Do You Have Clients Working Past Age 65?

Medicare and Working Past 65

Today, an increasing number of Medicare eligibles are working past their 65th birthday.

Statistically, 32% of people ages 65-69 are still working either full or part-time.* For these employees, they still must address Medicare when turning 65.

* Data sourced from magnifymoney.com – last visited on 4/7/2023.

Medicare Guidelines When Working Past 65

While the decision to work past 65 is made by the employee, remaining on group health insurance must comply with Medicare guidelines.

If your employees receive group health benefits through their own employment or their spouse’s employment, here are the guidelines to be applied when working past 65.

Life Events When Working Past Age 65

Life happens, and it’s important to understand how these milestones and changes impact your Medicare benefits. 

Medicare and Retirement

When an employee retires, they are required to complete a series of steps to successfully transition from the group health plan into Medicare.

Retirement and Medicare Part A

Most employees have already enrolled in Part A when they turned 65, and, therefore, do not need to address this when they are retiring.

However, for those employees that were on a High Deductible Health plan or just forgetful when turning 65 can apply anytime for premium-free Part A and face no penalties.

Note:  Applying for Part A after age 65 will automatically backdate their Part A coverage 6 months from the date of the application.  This can have a significant impact on HSA contributions.

Retirement and Medicare Part B

For employees to enroll in Part B, there is an 8-month Special Enrollment Period (SEP) that starts the day they lose their employer group health coverage. Under this SEP, they must enroll for Part B during this period or they can face a lifetime penalty and delays in coverage.

Employees that don’t enroll in Part B during their SEP will have to wait until the General Enrollment Period, which runs annually from January 1 – March 31, to apply for Part B.

Note: Without active Parts A and B, an individual cannot enroll in a Medicare Advantage (Part C) or a Medicare supplement plan.

Retirement and Medicare Parts C and D

Employees have only 2 months from their last day of group health coverage to enroll in a Part D prescription drug plan. They can resolve their prescription drug needs by enrolling in a stand-alone Part D plan or a Medicare Advantage plan (Part C) that includes prescription drug benefits.

Note:  Not enrolling during the 2-month period would result in lifetime penalties.

Retirement and Medicare Supplement

To enroll in a Medicare supplement plan, an individual would have to have Medicare Parts A and B active.  Once both are active, an individual would have 6 months from their Part B start date to enroll in a Medicare supplement plan without any medical underwriting.

Note:  Not enrolling within 6 months of your Part B start date would allow Medicare supplement providers to require medical underwriting. Unfavorable medical underwriting could lead to higher rates, access (or limitations?) to certain plans, pre-existing exclusions and denial of enrollment.

Medicare and Work Reduction

If an employee remains at work after 65, but becomes ineligible for the group health plan due to work reduction or part-time status, they would need to address their Medicare enrollment.  With the loss of the group health plan, Medicare would become their only health insurance option.

Work Reduction and Medicare Part A

Most employees have already enrolled in Part A when they turned 65, and, therefore, do not need to address this when they reduce the amount of time they work.

However, for those employees that were on a High Deductible Health plan or just forgetful when turning 65 can apply anytime for premium-free Part A and face no penalties.

Note:  Applying for Part A after age 65 will automatically backdate their Part A coverage 6 months from the date of the application.  This can have a significant impact on HSA contributions.

Work Reduction and Medicare Part B

For employees to enroll in Part B, there is an 8-month Special Enrollment Period (SEP) that starts the day they lose their employer group health coverage. Under this SEP, they must enroll for Part B during this period or they can face a lifetime penalty and delays in benefits.

Employees that don’t enroll in Part B during their SEP will have to wait until the General Enrollment Period, which runs annually from January 1 – March 31, to apply for Part B.

Note: Without active Parts A and B, an individual cannot enroll in a Medicare Advantage (Part C) or a Medicare supplement plan.

Work Reduction and Medicare Parts C and D

Employees have only 2 months from their last day of group health coverage to enroll in a Part D prescription drug plan. They can resolve their prescription drug needs by enrolling in a stand-alone Part D plan or a Medicare Advantage plan (Part C) that includes prescription drug benefits.

Note:  Not enrolling during the 2-month period would result in lifetime penalties.

Work Reduction and Medicare Supplement

To enroll in a Medicare supplement plan, an individual would have to have Medicare Parts A and B active.  Once both are active, an individual would have 6 months from their Part B start date to enroll in a Medicare supplement plan without any medical underwriting.

Note:  Not enrolling within 6 months of your Part B start date would allow Medicare supplement providers to require medical underwriting. Unfavorable medical underwriting could lead to higher rates, access (or limitations?) to certain plans, pre-existing exclusions and denial of enrollment.

For most, they applied for Part A when turning 65, thus there is no need to address this when reducing their hours. However, for those on an HSA or were just forgetful when turning 65, they can apply anytime for premium-free Part A and face no penalties or the need for a special enrollment period.

