How Do I Choose Between Medicare and Employer Coverage?

Steven Mott by Steven Mott | Licensed since 2012

This article was updated on: 10/21/2018

Nearly 20% of Americans age 65 and over are still working (whether or not they have retired from their careers), according to a 2013 study by the Associated Press. If you’re one of them, you may have questions about whether to enroll in Original Medicare (Part A and Part B) – especially if you have employer coverage that’s meeting your needs pretty well right now.

There are various factors to consider when deciding whether to enroll in Medicare as soon as you are eligible if you already have employer coverage. This article will walk you through your options.

Should I enroll in Medicare Part A if I have employer coverage?

In most cases, enrolling in Medicare Part A as soon as you’re eligible may be a good idea, even if you already have employer coverage. This is because if you have a qualifying work history, Part A coverage is premium-free, which means it costs you nothing to take advantage of your Part A benefits. In general, you qualify for premium-free Part A coverage if you or your spouse worked at least 40 quarters (10 years) while paying Medicare taxes. However, it would be a good idea to contact your employer or union benefits administrator to see if they require you to sign up for Medicare Part A. If you choose to enroll in Part A after your employer coverage ends you will eligible for a Special Enrollment Period.

Part A covers allowable, medically necessary hospital expenses; limited home health care and institutional care in a skilled nursing facility in certain situations; limited home health care; and hospice care.

Here are a few things to keep in mind:

  • Your existing employer coverage may change your benefit details once you enroll in Medicare, so be sure to check with your employer plan before you decide. When you enroll in Medicare, you’ll also have to complete a questionnaire to help Medicare determine which coverage pays first for your health care.
  • If your employer coverage is a high-deductible health savings account (HSA), you may not be able to make additional contributions after you enroll in Medicare without facing a tax penalty (you can continue to make withdrawals to pay for your out-of-pocket health-care costs, however).
  • If you aren’t eligible for premium-free Part A, and you don’t enroll as soon as you are eligible, you may have to pay a 10% premium penalty for twice the number of years you delayed purchasing the coverage. If you qualify for a Special Enrollment Period for Medicare Part A, you may be able to sign up without paying a late penalty.

If you have questions about your specific situation, you can contact any of the following for more information.

  • Your employer group health plan administrator
  • Medicare – call 1-800-MEDICARE (1-800-633-4227; TTY users, 1-877-486-2048). Medicare representatives are available 24 hours a day, seven days a week.
  • Your State Health Insurance Assistance Program (SHIP)

Should I enroll in Medicare Part B if I have employer coverage?

Medicare Part B (medical insurance) comes with a monthly premium. Some beneficiaries who are covered by employer health plans choose to delay enrollment in Medicare Part B.

There is a late-enrollment penalty if you sign up for Medicare Part B after your Medicare Initial Enrollment Period, unless your situation qualifies you for a Medicare Special Enrollment Period.

For example, if you qualify for Medicare but you’re still working, or your spouse is still working, and you decide to delay enrollment in Medicare Part B, you may be able to enroll in Part B when your group coverage ends without incurring a penalty. You can usually qualify for a Special Enrollment Period:

  • Anytime that you’re still working and covered under the employment-based health plan
  • For eight months beginning the month after the employment ends or the group health plan insurance ends, whichever happens first.

If your employer coverage is through an organization with fewer than 20 employees, you may want to enroll in Medicare Part B as soon as you are eligible. This is because, under current federal guidelines, Medicare is the primary insurer for organizations of this size for their employees who are eligible for Medicare and the employer’s plan is secondary.

If your employer has 20 or more employees, the decision whether to enroll in Medicare Part B is more complex. When you enroll in Part B, unlike Part A, you must pay a monthly premium, and you pay that in addition to your employer plan premium if you continue with that plan. Your employer coverage typically remains the primary insurer and Medicare is secondary. In this situation, you may find that it is not financially to your benefit to pay both premiums, and choose to delay your Part B enrollment. However, to avoid paying a Part B late-enrollment penalty, you may want to sign up for Part B during a Special Enrollment Period (described above).

Note: If you’re not working and you have health coverage through a retiree plan, such a plan will most likely not qualify you for a Medicare Special Enrollment Period.

