Where you work (and how big your employer is) affects how much you will pay for health care when you turn 65. Not only do some health plans offer better coverage than others but some will affect your Medicare coverage too.

Medicare Eligibility	Small Employer	Large Employer
Can Require You to Sign Up for Medicare	Yes	No*
Can Offer Fewer Health Benefits Than Younger Employees	Yes	No
Eligibility for Medicare Special Enrollment Period	No	Yes
Who Pays First	Medicare	Your Employer Plan

Small Employer vs. Large Employer

When you work for a small employer, that employer can require you to sign up for Medicare when you turn 65. Medicare will become your primary insurance. These employers do not have to offer you a health plan. If they do, that plan could be used as a secondary or supplemental insurance and may not offer as many benefits.

When you work for a large employer, that employer cannot require you to sign up for Medicare, even when you are eligible.* They must offer you a health plan that has the same benefits as someone younger than 65. You get to decide what works best for your situation — the employer health plan, Medicare, or both. If you choose to sign up for their health plan, that health plan will be your primary insurance. Medicare could be used as secondary insurance.

* The only time a large employer can require you to sign up for Medicare is when you have end-stage renal disease, kidney disease that requires dialysis or a kidney transplant.

Counting to 20

It’s important to understand what defines an employer as small or large when you continue working at 65. This will determine what kind of health plans they can offer and for whom.

Small Employer: Less than 20 employees

Large Employer*: 20 or more employees

*A large employer can be a single employer or a multi-employer group where at least one of the employers in the group hires at least 20 people.

Please know that the rules here apply for people eligible for Medicare based on age.

There are different employer rules for people eligible for Medicare based on a disability.

All in the Timing

Counting to 20 is not always enough. After all, some businesses are seasonal or may change how many people they hire during the year. Timing is important too.

To qualify as large, a business must have at least 20 employees on their employment rolls for each working day in each of 20 or more calendar weeks in the last year or the current year.

• The employee count includes full- and part-time individuals even if they do not enroll in the health plan.
• The employee count does not include self-employed individuals covered by the health plan.
• Employees do not have to work on a given day to count; they just need to be on the employee rolls at the time.
• Weeks do not need to be consecutive when counting.
• Once a business meets large employer status in a given year, that status continues through the end of the calendar year, even if employee numbers change after the fact.
• If a business meets for large employer status at the end of one year (even if they met for small employer status earlier in the year), that status will carry over into the following year.

Applying the Rules

To better understand these principles, it helps to see them in action. Let’s look at an employer in 2022. We will take into consideration their employee counts in 2021 (the last year) and 2022 (the current year) to see how they apply.

Example #1: A business hired 20 people for the whole of 2021. They would be considered a large employer in 2022 (met based on the last year), even if they hired fewer people in 2022.

Example #2: A business hired 20 people for the whole of 2022 but not for 2021. They would be considered a large employer in 2022 (met based on the current year).

Example #3: A business hired 20 people but only for the last 6 months of 2021. They would be considered a large employer for all of 2022 (met based on the previous year).

Example #4: A business hired 20 people but only for the last 6 months of 2022. They would be considered a small employer for the first half of 2022 but a large employer for the second half of 2022 (met based on the current year).

The Small Employer Exception

Working for a large multi-employer group does not guarantee they will follow large employer rules. That’s because one of the employers within that group may hire less than 20 employees. In that case, they can request a small employer exception through the Benefits Coordination & Recovery Center (BCRC). If and when the BCRC approves their request, they get to follow the rules for a small employer even if it looks like they fall under a large umbrella.

A small employer exception changes how their health plan works with Medicare. You can choose to sign up for their health plan, but they can require you to sign up for Medicare when you turn 65. When that happens, Medicare will pay first and their health plan second.

PRO TIP:

Do not assume you work for a large employer, especially if your company is part of a bigger group. Depending on their size, it is possible they sought a small employer exception. Reach out to their Human Resources Department to find out about your healthcare options and how their plan works with Medicare.

The Medicare Special Enrollment Period

If you want to avoid late penalties, you need to sign up for Medicare during the Initial Enrollment Period (IEP). The IEP begins 3 months before your 65th birth month and lasts 3 months after. Altogether, that gives you 7 months to sign up.

Not everyone wants to sign up when they turn 65 though. When you consider that Social Security set the retirement age at 67 (for those born in 1960 or later), most people will want to work past 65 to earn their full Social Security benefits. Anyone retiring before their designated retirement age will receive fewer SSI benefits.

Anyone who works for a small employer will face late penalties if they sign up after the IEP. People who work for a large employer, however, get the benefit of a Special Enrollment Period (SEP). The SEP gives them an 8-month window to sign up for Medicare when they leave their job or lose their health plan, whichever comes first. As long as they sign up during the SEP, they will not face late penalties.

Diagnosis Life Summary

If you are working when you turn 65 or start a new job when you’re older than 65, it’s important to understand your Medicare rights. Do your homework and find out how your employer’s health plan works with Medicare. Otherwise, you could get hit with unexpected costs down the road. Remember that Part B late penalties can last as long as you have Medicare.

 

Benefits Planner: Retirement | Retirement Age and Benefit Reduction. (2023). Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/agereduction.html

How Medicare Works with Other Insurance. (2023). Medicare.gov. https://www.medicare.gov/supplements-other-insurance/how-medicare-works-with-other-insurance

Medicare Secondary Payer | Working Aged MSP. (2022). Centers for Medicare & Medicaid Services. https://www.cms.gov/medicare/coordination-of-benefits-and-recovery/coordination-of-benefits-and-recovery-overview/medicare-secondary-payer/downloads/msp-working-aged.pdf

Small Employer Exception. (2021). Centers for Medicare & Medicaid Services. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/EmployerServices/Small-Employer-Exception