If you’re still working when you turn 65 and have company-provided health insurance, or you’re covered by your spouse’s plan, you may opt to postpone filing for some parts of Medicare.
Because Part A (hospital insurance) is free for most beneficiaries, there’s no downside to signing up for this coverage when you turn 65, unless you want to continue to contribute to your health savings account (HSA). You can’t contribute to an HSA once you’re enrolled in Medicare.
You may, however, choose to postpone signing up for Part B (medical insurance) while you are enrolled and paying premiums to an employer-provided plan. In that case, you may be eligible for a special enrollment period, which allows you to postpone enrolling in Part B without penalty as long as you’re covered by an employer plan. But to avoid penalties when you eventually sign up for Part B, it’s critical to confirm that your coverage meets Medicare’s standards and that you avoid gaps in coverage.
Here’s why: If you’re eligible for Medicare but no longer “actively covered” by company-provided health insurance, you have eight months to enroll in Medicare. If you fail to meet that deadline, you may be barred from enrolling in Medicare until the next general enrollment period, which runs from Jan. 1 to March 31 every year.
If you go without coverage for a year or more, you’ll be required to pay a late-enrollment penalty of 10 percent of your Part B premium for every year you should have had coverage. The penalty lasts as long as you receive Medicare benefits.
Medicare Part D (prescription drug coverage) has its own late-enrollment penalty. If you fail to sign up when you join Medicare and go 63 or more days without what Medicare terms “creditable drug coverage,” you’ll pay a penalty of 1 percent of the “national base beneficiary premium”—$34.70 in 2024—multiplied by the number of full, uncovered months you didn’t have Part D or creditable coverage.
Recent legislation has made late-enrollment penalties somewhat less onerous for some retirees. It’s now easier to correct errors that could trigger the penalty, such as wrong information from your employer or insurer. In addition, individuals who sign up during the general enrollment period will be able to receive coverage in the month after they sign up, says Casey Schwarz of the Medicare Rights Center. In the past, retirees had to wait until July for coverage to kick in, she says.
Given the potential penalties involved, it’s important to make sure the coverage you have meets Medicare’s standards. You should enroll in Part A, Part B and, in some cases, Part D if you’re 65 and have insurance through these sources:
A company with fewer than 20 employees. Your employer will probably require you to sign up for Medicare when you turn 65. Medicare generally becomes your primary coverage, and you’ll need to enroll to make sure all your health care is covered.
COBRA. If you lose your job, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue your employer-provided coverage for up to 18 months, although you will likely pay the employer and employee share of the premium. But even though COBRA provides the same coverage you had while you were working, Medicare doesn’t consider it active coverage. If you lose your job, or lose coverage because your spouse was laid off, sign up for Medicare as soon as possible to avoid late-enrollment penalties.
