Can You Stay on Employer Health Insurance After 65?

As individuals approach age 65, a key decision involves choosing between Medicare and employer-sponsored health coverage. This choice depends on factors like employment status and plan specifics, requiring careful consideration to ensure continuous and adequate health coverage.

Continuing Employer-Sponsored Coverage

Many individuals reaching age 65 can remain on their employer’s health insurance plan. This option is typically available if the individual, or their spouse, is actively working. The ability to continue employer coverage is largely determined by the size of the employer, due to Medicare Secondary Payer (MSP) rules. These rules dictate whether the employer plan or Medicare pays first for healthcare services.

If an employer has 20 or more employees, their group health plan is generally the primary payer for current workers aged 65 or older. This means the employer plan pays for medical costs first, and Medicare then acts as the secondary payer, covering any remaining eligible expenses. Employers with 20 or more employees are required to offer the same health insurance to current workers aged 65 or older as they do to younger employees. Employees covered by such plans can delay enrolling in Medicare Part B without penalty.

Conversely, for employers with fewer than 20 employees, Medicare typically becomes the primary payer for individuals aged 65 or older who are still actively working. In this scenario, the employer’s plan acts as the secondary payer. This difference in primary payer status is significant, as it can impact out-of-pocket costs and coverage details. Employers with fewer than 20 employees may even require individuals to enroll in Medicare Parts A and B to maintain coverage through their plan.

Coordinating Employer Coverage with Medicare

When an individual has both employer-sponsored health coverage and Medicare, coordination of benefits (COB) determines which plan pays first. This ensures medical bills are handled appropriately by both sources of coverage.

For employers with 20 or more employees, the employer plan processes claims first, paying up to its coverage limits. Any remaining costs, such as deductibles, copayments, or coinsurance, are then submitted to Medicare for potential coverage. Medicare may cover some or all of these residual expenses, helping to reduce out-of-pocket costs.

If the employer has fewer than 20 employees, Medicare pays its share first. The employer plan may then cover some of the remaining costs that Medicare did not fully pay.

Navigating Enrollment and Other Choices

When approaching age 65, individuals with employer coverage have several enrollment decisions to consider. One key aspect is the Medicare Special Enrollment Period (SEP). This period allows individuals who delayed Medicare Part B enrollment due to active employer coverage to sign up without penalty once that coverage ends. The SEP for Part B generally lasts for eight months, beginning the month after employment ends or employer coverage terminates, whichever occurs first.

COBRA, the Consolidated Omnibus Budget Reconciliation Act, provides a temporary continuation of employer health coverage after employment ends or hours are reduced. This coverage can last for 18 to 36 months, and it can serve as a bridge to Medicare or other health insurance. If an individual has COBRA and then becomes Medicare-eligible, Medicare typically becomes the primary payer, and COBRA becomes secondary. However, COBRA is not considered creditable coverage for delaying Medicare Part B or D without penalty, meaning individuals should enroll in Medicare when first eligible to avoid future late enrollment penalties.

Enrolling in Medicare Part A, which is usually premium-free for those who have paid Medicare taxes for at least ten years, is often advisable even if continuing employer coverage. While Part A covers hospital stays, Part B covers doctor visits and outpatient services and carries a monthly premium. Deciding whether to enroll in Part B while still working depends on the employer’s size and the coordination of benefits rules. If Medicare Part B is delayed without qualifying employer coverage, a permanent late enrollment penalty of 10% for each full 12-month period of delay can apply to the monthly premium.