Most people enroll in Medicare when they turn 65.
However, you don’t need to enroll in Medicare when you turn 65 if you are still working and have health insurance coverage based on your or your spouse’s active employment.
And, it may be unwise to enroll in Medicare if you have a Health Savings Account (HSA) and plan to continue making contributions to your HSA. You are not allowed to make contributions to your HSA if you are enrolled in Medicare Part A. Additionally, if you don’t sign up for Medicare Part A when you turn 65, Social Security will backdate your Medicare Part A effective date six months from when you enroll. You need to make any Health Savings Account contributions before your Medicare Part A effective date.
If you are drawing Social Security benefits, you will be signed up automatically for Medicare Part A. You can’t draw Social Security benefits without enrolling in Medicare Part A. And, if you have Medicare Part A, you can’t contribute to a Health Savings Account. Therefore, if you are drawing Social Security benefits, you cannot make contributions to a Health Savings Account.
If you enroll in Medicare after your 65th birthday, you must have employer group health insurance coverage through your or your spouse’s active employment to avoid a penalty from Medicare. However, if your health insurance is provided through an employer with less than 20 employees, you will generally need to sign up for Medicare when you turn 65.
The reason for this is that your employer’s health insurance company does not have to cover you if you are eligible for Medicare. They can assume that, since you are 65, you have or should have Medicare in which case Medicare would pay first (primary) and they (the insurance company) would pay second, like a Medicare Supplement. Therefore, if you don’t sign up, you will be responsible for about 80% of your expenses (the amount Medicare would have paid) after age 65.
If the employer with less than twenty is part of a Multiple Employer Welfare Arrangement (MEWA), Medicare may pay secondary and your employer group will pay primary.
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Medicare Enrollment Periods
Initial Enrollment Period
Your Initial Enrollment Period is the seven-month period that runs three months before your birth month, your birth month, and three-months after your birth month. Medicare always starts on the first of your birth month, unless you were born on the 1st of the month, then your Medicare coverage will begin on the first day of the month prior.
If you sign up during the three-months prior to your birth month, then your Medicare will be effective the first day of your birth month. If you sign up during your birth month, your Medicare will be effective the first day of the next month.
To sign up during your Initial Enrollment Period, you are required to enroll through the Social Security Administration website, unless you are already drawing Social Security benefits. If you are already drawing Social Security benefits, you will be enrolled automatically in Medicare Parts A and B. You will also receive a Red, White and Blue Medicare Card. You have the option to defer enrolling in Medicare Part B, but you must have Medicare Part A if you are drawing Social Security benefits. This has an impact on HSA contributions as discussed above.
Special Enrollment Period
The second enrollment period is called your Special Enrollment Period. Special Enrollment Periods apply to Medicare beneficiaries who choose to work past age 65 and have employer group health insurance. If you or your spouse has health insurance coverage through your or your spouse’s active employment, you can defer Medicare. You can defer Medicare enrollment provided you or your spouse is employed and you both have continuous coverage through the active employment of either of you. When you or your spouse decide to retire, then you have an eight-month window to enroll in Medicare. This window extends from the day you stop employment or your health insurance ends, whichever happens first.
Remember, if you work for an employer with less than 20 employees, the above paragraph does not apply to you. Employees on an employer plan with less than 20 employees should sign up for Medicare when they turn 65.
COBRA does not count as health insurance through your or your spouse’s active employment. Your eight-month Special Enrollment Period window extends from the day your employment ends or your group health insurance ends, not from when your COBRA ends.
We generally recommend that people who plan to utilize their Special Enrollment Period begin the Medicare enrollment process at least three months before their group coverage is going to run out. As part of the process, you need to prove to Social Security that both you and your spouse had coverage through active employment since your individual 65th birthdays.
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General Enrollment Period
The third enrollment period is the General Enrollment Period. This runs from January 1st to March 31st every year. This is for people who missed their Initial Enrollment Period or their Special Enrollment Period. You can sign up during this annual enrollment period and your Medicare will be effective July 1st of that year.
If you missed your Initial Enrollment Period and didn’t have a Special Enrollment Period, you must enroll in Medicare during a General Enrollment Period. You will also be penalized 10% of the Medicare Part B base premium ($135.50 ) for every 12-month period that you delayed your Medicare enrollment. This penalty does not go away and lasts as long as you are on Medicare.