The full retirement age has already increased from 65 to 66 and will rise incrementally
over the next several years to 67. That means more people today will be working while
they are eligible for Medicare.
What does this mean for people who work for small businesses? If you are 65 years old
and work for a small business that provides you and/or your spouse with group health
coverage, it is important to know how it will impact your Medicare coverage.
If you are 65 and work for a company with more than 20 employees and have a group
health insurance plan through your employer or through your spouse’s employer, you
can choose to delay Medicare enrollment. Be sure to compare your company plan’s
costs and coverage to Medicare’s and make the decision that is best for you. You might
find Medicare is a better plan.
You can choose to delay Part D enrollment without penalty if your company insurance
plan is creditable. If you decide to delay taking Part D, keep a record of your insurance
until you enroll in Medicare for proof of coverage when you sign up for Part D later.
However, if the employer has 20 or fewer employees, of if you are self-employed,
Medicare is the primary payer and if you do not sign up for Medicare at age 65, it will be
as if you have no insurance at all and you will face lifelong penalties.
Medicare Part A, which covers hospitalization, is free to workers and their spouses if the
worker paid Social Security and Medicare payroll taxes for at least 10 years. Because
there is no monthly premium, most Americans enroll in Medicare Part A at age 65 even
if they continue to work. The only change is that once they enroll in Medicare, they can
no longer contribute to a Health Savings Account, even though they can still use their
HSA funds tax-free to pay for out-of-pocket medical expenses.
Postponing enrolling in Medicare Part B, which covers outpatient services and doctors’
bills, until group health insurance coverage ends can save workers money by
eliminating the need to pay for duplicate health insurance.
Workers who take advantage of their/spouse’s employer group health insurance
coverage have up to eight months after that coverage ends to sign up for Medicare
Parts A and B penalty free. If they want to enroll in an all-inclusive Medicare Advantage
plan, also known as Medicare C, or a Medicare D prescription drug plan, they have only
63 days after the loss of employer healthcare coverage to enroll penalty free.
For most people who do not have continued coverage through an employer group
health plan, the time to sign up for Medicare is during the initial seven-month enrollment
period. This is the crucial enrollment period for workers in small businesses and the
self-employed.
The initial enrollment period runs from the three months prior to your 65th birthday
month, includes your birthday month and continues for three months after your birthday
month. For example, if your birthday is in September, your initial enrollment period
begins June 1 and ends December 31. If you fail to enroll in Medicare during your initial
enrollment period, you will be assessed a delayed enrollment penalty every month for
the rest of your life. You would also have to wait until the next general enrollment
period, which runs from January 1 through March 31 every year, to sign up for Medicare
with coverage beginning that year July 1.
The delayed enrollment penalty for Medicare B is 10% per year for every year you were
eligible to enroll in Medicare but did not. So, if you waited until 70 to enroll in Medicare
B, you would pay an additional 50% delayed enrollment penalty every month for the rest
of your life. The Medicare Part D delayed enrollment penalty is 1% per month (12% per
year) for every year you were eligible to enroll but did not. Penalties are only assessed if
no other creditable coverage existed.
If you plan on working past age 65 for a small business with less than 20 employees,
you need to enroll in Medicare when you first become eligible. If you fail to enroll in
Medicare during your initial enrollment period, you will be penalized.
Therefore, it is important to know all the facts about how Medicare functions in a small
business in relation to your group health plan. Talk with your employer to see whether
you need Medicare in addition to your current health coverage. Make sure to enlist the
aid of an Independent Medicare Insurance agent who can help guide and counsel you
on your options. This small move could save you big down the road.