Medicare and COBRA

It is important to understand that COBRA after age 65 works differently than before age 65.  Specifically, after age 65, COBRA cannot be the primary payer of claims, nor is considered creditable coverage for Medicare Part B.

The way COBRA works after age 65 is dependent on the employee’s Medicare eligibility and enrollment status. There are numerous scenarios relating to COBRA and Medicare and each is detailed below.

Note:  The rules for COBRA and Medicare apply regardless of who is paying for COBRA.  For example, if part of a separation agreement includes paying for COBRA premiums by the employer, this will not change the way the COBRA guidelines are interpreted and enforced.

Medicare and Turning 65

If an employee did not have Medicare Parts A and/or B prior to being offered COBRA, once they enroll in Parts A and B, their COBRA will be cancelled.

A common example is an employee turning 65 and on COBRA. Their enrollment into Medicare is mandatory because Medicare becomes primary when they turn 65. All COBRA benefits would be terminated upon their enrollment into Medicare.  This individual would want to apply for Medicare during their Initial Enrollment Period.

Medicare and Working Past 65

If an employee worked past 65 and is offered COBRA, there are a few scenarios.

  • Employee has Medicare Part A only and is offered COBRA. They would want to enroll in Part B immediately because Medicare becomes their primary payer in this scenario.  COBRA would act like a Medicare supplement and pay after Parts A and B, as well as provide Part D equivalent coverage for prescription drug needs.
  • Employee has Medicare Parts A and B before offered COBRA. COBRA would become the second payer behind Medicare as well as provide Part D creditable coverage for prescription drug benefits. They can remain on COBRA for up to 18 months, however, when reaching the end they would have to apply for individual Medicare plans including Part C, Part D and Medicare supplement.

Note:  COBRA is considered creditable coverage for Part D. Remaining on COBRA will not place you in a penalty situation with Medicare. However, whenever an individual leaves the COBRA plan, they would have 2 months from the end of the coverage to enroll in a creditable Medicare Part D plan.

Individual Coverage Health Reimbursement Arrangement (ICHRA)

When an Individual Coverage Health Reimbursement Arrangement is offered through an employer, it has an immediate impact on all employees approaching age 65 or already over age 65.

Under Medicare guidelines, employees can delay their Part B enrollment if they were on a large group health plan.  A large group health plan is defined as an employer with 20 or more employees during at least 20 weeks of the year.

ICHRA will remove access to the employer group health plan and, by doing so, it forces the employee to find alternative coverage. For Medicare eligible individuals, their only option is to enroll in Medicare as soon as possible.

Enrolling in Medicare is a multi-step process. Below are instructions to help an employee understand the process to successfully transition into Medicare.

ICHRA and Medicare Part A

Most employees have already enrolled in Part A when they turned 65, and, therefore, do not need to address this when they transition to Medicare.

However, for those employees that were on a High Deductible Health plan or just forgetful when turning 65 can apply anytime for premium-free Part A and face no penalties.

Note:  Applying for Part A after age 65 will automatically backdate their Part A coverage 6 months from the date of the application.   This may create a problem with any HSA contributions during this time.

ICHRA and Medicare Part B

For employees to enroll in Part B, there is an 8-month Special Enrollment Period (SEP) that starts the day they lose their employer group health coverage. Under this SEP, they must enroll for Part B during this period or they can face a lifetime penalty and delays in benefits.

Employees that don’t enroll in Part B during their SEP will have to wait until the General Enrollment Period, which runs annually from January 1 – March 31, to apply for Part B.

Note: Without active Parts A and B, an individual cannot enroll in a Medicare Advantage (Part C) or a Medicare supplement plan.

ICHRA and Medicare Parts C and D

Employees have only 2 months from their last day of group health coverage to enroll in a Part D prescription drug plan. They can resolve their prescription drug needs by enrolling in a stand-alone Part D plan or a Medicare Advantage plan (Part C) that includes prescription drug benefits.

Note:  Not enrolling during the 2-month period would result in lifetime penalties.

ICHRA and Medicare Supplement

To enroll in a Medicare supplement plan, an individual would have to have Medicare Parts A and B active.  Once both are active, an individual would have 6 months from their Part B start date to enroll in a Medicare supplement plan without any medical underwriting.

Note:  Not enrolling within 6 months of your Part B start date would allow Medicare supplement providers to require medical underwriting. Unfavorable medical underwriting could lead to higher rates, access (or limitations?) to certain plans, pre-existing exclusions and denial of enrollment.

IMPORTANT: Medicare benefits only begin on the first of the month. Make sure that you coordinate the end of group health insurance with the beginning of Medicare benefits to avoid any gaps in coverage.

Let us do the work for you.

MP Group eases the burden of exploring, choosing and enrolling your clients in a Medicare insurance plan that’s right for them based on their unique circumstances.  Remember, there is no cost to you or your client for our services.