Medicare Coverage: Can You Opt Out if You’re Still Employed?

As the workforce evolves, an increasing number of Americans are choosing to remain employed beyond traditional retirement ages. Currently, nearly 20% of adults ages 65 and older are still working, which is a significant increase from 11% in 1987, according to the Pew Research Center.

For those who are 65 or older and still employed, the question of whether to enroll in Medicare or continue with employer-provided health insurance becomes a critical decision.

Here’s what you need to know about your Medicare options and obligations if you’re still working past 65.

[READ: Medicare Mistakes to Avoid.]

Employer Health Coverage

If you’re 65 or older, your enrollment in Medicare is influenced by your current employment status and the size of your employer.

Here’s how it breaks down:

Large employers (20 or more employees). If you have health insurance from a large employer, either through your own plan or your spouse’s coverage, this plan will pay first before Medicare kicks in.

Small employers (fewer than 20 employees). In this case, Medicare becomes the primary payer for health care, and your employer’s plan pays second.

[READ: What Medicare Does Not Cover.]

Delaying Medicare Coverage: Your Options

There’s several options to consider if you’re still working past age 65, depending on your situation.

Scenario 1: You (or your spouse) are still working and will receive benefits from the employer

If you’re still employed and covered under a large employer’s health plan, you have the option to delay signing up for Medicare Parts A and B without facing penalties.

Next steps: Reach out to Medicare to inform them of your decision to opt out. You can contact them at 1-800-MEDICARE or visit your local Social Security office.

Scenario 2: You will receive benefits from Social Security at age 65

Once you have enrolled in Social Security benefits at age 65, you can only defer Part B coverage, not Part A coverage. To delay Part B, you must decline it before your Medicare coverage begins.

Next steps: Contact Social Security at 1-800-772-1213 or visit an office. Afterward, you will likely need to return your Medicare card. If you keep the card, that means you agree to keeping and paying for Part B.

Scenario 3: You will not receive benefits from Social Security at age 65

If you do not plan on receiving benefits from Social Security at age 65, you can delay both Parts A and B without doing anything.

Next steps: You don’t need to do anything to opt out of Medicare Parts A and B. However, you are encouraged to sign up for Medicare after you stop working or once your employer-provided health insurance ends.

[Read: Medicare vs. Medicare Advantage: How to Choose.]

Enrollment Options

If you missed your initial enrollment period when you first became eligible for Medicare, individuals can sign up for Medicare Part A or Part B during the general enrollment period, which runs from January 1 to March 31 each year.

“Individuals cannot use the annual open enrollment period that runs from October 15 to December 7 to enroll in Medicare Part A or Part B. That enrollment period can only be used by people with Medicare to sign up for drug coverage or Medicare Advantage coverage or switch coverage,” says Erin Nevins, president of USA Medicare Consultants in Greenville, New York.

There is a special enrollment period, or SEP, that allows individuals to sign up for Medicare later, within eight months of losing employer coverage or leaving a job.

“Medicare-eligible individuals are encouraged to enroll in Medicare Part A during the initial enrollment period since the program does not charge monthly premiums and a Medicare ID number is assigned upon being enrolled,” Nevins says. “It makes it much easier to apply for Medicare Part B when the time comes if you’re already enrolled in Part A.”

Late penalties

The penalty for late enrollment in Medicare Part B is 10% of the standard monthly premium for each 12-month period that enrollment is delayed. This penalty is permanent and is added to the actual premium amount, usually paid each month for as long as the individual has Medicare.

“This penalty is permanent and is added to the actual premium amount, usually paid each month for as long as the individual has Medicare,” says Gretchen Jacobson, vice president of the Medicare program for the Commonwealth Fund, a foundation focused on health care policy in New York City. “There is also a late enrollment penalty for Medicare Part A if someone does not automatically qualify for Part A.”

Specific Medicare Scenarios

When deciding whether to continue working past age 65, here’s what to consider when it comes to Medicare coverage:

Medicare Part A (hospital insurance). For most people, Medicare Part A is premium-free. You can opt to enroll in only Part A while continuing to work. However, enrolling in any part of Medicare will prevent you from making further contributions to a health savings account (HSA). You can still use existing HSA funds for qualified medical expenses, including Medicare costs.

Medicare Part B (medical insurance). Part B comes with a premium, and some individuals choose to delay it to avoid these costs. If you’re covered under a qualifying employer plan, you can defer Part B without penalty until you retire or lose your job. Without an SEP, failing to enroll in Part B during your initial enrollment period can result in significant penalties.

Medicare Part D (drug coverage). Ensure your employer’s drug coverage is considered “creditable,” meaning it meets or exceeds the standards of Medicare Part D. If it doesn’t, you must enroll in a Part D plan during your initial enrollment period to avoid penalties, which also necessitates enrolling in either Part A or Part B.

Bottom Line

In an era where more seniors are staying in the workforce longer, understanding how Medicare interacts with existing employer health coverage is crucial. Making the right choice can save you from unnecessary penalties and ensure you maintain comprehensive health coverage during this critical period.

Before deciding to delay Medicare if you’re still working past age 65, it’s essential to assess your current employer’s health insurance plan, particularly regarding drug benefits and overall cost-effectiveness. Carefully evaluate your employer’s plan and compare it with what Medicare offers to make an informed decision that best suits your health care needs and financial situation.

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Medicare Coverage: Can You Opt Out if You’re Still Employed? originally appeared on

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