How Working Past 65 Affects Your Medicare Enrollment

As retirement ages shift and more Americans choose to work beyond 65, understanding how Medicare fits into that decision has become increasingly important. Many people assume they must enroll in Medicare at 65 regardless of their work status, but the truth is a bit more nuanced. If you’re planning to stay employed past your 65th birthday, you have options - but you also need to be aware of potential penalties, coverage gaps, and coordination rules between Medicare and your employer’s insurance plan.

Working past 65 doesn’t automatically exempt you from Medicare enrollment responsibilities. The decisions you make about when and how to enroll depend heavily on the size of your employer, the type of health coverage you currently have, and whether you plan to contribute to a Health Savings Account (HSA). In this article, we’ll walk you through the essential factors you need to consider so you can make informed decisions that protect your health and your wallet.

The Basics of Medicare

Medicare eligibility begins at age 65 for most people. Your Initial Enrollment Period (IEP) is a seven-month window that starts three months before your 65th birthday, includes the month you turn 65, and ends three months after. During this time, you can enroll in Medicare Part A, which covers hospital care, and Part B, which covers outpatient services and doctor visits. You also have the option to enroll in Part D for prescription drug coverage or choose a Medicare Advantage plan (Part C), which combines Parts A and B and often includes Part D.

While many people enroll in Medicare as soon as they’re eligible, doing so isn’t always necessary, especially if you’re still working and have access to employer-sponsored health insurance. However, failing to understand how your current insurance interacts with Medicare could lead to expensive mistakes.

Does Your Employer Coverage Allow You to Delay Medicare?

Whether or not you can delay Medicare without facing penalties largely depends on the size of your employer. If you work for a company with 20 or more employees, your employer coverage is typically considered “primary,” meaning it pays first. In that case, you’re generally allowed to delay enrolling in Medicare Part B without facing a late enrollment penalty, as long as your employer coverage is considered “creditable.” This means the coverage is at least as good as Medicare in terms of benefits and cost-sharing.

On the other hand, if you work for a small employer with fewer than 20 employees, Medicare usually becomes the primary payer, and your employer coverage is secondary. In this situation, delaying enrollment in Medicare Part B could leave you without proper coverage, since your group plan may refuse to pay for services that Medicare would have covered. In such cases, enrolling in Medicare at 65 is not just advisable, pit’s essential.

Creditable coverage also applies to Medicare Part D, which covers prescription drugs. If your employer’s drug coverage is not considered creditable, you could face a late enrollment penalty when you eventually enroll in Part D, unless you qualify for a Special Enrollment Period.

Pros and Cons of Enrolling in Medicare While Still Working

Enrolling in Medicare while you’re still working comes with both advantages and disadvantages, and the right choice depends on your specific circumstances.

One potential advantage is cost. Medicare Part A is usually premium-free for individuals who have worked at least 10 years (or whose spouse has), so many people enroll in it even if they keep their employer coverage. In some cases, Medicare Part B and/or a Medicare Advantage plan may offer better coverage or lower out-of-pocket costs compared to your employer plan. This is especially true if your employer coverage has a high deductible or limited provider network.

However, there are also reasons you might choose to delay enrollment. If you’re satisfied with your current employer coverage and it’s cost-effective, paying for Medicare Part B premiums (currently $185 per month in 2025 for most people) may not make sense. Additionally, enrolling in Medicare, even just Part A, disqualifies you from contributing to a Health Savings Account (HSA). If you want to keep contributing to your HSA, you’ll need to delay all parts of Medicare, including the premium-free Part A.

Some workers choose a hybrid approach by enrolling in Part A to cover hospital stays while delaying Part B to avoid the monthly premium. This strategy can work well if your employer plan is creditable and you’re not contributing to an HSA.

What Happens If You Delay Medicare?

If you delay Medicare enrollment because you’re still working and have creditable employer coverage, you won’t face penalties, but only if you follow the proper process. Once your employment ends or your group coverage ends (whichever comes first), you’re eligible for a Special Enrollment Period (SEP). This eight-month window allows you to enroll in Medicare Part B without facing the late enrollment penalty.

It’s important to understand that this SEP only applies while you’re actively covered by employer insurance due to current employment. Retiree coverage or COBRA does not count as creditable coverage for delaying Part B. If you retire and rely solely on COBRA or a retiree plan without enrolling in Medicare, you may face late enrollment penalties and gaps in coverage.

To make sure you qualify for the SEP, you may need to provide documentation from your employer proving that you had creditable coverage when you delayed Medicare.

HSAs and Medicare: A Caution for Late Enrollers

Health Savings Accounts (HSAs) offer a tax-advantaged way to save for medical expenses, and many people working past 65 want to keep contributing. However, once you enroll in any part of Medicare (including the premium-free Part A) you’re no longer allowed to make HSA contributions.

This can catch people off guard, particularly those who delay Medicare enrollment until the last minute. Medicare Part A coverage is often retroactive up to six months (but not earlier than the first month you were eligible). That means if you enroll in Part A in June, your coverage could retroactively begin as early as January and any HSA contributions made during that time would be subject to tax penalties.

To avoid this issue, experts generally recommend stopping HSA contributions at least six months before you apply for Medicare. Planning ahead is essential if you want to maximize your HSA benefits without running afoul of IRS rules.

Coordination of Benefits: Who Pays First?

When you have both Medicare and employer insurance, it’s crucial to understand who pays first. This is known as the “coordination of benefits.” For employees at large companies with 20 or more employees, the employer’s group plan pays first, and Medicare is the secondary payer. In these cases, your group coverage generally remains your primary insurance, and you may not need Medicare Part B right away.

However, for employees at small companies with fewer than 20 employees, Medicare becomes the primary payer. If you delay enrolling in Medicare in this situation, your employer insurance may deny claims that Medicare would have paid. This can lead to substantial out-of-pocket costs and claim denials.

Understanding the coordination rules is essential to avoiding gaps in coverage and unexpected medical bills. It’s always a good idea to confirm with your employer’s benefits administrator how your group insurance coordinates with Medicare before making any decisions.

Common Mistakes to Avoid

Mistakes in Medicare enrollment can be costly and long-lasting, so it’s important to avoid common pitfalls.

One major mistake is assuming that COBRA or retiree health coverage allows you to delay enrolling in Medicare without penalty. It doesn’t. These forms of insurance are not considered creditable coverage for Medicare Part B, and relying on them can lead to a late enrollment penalty and a gap in coverage.

Another common error is failing to enroll in Medicare at 65 when working for a small employer. In these cases, Medicare is primary, and your group plan may not pay at all unless Medicare is billed first.

Missing your Special Enrollment Period after retiring is another frequent issue. The eight-month SEP begins the day your employment or employer coverage ends, whichever is sooner. Waiting too long could result in a late enrollment penalty that lasts for the rest of your life.

Lastly, many workers forget to stop HSA contributions before enrolling in Medicare. This can lead to tax penalties and the need to correct mistaken contributions.

Get Medicare Help Today

If you’re planning to work past 65, your Medicare decisions require careful planning. Whether you should enroll in Medicare depends largely on the size of your employer, the quality of your current health coverage, and your financial goals. Large employer coverage may allow you to delay without penalty, while small employer plans often require immediate enrollment. If you’re contributing to an HSA, you’ll need to factor in Medicare’s impact on your ability to save.

The key is to understand how your choices affect your coverage and costs - not just today, but in the years to come. If you’re unsure how to proceed, talking to a licensed Medicare agent at Local Medicare Specialists can help you navigate your options and avoid costly mistakes. With the right guidance, you can continue working with peace of mind, knowing your healthcare coverage is secure.