Medicare Rules for those Still Working


Hi, Gail,

I am still working and don’t plan to retire any time soon. However, since I am turning 65 in a few months, I’ve been told I need to sign up for Medicare even though I have great health insurance through my employer.  Why should I pay the monthly premiums to Medicare when my company covers me for free?  Will my premiums go up if I wait?


Hi, Gary,

Good news: based upon your circumstances, you don’t have to sign up for Medicare at age 65 and there will not be a penalty if you follow the rules (see below).

According to a Medicare spokesperson, as long as you have earned 40 work credits of Social Security, “you can sign up for Medicare Part A or B any time you want” without a penalty provided you meet both of the following conditions: a) you or your spouse are still working and b) you or your spouse are covered by a health insurance plan offered through an employer or a union.(1)

Once you leave your job and are no longer covered by a group plan, you have eight months to choose your Medicare coverage. This is called your “Special Enrollment Period” and it's an eight-month window that begins either the day after your employment ends or the day your work-based insurance coverage ends, whichever date is earlier.(2)

If you don’t sign up within your Special Enrollment Period, that’s when you could be subject to a penalty. According to the Social Security Administration, your “monthly premium will increase 10% for each 12-month period” during which you were eligible but did not enroll. Click here for more details.

Keep in mind that there are no premiums for Medicare Part A, which covers treatment provided in a hospital, a skilled nursing facility and hospice care. That’s because you have been pre-paying for this coverage each year of your working life via the Medicare tax that is deducted from every paycheck. While Part A coverage won’t go up in cost if you miss your Special Enrollment Period, other forms of Medicare coverage will, such as Part B (doctor visits) and Part D (prescription drugs).

In addition, both of these options are means-tested. If your income is below a certain amount, you may qualify for assistance in paying these premiums. If you want to investigate this a good place to start. .

On the other hand, if your income exceeds certain thresholds, you might have to pay more. This is spelled out in a brochure from the Social Security Administration (where you actually sign up for Medicare coverage).

Hope this helps!

Dear Gail,

I will be turning 65 in February and have been starting to research Medicare. Everything I’ve come across advises me to sign up within a seven-month window around my birthday month, i.e. from Nov. 1 through May.  However, I’ve heard from co-workers that once I sign up for Medicare, I can no long contribute to my Health Savings Account (HSA). My husband and I are (thankfully) pretty healthy so I’ve been maxxing out my contributions in order to build up a significant balance to cover out-of-pocket health costs we might incur in the future.

I really don’t want to stop contributing to my HSA. Is it really mandatory that I enroll in Medicare right now?



Dear Connie,

Your co-workers are correct. The month after you sign up for Medicare Part A or Part B you lose the ability to make any more contributions to your Health Savings Account. But don’t blame Medicare or the Social Security Administration for this rule. It comes from the IRS by virtue of the fact that contributions to an HSA are tax deductible. Click here for more information.

By law, you can only contribute to a Health Savings Account if you are covered by a High Deductible Health Plan, or HDHP. Under this type of health insurance, you generally have to pay for several thousand dollars of medical expenses out-of-pocket before any coverage kicks in. Once you sign up for Medicare, your deductibles become significantly lower.

Although there is a high-deductible option under Medicare called an MSA, it’s important not to confuse this with an HSA because there are significant differences. For instance, you do not make contributions to an MSA plan. Instead, Medicare credits your account with a certain amount of value and so does the insurance company that is your MSA provider.  The balance in your account is automatically used to cover health-care expenses that are not covered by Medicare Part A or Part B. These costs are deducted from your MSA balance and are applied to your plan’s “deductible.”

If you use up all of the value in your MSA account, you are responsible for paying additional costs out-of-pocket until the plan deductible is met. Then the insurance part of your MSA plan kicks in.

Any balance in your MSA account at the end of the year carries over to the next year. There are several publications on the Medicare website that go into detail about MSAs. A spokesperson for Medicare recommends starting here.

The good news is that as long as you meet the two criteria I spell out in my response to Gary (above), you do not have to sign up for Medicare at this time, which means you can continue contributing to your company-sponsored Health Savings Account.

1. If you have not earned the minimum of 40 credits of Social Security, then you are not eligible for free Medicare Part A. In this case, a Medicare spokesperson explains that individuals who “don’t buy it when they’re first eligible, [could see] their monthly premium may go up 10%. They will have to pay the higher premium for twice the number of years they could have had Part A, but didn’t sign up.”

2. If you are laid off and extend your health insurance coverage via COBRA, this does not extend your Special Enrollment Period.