Top 6 Questions Answered – Employer Health Insurance After Age 65

Written by Joanna Morrow

Joanna Morrow, Principal and Founder of Employer Benefits & Advice, is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU).

Top 6 Questions Answered – Employer Health Insurance After Age 65

Question 1:

I am 65 and plan to keep working for some years. I have health insurance from my employer. Do I have to sign up for Medicare Part B now?

Probably not. In most cases, for as long as you have group health insurance provided by an employer for whom you are still actively working, you can delay enrolling in Part B.

Part B covers doctor’s visits and other outpatient services and requires a monthly premium. When you eventually retire, or leave work, you’ll be entitled to a special enrollment period of eight months to sign up for Part B without incurring a late penalty. This also applies to most people who are covered beyond age 65 by insurance from the employer of their actively working spouse.

Question 2:

Will I get the same health benefits at work as I get now?

By law, people who continue to work beyond age 65 still must be offered the same health insurance benefits (for themselves and their dependents) as younger people working for the same employer. So employers cannot require employees to take Medicare at age 65 or offer those employees a different kind of insurance.

For example, by paying the premiums for Medicare supplemental insurance or a Medicare Advantage plan, as an inducement to enroll in Medicare and drop your employer plan. However, this law (known as ERISA) applies only to employers with 20 or more workers. So if you work for a smaller business or organization, you may be required to enroll in Part B at age 65.

Question 3:

Should I still sign up for Medicare Part A?

With one BIG exception (see next question), there’s no reason not to enroll in Part A.

Part A covers hospital stays, and there are no premiums for Part A. You can sign up for Part A during your initial Medicare enrollment period, which runs for seven months, starting three months before the month of your 65th birthday, the month of your 65th birthday and ending three months after your 65th birthday. You may contact Social Security, which handles Medicare enrollment, at 1-800-772-1213 to schedule an appointment for an interview, which can be done on the phone or at your local Social Security office. Or you can do apply online at www.ssa.gov. You may be required to provide documents showing you have an employer group health plan through either your active employment or that of your spouse.

Question 4:

What if I have a Health Savings Account (H.S.A.) at work?

You need to be careful if your employer insurance takes the form of a high deductible plan with a health savings account. Under IRS rules, you or your employer cannot continue to contribute to an HSA if you are enrolled in Medicare (even Part A) or, after age 65, and are receiving Social Security retirement or disability benefits. You can draw on funds already in your account, but you cannot add to them. You will be able to sign up for Part A without risk of a late penalty, during the same special enrollment period, when you enroll in Part B, after you cease employment. If you are married to somebody who has an HSA at work, and you are covered by that plan, it doesn’t make any difference whether you are enrolled in Medicare or not. You can still use the HSA for your medical needs. The IRS rule only applies to the employee who is contributing to the plan.

Question 5:

I have health insurance from my employer in the form of a Health Savings Account, but I’m told I can’t use it if I’m eligible for Medicare. Is this correct? If so, what can I do to keep this insurance if I continue working after age 65?

Health Savings Account (HSA) is a type of health insurance, which combines a high-deductible health plan with a tax-free health savings account to which the employee and the employer can contribute.

IRS rules say that you or your employer cannot continue to contribute to an HSA if you’re entitled to Medicare. You can draw on funds already in the account but you cannot add to them.

But it’s important to know the difference in meaning between “eligible” and “entitled” as defined by government:

Eligible for Medicare means that you’ve met the requirements to qualify for Medicare Part A hospital insurance, in other words, you or your spouse have enough Social Security work credits, but haven’t yet applied.

Entitled to Medicare means that you’re eligible, you’ve filed an application to receive Medicare Part A or have been approved automatically, and your name is already in the system, or that the application has been processed and you’ve been sent a Medicare card showing the date your coverage starts.

Enrolled in Medicare means that you’ve chosen to sign up for Part B, coverage of doctor and outpatient
services, or that you’re one of the relatively few people who pay premiums to purchase Part A. Most people do not need to actively enroll in Part A because if they have sufficient work credits, they’re automatically eligible and pay no premiums for it.

These three “E”s really matter if you have an HSA through your employer and you want to continue to use and contribute to it, after age 65, while you’re still working.

Here’s how they apply to different circumstances:

Eligible: If you’re eligible for Medicare, but have not filed an application for either Social Security retirement benefits or Medicare, you need do nothing. You can continue to contribute to your HSA after age 65 and postpone applying for Social Security and Medicare until you stop working. There is no penalty for this delay.

Entitled: If you’re entitled to Medicare because you signed up for Part A at age 65 or later but have not yet applied for Social Security retirement benefits, you can withdraw your application for Part A. There are no penalties or repercussions and you are free to reapply for Part A at a future date.

Enrolled: But, if you have applied for, or are receiving, Social Security benefits, which automatically entitles you to Part A , you cannot continue to contribute to your HSA. In these circumstances, the only way you could opt out of Part A is to pay back to all the money you’ve received from Social Security, plus everything Medicare has spent on your medical claims. You must repay these amounts before your application to drop out of Part A can be processed. If you take this action, you are no longer entitled to Social Security or Medicare — but you can reapply for both at any time in the future.

Question 6:

What if my employer offers me COBRA or retiree health benefits?

I know it’s confusing, but different rules apply to Part B and Part D in either of these situations:

Part B: You can delay Part B enrollment without penalty, only while you or your spouse is still actively working for the employer that provides your employer group health insurance. Neither COBRA nor Retiree Coverage is a reason, per the Social Security Administration, to delay enrollment in Part B. If you elect COBRA or Retiree Coverage, and are not actively employed, you may incur a late enrollment penalty, when you do enroll in Part B. You would not be eligible for a special enrollment period and would have to enroll during the general election period of January 1 through March 31st of each year. Your Part B coverage would then be effective on the following July 1st.

Part D: As long as your COBRA or retiree drug coverage is creditable (meaning it’s better than or equal to what you would receive under Medicare), you do not need to enroll in Part D until these benefits end, as explained above.