A growing number of Americans are choosing to work past their 65th birthday. According to data from the Bureau of Labor Statistics (BLS), approximately 20% will decide to continue working well into their 60s and 70s. The top reason for the shift is a positive one. As many as 75% of Americans over the age of 65 describe their health as good or excellent, and seniors feel more capable to continue working than they have in the past.
If Americans over age 65 continue to work, how does that impact their current health insurance coverage and Medicare enrollment?
Creditable Coverage And Medicare Enrollment
Approximately 10,000 people in the United States celebrate their 65th birthday every day, making them eligible to enroll in Medicare, which is the U.S. federal government health insurance program. While enrollment into Medicare Parts A and B is technically optional, not enrolling on time can lead to lifetime penalties, delays in coverage and unlimited exposure to medical claims. It is vitally important you understand what, if any, actions you need to take as your 65th birthday approaches.
To understand why delaying enrollment in Medicare is sometimes the right choice, it’s important to first understand what creditable coverage is. Creditable coverage describes any health and prescription drug coverage and benefits that are equal to or better than the coverage provided by Medicare. You may receive this coverage through your or your spouse’s current employer, former employer or a union. The Centers for Medicare and Medicaid Services (CMS) defines creditable coverage as a health plan sponsored by an employer with 20 or more employees. If the company employs fewer than 20 people, enrollment in Medicare is highly recommended as Medicare is considered your primary payer of claims; without that coverage, you are then responsible for those costs. For example, Medicare Part B is responsible for 80% of the cost of covered outpatient care and service, but failing to enroll in Medicare leaves you responsible for those costs. You also could face penalties for failing to enroll in Part B when first eligible at age 65. Checking with your employer to determine if Medicare is your primary or secondary source of coverage is highly recommended.
Whether due to cost, benefits or both, it often makes sense to remain on employer insurance while actively working. For many, enrolling in Part A (hospital coverage) makes sense because it’s premium-free and will provide secondary payer benefits in the event of hospitalization. The one circumstance where an individual would not enroll in Medicare Part A is if they are funding a Health Savings Account (HSA) as Medicare does not allow one to make contributions into an HSA while on Medicare.
Special Enrollment Periods (SEPs) when Working Past 65
If you choose to delay enrollment in Medicare, you can enroll during a Special Enrollment Period (SEP) when you wish to transition from your creditable coverage to Medicare. In many cases, this occurs when you or your spouse decide to retire and your employer sponsored health coverage ends. SEPs allow you to enroll in a Medicare plan penalty-free outside of the typical enrollment periods. If you apply prior to retirement and leaving your employer, you can coordinate your Medicare benefits to start when your employer benefits end. You can begin the application process three months prior to your desired start of Medicare. Note, Medicare only begins on the first of the month, so coordinate your existing benefits to end the last day of the prior month to avoid any breaks in coverage.
Generally speaking, you have eight months to enroll in Medicare after you stop working or coverage under your employer or union ends. Whichever of those occurs first is the starting point of your specific SEP, according to Medicare.gov: the window when your coverage ends or the eight months after you stop working constitute the term of your SEP. If you miss your SEP, you may be subject to a penalty that grows larger the longer you go without coverage, and that cost may continue for the remainder of your life. That’s why it’s important to confirm the existence of your creditable coverage with your employer or union before delaying Medicare enrollment, and properly ensuring that you manually enroll in Medicare within your Special Enrollment Period.
If you intend to continue to work after 65, remaining on your employer’s or union’s plan may be your desired solution; however, understanding Medicare employer size guidelines should be the first step in evaluating your enrollment steps. To help you plan your transition from creditable coverage to Medicare, a local Medicare insurance agent can help you evaluate your options and choose the plan that will best meet your health care and prescription drug needs. Contact Medicare Portal today to learn more about how delaying retirement impacts your health care coverage choices and Medicare enrollment!