How To Transition From Employer Coverage To Medicare At Retirement

How and when you transition from employer coverage to Medicare depends on when you retire – at 65 or after. Everyone’s situation is different. Other factors that affect your transition to Medicare are your employer’s size, your group health coverage, and whether you contribute to a health savings account. Let’s look at each scenario.

Retiring at 65 years old

Transitioning to Medicare from employer coverage is quite seamless when you retire at 65. If you plan to retire at 65, you will need to apply for Medicare during your Initial Enrollment Period.

Your Initial Enrollment Period starts three months before your 65^th birthday month, includes your birthday month, and ends three months after your 65^th birthday month. For instance, if your 65^th birthday is on July 18^th, your Initial Enrollment Period starts on April 1^st and ends on October 31^st.

You will need to apply for Part A and Part B during this period. You will also need to choose between applying for a Medicare Advantage plan or Medigap plan.

• If you decide a Medigap plan is best for your situation, you will also need to apply for Part D during your Initial Enrollment Period.
• If you decide Medicare Advantage is a better fit for you, you likely won’t need a Part D plan, as most Medicare Advantage plans include one.

Applying for Medigap and Medicare Advantage

Technically, you can apply for a Medigap plan at any time. However, you can only apply without medical underwriting within the six months directly following your Part B effective date. This window is called your Medigap Open Enrollment.

• If you apply for Part B within the first three months of your Initial Enrollment Period, your Part B effective date will be the 1^st of your 65^th birthday month. In this case, your Medigap Open Enrollment window would start on the 1^st of your 65^th birthday month and end six months later. You can still apply for Medigap after this window. However, you’ll likely have to answer questions about your health and past medical history.

• If you decide to apply for a Medicare Advantage plan instead of Medigap, you can do so during your Initial Enrollment Period. If you don’t apply for a Medicare Advantage plan during this time, you will have to wait until the Fall Open Enrollment Period for another chance to apply.

Working past 65 years old

Transitioning to Medicare from employer coverage when you plan to work past 65 is a bit different. Most people who work past 65 can delay Medicare enrollment until retirement. People who work past 65 for an employer with 20 or more employees and have the employer’s health plan can delay Medicare until they retire and lose employer coverage.

They can do this because a large employer’s health plan is creditable coverage for Medicare, meaning it is the primary payer before Medicare. Therefore, delaying Medicare wouldn’t cause any late penalties. However, most people earn premium-free Part A, so enrolling in Part A while working can give you extra hospital coverage at no cost.

On the other hand, if someone works for a small employer with less than 20 employees, he would need to enroll in Medicare during his Initial Enrollment Period to avoid owing late penalties.

Applying for Medicare after working past 65

If you already have Part A, you will need to apply for Part B, as well as Medicare Advantage or Medigap and Part D. You will have eight months from the day you lose your employer coverage to apply for Part B without owing late penalties.

• If you choose Medigap, your Medigap Open Enrollment window will start the day your Part B is effective.
• However, if you choose Medicare Advantage, you will only have 63 days to apply. This is called a Special Election Period, and it starts the day you lose your employer coverage. This enrollment period is the same for Part D.
• If you don’t apply for Part D during this Special Election Period, you will owe late penalties.

Transitioning from employer coverage to Medicare

Depending on the type of Medicare plan you choose, Medicare can be quite different than from your employer health plan. Take the time to research and learn how Medicare covers you to avoid confusion. Also, be sure to learn these enrollment periods so you don’t owe any late penalties in the future.

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