All United States citizens and permanent residents of at least five years are eligible for the Medicare program at age 65. However, many people will qualify for Medicare early due to specific disabilities, and when you qualify early, you will be automatically enrolled in Medicare Parts A and B. You will also be automatically enrolled in Medicare if you’ve received Social Security benefits or Railroad Retirement Board benefits for at least four months before your 65th birthday month. If you are not automatically enrolled, you will need to submit a Medicare application yourself. You may or may not enroll in Medicare if you or your spouse are actively working. Many people wonder how does working affect Medicare? You will want to ask yourself a few questions to help you determine whether you need to claim Medicare while you have a job.

What is your employer size?

The employer company size matters when you reach Medicare eligibility. This is because the number of employees does affect which insurance is primary and which is secondary. For those actively working at age 65 for an employer with 20 or more employees, you can delay Medicare while covered by that group health plan. Many people will enroll in at least Part A while they have creditable employer coverage since most people qualify for $0 premium Part A. However, if you contribute to a Health Savings Account (HSA), then you would not want to enroll in any part of Medicare, or you would want to stop contributions in time. However, if you do not stop contributions and enroll in Medicare, you can be charged an IRS penalty. The Part A benefit would provide secondary hospital insurance in this situation.

You would not be charged a late enrollment penalty since you would have creditable coverage while you delay Medicare. You would qualify for a Special Enrollment Period to apply for Medicare when you retire or lose coverage. Additionally, you would have a two-month window to apply for a Part D prescription drug plan with no penalty if your employer health insurance had creditable drug coverage.

However, you can enroll in Part A and Part B, which would be secondary to the large employer insurance plan. You would have to pay the Part B premium and your employer plan’s premium, which may not be cost-effective.

How does Medicare change for those under 20 employees?

When you work for an employer with less than 20 employees, the employer health insurance plan is not creditable for Medicare. Since it is not creditable, you would need to enroll in both Part A and Part B during your Initial Enrollment Period (IEP) window. Your IEP starts three months before your 65th birthday month and ends three months after. If you fail to enroll during this window, you will be penalized.

In this situation, Medicare is primary, and your employer plan is secondary.

Employer size for those under 65

The employer size changes when you are under 65 with Medicare. The number changes to 100 employees. For example, if your spouse is actively working for an employer with 100 or more employees, that coverage is creditable, and you can delay Medicare with no penalties. However, you can choose to enroll in Part A and Part B, but Medicare would be secondary.

If there are less than 100 employees, then the employer health coverage is not creditable, and you would need to keep Medicare Part A and Part B. In that case, Medicare is primary. If you are unsure of the number of employees, you can get more information from your Human Resources department.

Spousal coverage

If your spouse actively works and their employer’s insurance plan covers you, you can keep their plan. However, whether or not you need Medicare will depend on the employer’s size.

Will enrolling in Medicare be cost-effective?

When you decide whether to enroll in Medicare while you keep working, you will want to consider the costs. Most individuals would qualify for premium-free Part A if they worked at least 40 quarters in the U.S because they paid payroll taxes while they worked. You can also qualify through your spouse’s work history as long as they are at least 62 years old and have been married for at least one year.

If you do not qualify for premium-free Part A, you could pay $499 per month or $274 depending on how many quarters you worked. If you have to pay a premium, you may decide not to enroll in Medicare Part A at 65 if you have creditable coverage.

Part A will provide inpatient hospital coverage and hospice care, skilled nursing facility, home health care, and more. There is a Part A deductible and cost-sharing. The cost-sharing you would be responsible for will depend on whether Medicare Part A is primary or secondary to the company coverage.

Medicare Part B costs

In addition to Part A, you may consider enrolling in Part B. Part B provides outpatient medical coverage on services such as doctor visits, surgeries, etc. All beneficiaries must pay the Part B premium, which is $170.10, in 2022. However, this is the base premium. If you are subject to an Income Related Monthly Adjustment Amount (IRMAA) surcharge, you will pay more in Medicare Part B premiums and Medicare Part D premiums.

Social Security looks at your modified adjusted gross income (MAGI) from your tax returns from two years before determining what you will pay for Part B. Your MAGI is your adjusted gross income plus tax-exempt interest income and certain deductions. MAGI determines if you can deduct your individual retirement account (IRA) contributions or if your MAGI exceeds limits set by the IRS. If you are subject to IRMAA surcharges, you may consider delaying Part B while you work for a large employer since you would be paying a lot of money in premiums.

IRMAA thresholds

The income threshold you fall in will depend on whether you file taxes individually or jointly. If you have any questions on your earnings, payments, and expenses and how they could affect your income, you will want to speak with a financial advisor who is an expert with taxes in retirement. Some people have a retirement plan before they start Medicare, but if you don’t, it is not too late to learn the rules and other things about this government program and how they determine IRMAA.

Filing individually

If you filed individually and made $91,000 or less, you will pay the standard premium of $170.10. If you made more than $91,000 but less than $114,000, you would pay $238.10. If you made more than $114,000 and less than $142000, your Part B premium would be $340.20. If you made more than $142,000 but less than $170,000, your premium would be $442.30. If you made above $170,000 but less than $500,000, your premium is $544.30. Lastly, if you made $500,000 or more, your premium will be $578.30.

Filing jointly

The income brackets change when you file jointly as a couple. For example, if your income was $182,000 or less, you would pay $170.10. If your income was more than $182,000 but less than $228,000, your premium is $238.10. If your income was more than $228,000, but less than $284,000, your premium is $340.20. If your income was more than $284,000 but less than $340,000, your premium is $442.30. If the income was above $340,000 and less than $750,000, you would pay $544.30. If your income was $750,000 or more, you would pay the highest amount, $578.30.

Many retirees are unaware of how their incomes from two years prior affect their Medicare premiums today. When you are unaware of the IRMAA surcharges, you may need to make confident lifestyle choices to help your budget. Some retirees will even return to the workforce to help bring in additional money. It can be a tough decision to make after working 40+ years in the U.S.

Additional coverage to compare

When you continue to work past 65, you will want to look at all plan options. Keeping your options open is because it could be more cost-effective to leave the employer insurance. Instead of maintaining the employer coverage, you would enroll in a Medigap plan and Part D plan or a Medicare Advantage plan. If you apply for a Medigap plan within six months of your Part B effective date, you can enroll with no health questions asked. Medigap plans will help cover the gaps after Medicare and leave you with little out-of-pocket costs. The rate of a Medigap plan can be higher than an Advantage plan, but the Medigap route is one option.

The other way to go is with a Medicare Advantage plan which is an alternative way to receive your Medicare benefits. Everyone has different opportunities as some may be able to afford a Medigap plan more easily than others. The bottom line is it takes time to prepare for this transition and involves planning for retirement and making sure you have the funds you need. Although you cannot contribute to Health Savings Accounts, you can use them to pay for medical services.

Conclusion

Whenever you become eligible for Medicare, you can claim your Medicare benefits. You can continue to work until your full retirement age and be enrolled in Medicare. However, you can also delay Medicare if you have creditable coverage and do not pay the Part B premium. You will want to evaluate what will be the most cost-effective route as Medicare does have monthly premiums. Make sure you research if Medicare would be primary or secondary and how Medicare affects that status.