Help Your Older Workers Navigate the Tricky Medicare Maze

Article main image
Nov 25, 2019

Preparing for retirement is a big task. Retirement brings several changes, such as income variations and loss of benefits. Transitioning from employer coverage to Medicare is one of the most daunting changes of all. Learning an entirely different kind of insurance, and knowing when and how to enroll in it can be hard for anyone.

This may not be a part of your offboarding process, but it should be. With so many boomers reaching retirement age every day, a proactive approach to retirement information — especially the critically important issue of health coverage — should be a human resources priority for an organization’s older workers.

Navigating the multiple possibilities and understanding the consequences of each can be complicated. However, breaking each scenario down helps to alleviate some of the stress that comes with transitioning to Medicare. Depending on the situation, the transition from employer coverage to Medicare can be different.

Scenario 1: Retiring at 65

People who retire at 65 have the smoothest transition of all. A 65-year-old retiree needs to apply for Medicare during the Initial Enrollment Period to avoid late penalties. Each beneficiary’s Initial Enrollment Period starts three months before their 65th birthday and ends three months after. However, if a beneficiary’s birthday is on the 1st, their Initial Enrollment Period would start four months before their birthday and end three months after.

These beneficiaries would need to enroll in Part A and Part B during this time frame. They can enroll in a Medicare Advantage plan or Part D plan (prescription drugs) during this time as well – usually only one or the other is needed. If a beneficiary wants to add a Medicare Supplement plan to their Medicare coverage, they have six months from the day their Part B is effective to enroll in one without answering health questions.

Scenario 2: Working past 65 for a small employer

Working past 65 for a small employer is very similar to retiring at 65. A small employer is one that has fewer than 20 employees. When people continue to work past 65 for a small employer, they need to apply for Part A and Part B during their Initial Enrollment Period. Small employer coverage is secondary to Medicare, indicating these employees would need Part A and Part B as primary coverage.

If anyone working past 65 for a small employer didn’t enroll in Part A or Part B during their Initial Enrollment Period, there may be late enrollment penalties. These employees are generally able to delay Part D without penalty since small employer coverage usually has creditable coverage for Part D.

In this scenario, Medicare would pay its share first. Then the employer coverage would help pick up the leftover costs.

Scenario 3: Working past 65 for a large employer

When working past 65 for a large employer, people have the option to delay Medicare enrollment. A large employer is one that has 20 or more employees. Large employer coverage is primary to Medicare. Therefore, when a beneficiary has large employer coverage, they can delay Medicare without penalty until their employer coverage ends.

However, most Americans earn premium-free Part A. These employees can enroll in Part A as soon as they’re eligible so they can have extra inpatient coverage. But if the employee contributes to a health savings account, they will need to delay Part A as well.

Once retirement rolls around, these employees will have an eight-month Special Enrollment Period to enroll in Part B, and a 63-day Special Election Period to enroll in Part D.

Scenario 4: Having employer coverage through a spouse past 65

If one spouse retires at 65, and the working spouse covers the retired spouse on her insurance, then the retired spouse may be able to delay Medicare. It all depends on the size of the working spouse’s employer.

The same rules apply as above. If the employer is a small employer, the retired spouse will need to enroll in Medicare during his Initial Enrollment Period. However, if the employer is a large employer, then the retired spouse can delay Medicare without penalty.

Medicare beneficiaries can’t contribute to a health savings account. However, if the health savings account is under the working spouse’s name, the retired spouse’s Medicare won’t affect contributions. The only time it matters is if the health savings account is under the name of the Medicare beneficiary.

Choose the right scenario

As described, the transition from employer coverage to Medicare varies by situation. Choosing the right scenario, then deciding whether enrolling in Medicare at 65 is the best option can be a difficult job. HR can make a difference here, providing information and sponsoring lunch and learns for workers nearing Medicare eligibility or retirement.