Can I Use Medicare and an Employer-Based Insurance Plan?
Key takeaways:
You can have both employer-sponsored insurance and Medicare. However, as long as you have creditable coverage through your job, you will not be penalized if you don't enroll in Medicare when you turn 65.
When you have Medicare and employer-based health insurance, your plans coordinate benefits to determine which one pays first or second.
Enrolling in Medicare could be a good option if your current employer coverage doesn’t meet your needs or if you think secondary coverage would be helpful.
Table of contents
Instead of retiring at age 65, people are increasingly staying in the workforce. According to the U.S. Bureau of Labor Statistics, about 1 in 10 Americans over age 65 will still be working in 2030.
If you’re about to turn 65 and you’re still in the workforce, you may wonder if you can have both employer-sponsored insurance and Medicare. The answer is yes, but there are a few points to consider.
Can you sign up for Medicare if you’re still working?
Yes, when you turn 65, you can sign up for Medicare even if you’re still working and have health insurance through your employer.
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Medicare is the federal health insurance program that covers people age 65 and older, as well as some younger people with disabilities or specific health conditions. Generally, it’s recommended to sign up for Medicare during your initial enrollment period, which is the 7-month window around your 65th birthday. There are stiff penalties if you delay enrolling and don’t meet certain criteria.
Is Medicare enrollment required for people who are still working?
If you have health insurance through your job when you become eligible for Medicare at 65, you have three choices:
Enroll in Medicare while keeping your employer-sponsored insurance, to give you additional coverage
Drop your work insurance and switch to Medicare
Keep your work insurance and delay joining Medicare until you retire
If your employer has fewer than 20 employees or you don’t have health insurance through work, you should sign up for Medicare (including Part D) as soon as your initial enrollment period rolls around to avoid a late-enrollment penalty.
If you have comprehensive health insurance through your work or your spouse’s work, you can delay Medicare enrollment until you no longer have job-based coverage. Or you may choose to join premium-free Medicare Part A, in addition to your employer insurance, and defer enrollment in Medicare Part B since it comes with a premium.
As soon as you retire or lose your employer coverage, you’ll enter Medicare’s 8-month special enrollment period. A special enrollment period is when you can sign up for Medicare or make changes to your coverage, like adding Part B and Part D, without paying a late-enrollment penalty.
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How does Medicare work with your employer insurance?
Medicare and employer-sponsored insurance can work together to give you comprehensive health coverage. The health plans coordinate their benefits to determine which is the primary and secondary payer. The primary payer covers its share of your medical bill first. Any unpaid amount goes to the secondary payer.
Here’s how Medicare works with your employer insurance:
If your employer has 20 or more employees: Your employer’s group health plan, or your work insurance, is considered the primary payer and Medicare is the secondary payer.
If your employer has fewer than 20 employees and is not part of a multi-employer group plan: Medicare becomes the primary payer and your work insurance is secondary. A multi-employer group plan is when small employers join together to offer health insurance as one large group to get better rates.
If your employer has fewer than 20 employees but is part of a multi-employer group plan with a larger employer: If your multi-employer group plan includes one employer with 20 or more employees, your work insurance pays first and Medicare pays second. This is because your insurance is treated as a large employer plan.
If you're covered under a spouse’s workplace that has 20 or more employees: The work insurance pays first and Medicare pays second. The same applies if your spouse’s workplace has fewer than 20 employees but is part of a multi-employer group plan.
If you have a group or retiree health plan and qualify for Medicare due to end-stage renal disease (ESRD): Your work insurance pays first for up to 30 months. This is called the coordination period. When this period ends, Medicare takes over as the primary payer and your work insurance pays second. The same applies if you have Medicare due to ESRD and COBRA.
If you have both Medicare and employer-based insurance, it’s important to understand which insurer is primary and which is secondary. Call the Center for Medicare & Medicaid Services’ Benefits Coordination & Recovery Center at 1-855-798-2627 (TTY: 1-855-797-2627) or check with your policies to find out more.
What are the benefits of getting Medicare while I am working?
Signing up for Medicare while you already have health insurance through work can be beneficial. If your job-based health insurance restricts you to a small network of healthcare providers, having Medicare may give you access to more. Signing up for Medicare may also save you money on out-of-pocket costs while giving you extra coverage.
For example, Medicare Part A covers hospital visits after you pay a deductible. If you need to be admitted to the hospital, your employer insurance will likely pay first. Part A may then help cover any remaining copays or costs.
What are the drawbacks of getting Medicare while you’re still working?
While Medicare Part A is generally premium-free, Medicare Part B — which covers healthcare provider visits and outpatient medical supplies — requires you to pay a monthly premium. If you keep your employer-sponsored insurance, you could end up paying premiums for two policies, which may get expensive.
Also, having two insurance policies can be confusing and possibly lead to billing complications. You and your healthcare providers will have to keep track of which plan is primary and which is secondary.
Your employer's prescription medication coverage may offer better benefits than Medicare Part D, so enrolling in Part D could be an unnecessary added cost.
Finally, if you have a health savings account (HSA) through your employer, you can no longer continue to contribute to the account once you enroll in Medicare.
What happens if I decline Medicare coverage?
If you have insurance through an employer with more than 20 employees, you can decline Medicare with no penalty, as long as you sign up during your special enrollment period later on.
If you don’t have employer-based insurance, or your employer has fewer than 20 employees, declining Medicare when you’re first eligible means you’ll end up paying higher premiums later on. When you do sign up for Medicare, your monthly late-enrollment penalty could look like:
If you have to pay for Part A, your premiums will go up 10%.
For Part B, premiums go up 10% for every 12 months that you don’t sign up.
The penalty for signing up late for Part D is based on how long you went without creditable prescription medication coverage.
How do I decide which approach is the most cost-effective for me?
When you have access to both employer-sponsored insurance and Medicare, deciding on the most cost-effective approach takes a bit of work. To start:
Add up each plan’s out-of-pocket costs, including the premiums, deductibles, copays, and prescription medication costs.
Consider what treatments and services you use most often and what you think you’ll need in the near future.
Ask your employer’s benefits manager to help you understand your work-based insurance benefits.
Compare the total estimated costs for employer insurance and Medicare coverage side by side.
Use this guide from Medicare to help you make your decision.
The bottom line
You can enroll in Medicare even if you have health insurance through your job. To decide on the right approach, you’ll need to consider both plans’ costs and coverage details. If you decide to stick with employer-based insurance and defer Medicare, make sure that, when you leave your job, you sign up for Medicare during your special enrollment period to avoid penalties.
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References
Centers for Medicare & Medicaid Services. (2023). Coordination of benefits and recovery overview.
Kaiser Family Foundation. (2021). 2021 employer health benefits survey.
Medicare.gov. (n.d.). Avoid late enrollment penalties.
Medicare.gov. (n.d.). Consider these 7 things when choosing coverage.
Medicare.gov. (n.d.). How Medicare works with other insurance.
Medicare.gov. (n.d.). Part D late enrollment penalty.
Medicare.gov. (n.d.). When does Medicare coverage start?
Medicare Rights Medicare Interactive. (n.d.). Creditable drug coverage.
Medicare Rights Medicare Interactive. (n.d.). Medicare Part B late enrollment penalties.
Ochieng, N., et al. (2023). How many physicians have opted out of the Medicare program? Kaiser Family Foundation.
The Economics Daily. (2021). Number of people 75 and older in the labor force is expected to grow 96.5 percent by 2030. U.S. Bureau of Labor Statistics.
