Working Past 65: How Creditable Coverage Impacts Your Medicare Plan

According to the U.S. Census Bureau, around 10,000 people turn 65 years old every day, which potentially makes them eligible for Medicare health insurance benefits. Working past age 65 and delaying retirement can pose a challenge when considering your coverage options and navigating Medicare enrollment. Consulting with a local Medicare insurance agent can help you learn more about coverage options for your specific situation. 

Once turning 65, Medicare beneficiaries may fulfill medical and prescription drug coverage requirements either by enrolling in Medicare or maintaining creditable coverage.

What is Creditable Coverage?

Many of those who are working past 65 have the option to enroll in Medicare or, if they have “creditable” coverage, can coordinate their current group health coverage with Medicare. Creditable coverage is a designation that applies to qualifying health and prescription drug coverage obtained through your or your spouse’s employer, union or Department of Veterans Affairs (if you’re a veteran). An important caveat to determine if employer health coverage is creditable: your or your spouse’s employer must have over 20 employees for you to maintain creditable coverage and delay Medicare enrollment. Otherwise if your or your spouse’s employer has fewer than 20 employees (and is not part of a multiple employer plan), then Medicare is considered the primary payer and you must enroll when you first become eligible. 

If your current group health coverage is creditable, you may choose to delay enrollment in Medicare Part B (Medicare insurance) and/or Medicare Part D (prescription drug coverage) in favor of maintaining your current coverage. Here’s how creditable coverage impacts your Medicare plan.

Avoid Late Enrollment Penalties

When your Medicare eligibility begins at age 65, you typically have two options for obtaining your health insurance – either through your employer (or other creditable coverage plan) or by enrolling in Medicare Part B and/or Part D. If you miss your Medicare Initial Enrollment Period or delay your enrollment without maintaining creditable coverage, you’ll incur a lifetime penalty when you do eventually enroll. Having creditable coverage can save you from this lifetime late enrollment penalty. Your current health plan may be considered creditable coverage if it meets certain conditions. By law, your insurer must notify you whether or not your coverage is considered creditable. 

Lower Premiums

If you have creditable health insurance, you won’t be required to sign up for Medicare Part B and Part D while your coverage is in effect as an active employee. Oftentimes, this can save you money if your current premiums and out-of-pocket costs are lower than what Medicare would charge on a monthly basis. To evaluate if Medicare would be a viable option, you would want to compare the benefits and total costs between your current health care plan and Medicare to determine which is your lowest premium option. If you’re happy with what you have as creditable coverage and the costs are affordable, you may want to delay enrolling in Medicare Part B and/or Part D. Note that you may reevaluate your choices later on, and do not have to wait until retirement to enroll in Part B or Part D, and can do so separately. 

Health Savings Account Eligibility

Once you enroll in Medicare, you can no longer contribute to a health savings account. If you’re relying on your health savings account (HSA) to boost pre-tax savings, you may want to postpone your Medicare enrollment if you have creditable coverage. If you are working past 65 , but retiring in the future, you would want to request any HSA contributions stop between one to seven months before you enroll to avoid an IRS penalty. This is because Medicare will backdate your Part A 6 months from date of application. 

Navigating Medicare rules and regulations while working past age 65 can be complicated, but it doesn’t have to be. Medicare insurance agents can help you figure out your options, settle on a plan that’s optimal for you and help you reevaluate your coverage choices if your needs or employment status changes. If you need assistance navigating your plan options or determining how creditable coverage or delaying retirement impacts your Medicare enrollment, contact Medicare Portal today.

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