- The first chance to sign up for Medicare is a seven-month window around the 65th birthday. Missing it without qualifying coverage can add 10 percent to the Part B premium for each full year of delay, permanently.
- Coverage from a current job at an employer with 20 or more employees generally lets you delay Part B without penalty. Coverage from a smaller employer usually does not work the same way.
- COBRA, retiree plans and Marketplace plans do not count as coverage from current employment. When the job ends, an eight-month sign-up window begins, whether or not COBRA is in place.
Robert retired at 67 from a company he had worked at for two decades. He was offered eighteen months of COBRA and took it. It was the same plan he had always had, and he saw no reason to deal with Medicare paperwork until it ran out.
When the COBRA coverage ended, he applied for Medicare Part B. He learned three things that week. His special window to enroll had closed ten months earlier. He would have to wait for the next general enrollment period at the start of the year. And his Part B premium would carry a late penalty every month from then on.
Nothing Robert did was careless. He kept continuous, comprehensive health insurance the entire time. He simply did not know that Medicare draws a line between coverage tied to a current job and every other kind.
The seven-month window at 65
Medicare eligibility for most people begins at 65. The Initial Enrollment Period is seven months long: the three months before the month of your 65th birthday, the birthday month itself, and the three months after it.
If you are already receiving Social Security benefits at least four months before turning 65, you are enrolled in Part A and Part B automatically and a card arrives in the mail. Everyone else has to sign up, which is done through the Social Security Administration.
Medicare has several parts, and the decision is different for each one.
Part A: hospital
Free of premium for most people who worked and paid Medicare taxes for about ten years. Many people enroll at 65 even while working, with one important exception related to health savings accounts, covered below.
Part B: medical
Doctor visits and outpatient care. It has a monthly premium, which is why people consider delaying it. This is where the lifetime penalty applies.
Part D: prescriptions
Drug coverage through private plans. It has its own late penalty if you go 63 days or more without “creditable” drug coverage after first becoming eligible.
Who can delay Part B without a penalty
The rule is narrower than most people assume. You can delay Part B penalty-free while you have group health coverage based on current employment, either your own or your spouse’s. Each part of that phrase matters.
| Your coverage at 65 | Can you delay Part B? | Why |
|---|---|---|
| Current job, employer with 20 or more employees | Generally yes. | The employer plan pays first. You get a Special Enrollment Period when the job or the coverage ends. |
| Spouse’s current job, employer with 20 or more employees | Generally yes. | Coverage through a working spouse counts the same way. |
| Current job, employer with fewer than 20 employees | Usually not advisable. | Medicare is normally the primary payer. Without Part B, the employer plan may pay little or nothing of what Medicare would have covered. |
| COBRA | No. | COBRA is not coverage from current employment. |
| Retiree health plan | No. | Retiree plans generally expect you to have Medicare and pay after it. |
| Individual or Marketplace plan | No. | It is not employer group coverage. Premium tax credits also generally end once you are eligible for premium-free Part A. |
The question to put to your benefits office in writing: “Does our group health plan cover 20 or more employees, and will it remain the primary payer for me after I turn 65?” Keep the reply.
How the penalties are calculated
The Part B late enrollment penalty adds 10 percent to the monthly premium for each full 12-month period in which you could have had Part B and did not, and had no qualifying coverage from current employment. It is not a one-time fee. It is added for as long as you have Part B.
One full year of delay without qualifying coverage.
Two full years of delay.
Three full years of delay, paid on every premium afterward.
The Part D penalty works on months instead of years. For every full month you went without creditable drug coverage after you were first eligible, 1 percent of a national base premium is added to your monthly drug plan premium, again for as long as you have Part D. “Creditable” means the coverage is expected to pay at least as much as standard Medicare drug coverage. Employer plans must tell you each year, in a written notice, whether their drug coverage meets that test. Save those notices.
A missed deadline also costs time. People who miss both the initial window and any special window have to wait for the General Enrollment Period, which runs from January 1 to March 31 each year, with coverage beginning the month after they sign up. That can mean months with no medical coverage at all.
The eight-month window after work ends
If you delayed Part B correctly, you have a Special Enrollment Period to sign up later with no penalty. You can enroll at any time while you are still covered by the group plan through current employment. After that, you have eight months, beginning the month after the employment ends or the group coverage ends, whichever comes first.
