on an agency website is worse than none. Ask us, ask 1-800-MEDICARE, or ask a free SHIP counsellor for the current figure.

The question to ask, in writing

Do not ask your HR department “can I stay on the plan?” They will almost always say yes, and they will be answering a different question.

Ask this instead, and ask for the answer in writing:

Is this coverage creditable for Medicare purposes, and for an employee of my age at a company of this size, does it pay primary or secondary to Medicare?

Those are two distinct facts and you need both. Keep the reply. If you later need to prove you had creditable coverage in order to avoid a penalty, that document is what does it.

COBRA and retiree coverage are not the same thing

A common and expensive assumption: that COBRA counts as employer coverage for the purpose of delaying Part B. Generally it does not. Neither does most retiree coverage.

If you are relying on either, the safe assumption is that your Special Enrollment Period is already running or has run, and you should check rather than assume. This is one of the situations where a phone call today is worth more than any amount of reading.

Health Savings Accounts

If you contribute to an HSA, there is an interaction worth knowing about: enrolling in Medicare generally ends your ability to contribute. There can also be a look-back on Part A that catches people who enrol later than 65.

The details are tax rules rather than insurance rules, which means the right person to ask is a tax adviser, not an insurance agent. We will flag it; we will not advise on it.

What to do, in order

1. Find out your employer’s size, and get the primary/secondary answer in writing.
2. If you contribute to an HSA, speak to a tax adviser before you enrol in anything.
3. If the employer plan is secondary, take Part B during your Initial Enrollment Period.
4. If it is primary and you delay, keep the creditable-coverage letter safe. You will need it.
5. When employment or coverage ends, act inside the Special Enrollment Period rather than waiting for the next general window.

If any of that is unclear for your situation, telephone us — no cost, and if the answer is “your employer coverage is fine, do nothing yet”, that is what we will say. A SHIP counsellor will give you the same answer for free and sells nothing at all.