Turning 65 no longer automatically means retiring. Many Americans are choosing to work longer, whether to stay active, maintain employer benefits, or continue building savings. If you’re in this situation (or covered under a working spouse’s plan) you may be wondering how Medicare and employer-sponsored health insurance work together.
Understanding how to coordinate the two is essential to avoiding late penalties, coverage gaps, or unnecessary costs. In this guide, we’ll explain how Medicare interacts with employer coverage, when you can delay enrollment, and how to make confident decisions when it’s time to transition fully to Medicare.
How Medicare and Employer Coverage Work Together
Medicare doesn’t always replace your employer coverage right away. In many cases, both forms of insurance can work together, with one acting as the primary payer and the other as secondary.
Which one pays first depends mainly on the size of your employer:
- If you work for a company with 20 or more employees, your employer plan pays first and Medicare pays second.
- If your employer has fewer than 20 employees, Medicare pays first and your employer plan becomes secondary.
This distinction is crucial. If you work for a small employer and choose to delay Medicare, your company’s plan may pay very little (or nothing at all) because it expects Medicare to be the primary payer. On the other hand, if you work for a large employer, you may safely delay Medicare and continue using your group coverage without penalty.
Before making any decisions, talk with your employer’s benefits administrator to confirm how your plan coordinates with Medicare. Every situation can vary slightly depending on the type of group policy and how it’s written.
When You Can Delay Medicare Without Penalties
One of the biggest concerns people have is whether delaying Medicare will cause late enrollment penalties. The answer depends on whether you have creditable coverage through an active employer plan.
If you or your spouse are still actively working and covered under that employer’s group plan, you can generally delay enrolling in Medicare Part B (and sometimes Part D) without any penalty. Your coverage is considered creditable if it’s expected to pay, on average, at least as much as Medicare for major medical services and prescription drugs.
However, it’s important to understand what does not count as creditable coverage. For example, COBRA coverage and retiree health insurance do not qualify as active employer coverage. If you leave your job and continue your plan through COBRA, Medicare considers that secondary coverage, and delaying enrollment could lead to penalties later.
Once your employment or your employer’s coverage ends, you’ll have an eight-month Special Enrollment Period (SEP) to sign up for Medicare Part B without penalty. That period begins the month after your active employer coverage ends, not after COBRA ends, so timing matters.
Should You Enroll in Medicare While Still Working?
Even if you have employer coverage, you might still choose to enroll in some parts of Medicare, depending on your situation.
Part A
Most people enroll in Medicare Part A at age 65 because it’s premium-free for anyone who worked at least 10 years (40 quarters) and paid Medicare taxes. Part A helps cover inpatient hospital stays and limited skilled nursing care, so it can work as a secondary payer to your employer insurance.
However, if you have a Health Savings Account (HSA) and want to keep contributing to it, you should delay enrolling in any part of Medicare, including Part A. Once you enroll in Medicare, you’re no longer eligible to contribute to an HSA, though you can still use existing HSA funds for medical expenses.
Part B
Deciding whether to enroll in Medicare Part B while still working depends on the quality and cost of your employer coverage. Part B covers outpatient care, doctor visits, and preventive services, and it comes with a monthly premium ($1202.90 in 2026).
If your employer plan is strong and affordable, you can usually delay Part B without issues. But if your employer coverage has a high deductible or limited network, it may make sense to take Part B and use Medicare as your primary insurance instead.
Part D
You can also delay Part D prescription coverage if your employer plan includes creditable drug coverage. Your employer is required to send you a notice each year stating whether your coverage meets Medicare’s standards. As long as it’s creditable, you can safely delay enrolling in a Part D plan.
How Medicare and Employer Drug Coverage Coordinate
If you have both Medicare and employer drug coverage, one plan will pay first and the other second. Usually, if you’re still working for a large employer, your employer’s prescription plan will pay first, and Medicare Part D will act as backup.
If your employer has fewer than 20 employees, Medicare pays first and your employer plan becomes secondary. Because coordination rules can get complicated, it’s important to verify how your coverage works before making any enrollment changes.
If you ever lose creditable drug coverage and go more than 63 days without new drug coverage, you’ll face a Part D late enrollment penalty that lasts as long as you have Medicare. This makes it crucial to act quickly when leaving your employer plan.
What Happens When You Retire or Lose Employer Coverage
When you decide to retire or your employer coverage ends, you’ll transition to full Medicare coverage. The steps are straightforward but must be timed correctly:
- Enroll in Medicare Part B. If you delayed Part B while working, you’ll need to enroll during your eight-month Special Enrollment Period. Your coverage will begin the first of the month after you apply.
- Add drug coverage. You can choose either a standalone Part D plan or a Medicare Advantage plan that includes drug coverage.
- Consider supplemental insurance. If you prefer to stay with Original Medicare, you can add a Medigap plan to help cover your deductibles and coinsurance.
Acting quickly is key. If you miss your Special Enrollment Period, you may have to wait until the General Enrollment Period (January 1 – March 31) to enroll, and penalties could apply.
Common Mistakes to Avoid
Navigating Medicare while working can be tricky, and a few common missteps can lead to costly problems later:
- Relying on COBRA as creditable coverage. COBRA is not considered active employer insurance for Medicare purposes. If you delay enrollment while on COBRA, you’ll face penalties later.
- Assuming small employer plans act as primary. If your company has fewer than 20 employees, Medicare is the primary payer, even if you’re still working.
- Missing your Special Enrollment Period. The eight-month window starts when employer coverage ends, not when COBRA or retiree coverage ends.
- Forgetting about drug coverage. If you lose creditable drug coverage and don’t enroll in a Part D plan within 63 days, you’ll pay a permanent late penalty.
- Not coordinating benefits correctly. Failing to inform both Medicare and your employer plan about dual coverage can result in denied claims or billing delays.
Taking time to clarify how your coverage works can save you from these headaches.
Coordinating Coverage When Your Spouse Works
Many couples find themselves in a situation where one spouse continues working while the other retires. The same Medicare rules apply: the spouse who is still working provides active employer coverage for both individuals.
If the employer has 20 or more employees, the working spouse’s plan pays first, and Medicare can usually be delayed. But if the employer is smaller, Medicare will pay first for the retired spouse, and they’ll need to enroll to maintain full coverage.
It’s always best to confirm these details with both the employer’s HR department and a Medicare professional before either spouse makes changes to their coverage.
Let Carolina Senior Benefits Be Your Guide
Coordinating Medicare with employer coverage involves a lot of moving parts, and even small mistakes can have big consequences down the road. At Carolina Senior Benefits, we help individuals and couples understand their options, verify whether their employer coverage is creditable, and determine the right time to enroll in Medicare.
Our licensed agents will walk you through every step from reviewing your employer benefits to comparing Medicare Advantage, Medigap, and Part D plans so you can make confident, penalty-free decisions that fit your unique situation.
