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Should I Enroll in Medicare Part A if I’m Still Working?
By Chris Gasparini
Sep 14, 2020
Although the answer to this will vary, the short answer is yes. For most people, Part A hospital insurance is premium-free, which means that you won’t pay any monthly premiums at all. If this is the case for you, Part A will come with no up-front costs at all, and function as your secondary medical insurance if you have a group plan from your employer.
In this case, enrolling in Part A can seem like a no-brainer. We’ll break down all of the details, as well as some related and alternative scenarios.
How Does Enrolling Work?
Enrolling in Medicare Part A is a fairly simple process. Enrolling when you turn 65 is distinct from enrolling later on, so we’ll go through them one by one.
Understanding the Late Enrollment Penalty
Before we go through the enrollment details, it’s important to understand late penalties. If you can enroll in Original Medicare (Medicare Parts A and B) and don’t do so, you will have to pay late penalties on your premiums unless you have an employer health plan. This means that if you defer your Medicare enrollment because you’re still working and have an employer health plan, you will be safe from the late penalties, and will be allowed to enroll later on.
The Late Enrollment Penalty will apply to both your Part A premium and your Part B premium, and will stay with you for life. Because it never goes away, making sure you don't have to pay it should be a priority for all those who are eligible for Medicare health care.
Enrolling When You Turn 65: The Initial Enrollment Period
Three months before your 65th birthday month, you will enter something known as the Initial Enrollment Period (IEP). This period lasts for 7 months: 3 months before your birthday month, your birthday month itself, and 3 months after. During this period, you will have full Medicare eligibility.
This period depends on the month of your birthday only, so the actual day your birthday is on is irrelevant. If your birthday is in April, your IEP will begin in January whether your birthday is on the 5th or the 25th.
For most people, enrollment in Part A as well as Medicare Part B will be automatic. If you are receiving Social Security benefits already, then your Part A enrollment will be automatic and you will have to specifically let Medicare know that you don’t want to enroll. This will be the case even if you have an employer health plan.
If you have paid the Medicare tax for 40 quarters or more or you receive Social Security retirement benefits, your enrollment will be automatic. If don’t want Part A, make sure to contact Medicare to defer your enrollment.
Enrolling Later On: The Special Enrollment Period (SEP)
When it comes to Medicare, a Special Enrollment Period refers to any period during which you are allowed to enroll in some form of Medicare without any penalties. There are many different types of SEPs. For example, if you have Medicare Advantage and move out of the coverage area, you will trigger an SEP that allows you to switch your plan to one that applies to where you now live.
When it comes to a deferral of Medicare benefits due to continuing with your employer's plan, the SEP is triggered when you stop working or when your employer stops offering coverage, whichever is first. Unlike the Initial Enrollment Period, this period will last for 8 months, not 7. This means that after you stop working, you have an eight month window to enroll in Medicare without any penalties following the loss of your current employment.
If you are in this situation, make it a priority to enroll in an insurance plan as quickly as possible, so you don’t have to deal with a gap in coverage. If you know your group health plan will end, talk to Medicare as soon as possible to get your coverage in place to begin as soon as your other coverage ends.
The Simple Case: When You Should Enroll
If you or your spouse have been paying the Medicare tax for ten years or more, you will not have to pay any premiums for Medicare Part A, at all. You will still have other fees, like the Part A deductible and coinsurance, but will pay $0 in monthly premiums. This is known as premium-free Part A, and it is available to most people who enroll.
If you are still working and receiving health coverage from your employer, you will still pay nothing in premiums for Part A. In this situation, Medicare Part A will function as your secondary insurance always -- it will never be primary. This means that Part A coverage will kick in if your primary payer is unable to pay.
If you have Part A as your secondary insurance and aren’t paying any premiums, you lose nothing. You will have associated fees like your coinsurance and deductible, but those will only kick in once you receive coverage. Because this will only happen when your primary insurance isn’t covering your expenses, the alternative is paying fully out-of-pocket. This means that there’s nothing to lose.
HSA: The Exception
An HSA, or Health Savings Account, is a type of medical savings account that some people use to handle their medical costs. You cannot contribute to an HSA while enrolled in any form of Medicare, as a general rule. This means that if you want to contribute to your HSA and are still working, it may be a better choice to delay your enrollment in Part A. Only you can decide what to prioritize.
What if I Have to Pay Part A Premiums?
If you have paid the Medicare tax for under 30 quarters (7.5 years), then you will have to pay the full premium amount for Part A. This comes out to $471 per month, which is likely quite expensive compared to your group health insurance. If you’ve paid the Medicare tax for 30-39 quarters, your Part A premium will be $259 per month.
If you’ve paid Medicare Tax for a number of quarters almost reaching 40, it may be worth it to delay your Part A coverage until then. That is, assuming you have the coverage you need from your employer. If you have employee coverage, you won’t be penalized, but also won’t waste money on a plan that is probably superfluous for most people.
Premium-free Part A is worth it to enroll in not because of the coverage it provides in addition to your employer plan, but simply because it’s free. Most people will never actually use their secondary Part A coverage at all -- but they aren’t paying for it. If you do have to pay for this plan and still have to use it as secondary insurance, it can be a waste. However, it can be worth it for some people, depending on your conditions and medical needs.
What About COBRA Plans?
COBRA plans are a unique in a way that is essential to be aware of. When your employer insurance ends, you trigger an SEP that allows you to enroll in Medicare with no penalties. This isn’t true for COBRA plans: you will have to pay late penalties if you don't enroll in Medicare when you have a COBRA plan.
Basically, COBRA plans don’t qualify as employer group plans in Medicare’s eyes. If you have a COBRA plan when you become eligible, you should enroll in Medicare as soon as possible so you don’t face late fees.
If your employer coverage ends after your IEP, then you still have 8 months to get covered by Medicare. During this time, you may be covered by a COBRA plan, but it will cease immediately when you start your Medicare coverage. In this situation, it’s still best to enroll in Medicare ASAP.
The General Enrollment Period
If you didn't complete your Part A or Part B enrollment during one of your other enrollment periods, you will have to wait until the General Enrollment Period, which lasts from January to March. Your Part A or Part B coverage will begin in July of that year.
Depending on your situation, you will still have to pay the late penalties and may also have a gap in coverage.
What About the Open Enrollment Period?
You may have also heard about the Open Enrollment Period, which lasts from October 15 to December 7 of each year. This is a period during which you can change your Medicare insurance, add on a Medicare Part D prescription drug plan, switch to a Medicare Advantage plan, or add a Medigap policy.
During this time, you're able to make these changes to your Medicare plan if you want prescription drug coverage or one of these other options. However, this won't impact your Original Medicare coverage or your Part A or B late penalties.
Remember, Enrollment Is Not One-Size-Fits-All
Although you should now be familiar with the general outline of concepts related to enrollment in Part A, the situation can be more complicated for some. Your best option is always to talk to your benefits administrator or visit your local social security office to gather more information specific to your unique situation. Everybody's situation is different, and enrollment is best handled in a way that looks at your situation uniquely to figure out what is best for you.
You can also find more information about enrollment at medicare.gov.
So, Should I Enroll in Part A?
As usual, it depends. For most people, the answer is yes: enrolling in Part A while you’re working offers no downsides, is easy to do and costs nothing for the majority of eligible people. That being said, it’s still important to understand what the limits of this are.
If you have an HSA or a COBRA plan, or if you have to pay for Part A premiums, your situation is very different from the norm. Only you can decide whether it will be worth it to pay the late fees or premiums, but being aware of the options is the best place to start.
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