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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

When Do I Enroll in Medicare?

Are you, like millions of Americans, approaching your retirement day, or at least can see it in the distance? I'm right there with you, and it seems to be coming with ever more rapidity.

With that, comes many things to consider and decisions to make. For instance, when to begin receiving your social security benefits, a topic I have written on frequently in the past.

Another such decision is when to enroll in Medicare. Maybe that question is better phrased, when do you HAVE to enroll in Medicare, because sometimes you have a choice and sometimes you really do not, at least not without incurring substantial penalties.

And like most things in the financial world, or in life, there is no one answer that fits all.

A good place to start is the general rule of when you must start Medicare. For most people, this means registering and getting started at age 65. For those already receiving Social Security benefits when they turn 65 (such as those who elect early benefits at age 62), generally you will automatically be enrolled, including in Part A (Hospital Insurance) and Part B (Medical Insurance).

For others not receiving social security at age 65, you have a seven-month "enrollment window" in which to enroll, which includes the three months immediately before your 65th birthday, the month of your birthday, and the three months immediately after your birthday. Here's the kicker – if you fail to enroll during this period, you could face financial penalties in the form of permanently higher future premiums than you would otherwise have to pay, so paying attention to the enrollment window is of critical importance.

But let's say you are still working at age 65, something that is becoming more and more common. Do you still "have to" enroll in Medicare? The answer is, it depends. Let me explain further.

If you have health insurance through your employer and there are fewer than 20 employees, Medicare normally will be your primary coverage and the employer plan will be secondary. This also applies if your coverage is through your spouse's employer. You will want to enroll in Medicare Parts A and B as soon as you are eligible to avoid penalties.

If the employer tells you that you do not need to enroll in Medicare at age 65, you should get confirmation of this in writing from the employer, since failing to enroll in Medicare on a timely basis could result in a gap in your medical coverage.

Later in this article, I discuss the Medigap issue for coverage from larger employers. This issue does not apply if you take Part B while working and the employer has 20 or fewer employees. But you will need to enroll in a Medigap plan within 63 days of the end of insurance coverage from the employer to ensure protection from being rejected for an illness or pre-existing condition.

If, on the other hand, you are covered by your employer's health insurance and your employer has 20 or more employees, you, rather than your employer, have the choice as to whether your coverage will be primary at age 65. The same applies if this coverage is through your spouse's employer.

If you are covered by insurance through an employer with 20 or more employees, you have three primary choices:

  • Stay on the employer plan and enroll in Medicare later
  • Decline the employer coverage and go 100% with Medicare coverage; or
  • Carry both coverages at the same time.

Some people choose to enroll in Medicare Part A, hospital coverage, even while covered by their employer's plan since there is no premium. This can be a good idea as Part A might pick up some charges not covered by the employer coverage.

However, if you have a high deductible health insurance plan and are contributing to a health savings account, or HSA, you may want to delay enrolling in Medicare, as HSA contributions are not allowed once you enroll in Medicare.

You can also enroll in Medicare Part B if you choose, but again your employer coverage will be primary. Because of this, you will want to know what items are not covered by your employer's plan before enrolling in Part B, since Part B has a premium, and there is no use in paying that premium if it merely duplicates your primary coverage and doesn't cover something more.

As alluded to earlier, another issue with enrolling in Part B if your employer coverage is primary lies with Medicare supplement Medigap. Normally, you can purchase Medigap coverage within six months of enrolling in Part B without any risk of being denied coverage by one of the private insurers offering these policies for pre-existing health issues. Coverage under a larger employer does not extend this protected six-month period for obtaining Medigap coverage.

Finally, different rules apply if you have COBRA coverage from a former employer's plan. Space limits a further discussion about this here, but if you are on COBRA when you become Medicare eligible, be sure you find out how this affects you so that you don't inadvertently enroll late and suffer financial penalty.

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