Employer-Sponsored Health Coverage, Medicare Enrollment and HSAs
By Anne Newhouse, CEBS |Originally posted on IFEBP
2024 signified the year of “Peak 65”—the name for the record numbers of Baby Boomers reaching age 65. According to a report by the Alliance for Lifetime Income, more than 4.1 million Americans will turn 65 each year through 2027. With so many turning 65, it’s natural for employees still working to wonder what to do about their health insurance options, especially when they have a health savings account (HSA) as well. This blog focuses on employer health insurance and Medicare coordination for active workers at age 65. It does not cover every aspect of Medicare (such as medical conditions caused by disabilities resulting in eligibility for Medicare prior to age 65).
Understanding How Medicare Works at Age 65
In general, Medicare rules are complex, especially for those who continue to work while covered by employer health insurance. Medicare also has specific enrollment timing rules to understand, based on when the individual turns 65.
Medicare Parts A and B
Medicare Part A (Hospital Insurance): Available at age 65. Most people get Part A premium-free based on working for a specific number of quarters, but some may have to pay for this coverage. If receiving Social Security retirement benefits, individuals are automatically enrolled in Part A at age 65 with no opt-out available.
Medicare Part B (Medical Insurance): Available at age 65. Individuals can opt in to Part B at age 65 or delay enrollment based on coverage in an employer-sponsored health plan. However, if coverage in Part B is delayed, there is a late enrollment penalty based on health plan creditable coverage status. See the International Foundation’s previous blog for more information: “CMS Creditable Coverage Updates for Group Health Plans.”
Two key aspects of Medicare coordination for employers are the Medicare Secondary Payer rules and ceasing HSA contributions upon Medicare enrollment.