This is where Robert went wrong. His eight months began when he stopped working, not when COBRA stopped. COBRA ran for eighteen months. By the time it ended, the special period was long over.
- Two to three months before your last day, contact Social Security to enroll in Part B, timed so coverage begins the month the employer coverage ends.
- Ask your employer to complete the form that verifies your group coverage dates. Social Security uses it to approve the special enrollment without a penalty.
- Choose how you will get drug coverage, through a Part D plan or a Medicare Advantage plan, within 63 days of losing the employer’s drug coverage.
- If you want a Medicare Supplement policy, apply in the six months after Part B starts. During that period insurers generally cannot turn you down or charge more for health conditions.
- Treat any COBRA offer as a possible supplement to Medicare for a short period, not as a reason to postpone it.
The health savings account complication
Once you are enrolled in any part of Medicare, including premium-free Part A, you can no longer contribute to a health savings account. You can keep spending the money already in it.
That gives people with a high-deductible plan and an HSA a reason to delay even Part A while they keep working. There is a catch at the end. When you sign up for Part A after 65, the coverage is backdated by up to six months, though never earlier than your 65th birthday month. Contributions made during those backdated months count as excess and can be taxed. The usual practice is to stop HSA contributions about six months before applying for Medicare or for Social Security retirement benefits, since claiming Social Security at 65 or older brings Part A with it.
This is a tax question as much as an insurance one, and a tax professional can confirm the figures for your situation. If you are deciding whether an HSA is available to you at all, see Have a Bronze Plan? You May Now Be Able to Open This Tax-Saving Health Account.
Four situations, sorted
Large employer, plan to keep working
You can generally delay Part B. Decide on Part A based on whether you contribute to an HSA. Keep the yearly creditable coverage notices.
Small employer, under 20 employees
Ask the plan how it pays for employees who are 65. In most cases you will want both Part A and Part B at 65.
Covered by a working spouse
The same test applies to the spouse’s employer. Your eight-month window begins when your spouse stops working or the coverage ends.
Retired, on COBRA or a retiree plan
Sign up for Part A and Part B during your initial window, or within eight months of the job ending. Do not wait for the other coverage to run out.
Some people have coverage that does not fit these boxes, such as TRICARE, veterans’ benefits, a union plan that covers several employers, or coverage because of a disability instead of age. The rules for those differ. Confirm with Social Security or a counselor before delaying.
One more surprise: the income surcharge
People with higher incomes pay more for Part B and Part D through an income-related adjustment. Social Security bases it on the tax return from two years earlier. Someone who retires at 66 may be charged according to the salary earned at 64.
If your income has dropped because you stopped working or reduced your hours, you can ask Social Security to use a more recent year. Retirement is one of the recognized life-changing events. The request is made on a specific form and usually needs proof, such as a letter from the employer. Many new retirees pay the surcharge for a year without knowing it can be reviewed.
If the deadline has already passed
Enroll at the next opportunity, which may be the General Enrollment Period from January through March. Ask Social Security whether any exception applies. Relief is available when the delay resulted from incorrect information given by a federal employee, and special enrollment periods exist for certain exceptional circumstances such as a natural disaster or an employer’s error about your coverage. People with limited income may qualify for a Medicare Savings Program, in which the state pays the Part B premium and the penalty is removed.
Free, unbiased help is available in every state through the State Health Insurance Assistance Program, known as SHIP. Its counselors do not sell insurance. You can also call 1-800-MEDICARE. Be cautious with unsolicited callers who offer to “verify” your eligibility. As we explain in Your Medicare Card Isn’t Something a Stranger Needs to “Verify,” Medicare does not call to ask for your number.
Whether you can wait on Medicare at 65 depends on those three facts. Find out how many employees your plan covers, remember that only coverage from a current job protects you from the penalty, and count eight months from the day the work ends. Then put the dates on a calendar.
Once you are enrolled, plans can change every year. See You Kept the Same Medicare Plan. So Why Is It Different in January?
Sources: Medicare.gov, when to sign up, working past 65, late enrollment penalties and how Medicare works with employer coverage; Social Security Administration, Medicare enrollment and income-related monthly adjustment amounts; Internal Revenue Service, Publication 969 on health savings accounts. This article is general information and is not legal, tax or financial advice. Confirm your own situation with Social Security or a SHIP counselor.