More about the Medicare Part B late-enrollment penalty

If you don’t enroll in Part B as soon as you become eligible, and you don’t qualify for a Special Enrollment Period, you may have to pay a late-enrollment penalty for as long as you have coverage. This is currently 10% of the premium amount for each 12-month period you delayed your Part B enrollment.

Remember that a Medicare Special Enrollment Period generally only applies to coverage from your or your spouse’s current employer. If you get your health coverage through COBRA after you or your spouse has left a job, this does not extend your Special Enrollment Period; you still typically have eight months after employment ends to enroll in Part B without paying the penalty.

How do I delay my Medicare Part B enrollment?

Depending on your situation, you might not need to do anything to delay your Medicare Part B enrollment.

  • If you’re already receiving Social Security Administration (SSA) or Railroad Retirement Board (RRB) benefits when you become eligible for Medicare, then in most cases you’re automatically enrolled in Original Medicare, Part A and Part B. So if you want to delay enrollment in Part B, you’ll need to follow the instructions for opting out of this coverage included in your “Welcome to Medicare” packet. You’ll generally get this packet in the mail about three months before your Medicare eligibility date.
  • If you’re still working when you become eligible for Medicare, and you’re not receiving SSA or RRB benefits, you typically won’t be automatically enrolled in Medicare, so you won’t have to take steps to delay enrollment.

Should I enroll in Medicare Part D if I have employer coverage?

While Medicare Part D (prescription drug coverage) is entirely voluntary, you will pay a late-enrollment penalty if you don’t enroll as soon as you’re eligible and later decide you want this coverage. There are exceptions to this rule, however, and having creditable employer coverage may help you avoid the penalty.

In order to be creditable, your employer-sponsored prescription drug coverage must be at least as comprehensive as a standard Medicare stand-alone Part D Prescription Drug Plan or Medicare Advantage Prescription Drug plan. Employer coverage might qualify, but be sure to verify it with your employer. Your plan should send you a Notice of Creditable Coverage each year informing you whether or not your coverage is creditable under the law. If your coverage isn’t creditable, and you don’t enroll in Medicare prescription drug coverage when you initially become eligible for Medicare, the Part D late penalty will typically apply if you sign up later.

Under the Medicare program, if you go more than 63 consecutive days without creditable prescription drug coverage, you might pay the Part D late-enrollment penalty when you do decide to get this coverage. It may be a good idea to keep proof of employer coverage after you leave your job in case there is a question about whether or not the late-enrollment penalty applies.

If your employer plan’s prescription drug coverage is creditable, you can generally enroll in a Medicare stand-alone Prescription Drug plan or a Medicare Advantage Prescription Drug plan during the two-month Special Election Period that starts after the month that your employer coverage ends – thus avoiding the Part D late-enrollment penalty.

What if I want a Medicare Advantage plan?

The Medicare Advantage program, also called Medicare Part C, is simply an alternative way to get your Original Medicare (Part A and Part B) benefits (except for hospice care, which Part A covers). In most cases, Medicare prescription drug coverage is included in your Medicare Advantage plan – and many plans include other benefits as well (such as routine vision care).

If you are interested in a Medicare Advantage plan, but still have employer coverage, the same enrollment guidelines generally apply as those explained above (but not the Special Enrollment Period – see below). When you have a Medicare Advantage plan, you’re still in the Medicare program. You must have Medicare Part A and Part B, and you need to continue paying your Part B premium. You’ll need to consider the benefits, premiums, copayments, coinsurance, and deductible amounts associated with any Medicare Advantage plan you’re considering and compare them with your employer coverage to see which plan better suits your health care and financial needs.

If you decide to continue your employer coverage and enroll in a Medicare Advantage plan later, you can usually enroll in a Medicare Advantage plan during the two-month Special Election Period that starts after the month that your employer coverage ends.

Still have questions about whether employer coverage or Medicare is right for you? I’m available to help you find answers.  If you’d like information via email, or wish to schedule a phone call at your convenience, choose the corresponding link below. Find out more about me by clicking the “View profile” button. You can also view a list of plans in your area by clicking the “Compare Plans” button.


Working Longer: Older Americans’ Attitudes on Work and Retirement,” The Associated Press-NORC Center for Public Affairs Research, 2013


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