Turning 65 doesn't automatically mean you need to jump on Medicare. If you're still working and have employer health insurance, you might have more flexibility than you think. But here's the catch: navigating the rules around delayed Medicare enrollment is surprisingly complex, and one wrong move can cost you thousands in late enrollment penalties or tax headaches.
The truth is, many people approaching 65 assume they must sign up for Medicare immediately. But if you're covered by a group health plan through your current job—or your spouse's job—you might be able to delay Part B enrollment without facing penalties. The key is understanding when your employer coverage qualifies as "creditable" and how the size of your employer changes everything.
The 20-Employee Rule That Changes Everything
The single most important factor in deciding whether to delay Medicare is the size of your employer. If you work for a company with 20 or more employees, your group health plan pays first and Medicare becomes secondary. This means you can safely delay enrolling in Medicare Part B without penalties, as long as you sign up within eight months of losing that employer coverage or stopping work.
But if your employer has fewer than 20 employees, the rules flip. Medicare becomes the primary payer, and your employer coverage becomes secondary. Many small employers will actually require you to enroll in Medicare at 65 to continue receiving their coverage. If you don't enroll and later try to sign up, you could face a permanent 10% premium increase on Part B for each full 12-month period you delayed—and that penalty lasts for as long as you have Medicare.
Companies with 20 or more employees are required by law to continue offering health insurance to workers 65 and older and their spouses. You have the choice to enroll in Medicare or stick with your employer plan, but your employer can't force you to take Medicare. This protection gives you real flexibility to evaluate which option works better for your situation.
Understanding Creditable Coverage and Special Enrollment
Not all health coverage at 65 qualifies as "creditable" for delaying Medicare. The term might sound like insurance jargon, but it has real consequences. Creditable coverage means your health insurance is expected to pay at least as much as Medicare would, allowing you to delay enrollment without facing late penalties.
Here's what counts as creditable coverage: health insurance through your current employer or your spouse's current employer (if the employer meets the size requirements). That's basically it. Retiree health plans don't count, even if they're comprehensive. COBRA continuation coverage doesn't count. Severance health benefits don't count. Individual health insurance marketplace plans don't count either.
If you delay Medicare enrollment based on employer coverage, you'll use a Special Enrollment Period when you do eventually sign up. This eight-month window starts the month after your employment ends or your employer coverage ends, whichever comes first. You'll need documentation proving you had creditable coverage—your employer should provide a letter confirming your coverage dates. Keep this paperwork safe, because without it, Medicare may treat your delayed enrollment as a late sign-up and hit you with penalties.
The HSA Trap Most People Don't See Coming
If you have a Health Savings Account paired with a high-deductible health plan, Medicare enrollment creates a minefield you need to navigate carefully. The moment you enroll in any part of Medicare, your HSA contribution limit drops to zero. You can still use the money you've already saved—that's yours forever—but you can't put in another dollar once Medicare coverage begins.
The real danger is the six-month lookback rule. When you apply for Medicare Part A after turning 65, your coverage can be backdated up to six months from your application date. This retroactive coverage means that if you made HSA contributions during those six months, they're now considered excess contributions. The IRS charges a 6% excise tax on excess contributions for every year that money remains in your account. If you don't catch it and remove the excess, those penalties compound.
The safe approach: stop all HSA contributions at least six months before you plan to enroll in Medicare. If your birthday is on the first of the month, you need to stop contributions even earlier—by the beginning of the month before your birth month. For 2025, the contribution limits are $4,300 for individual coverage and $8,550 for family coverage, with a $1,000 catch-up contribution if you're 55 or older. Make sure you and your employer both halt contributions well in advance of Medicare enrollment to avoid tax headaches.
Comparing Costs: Employer Coverage vs. Medicare in 2026
In 2026, Medicare Part B will cost $202.90 per month, up $17.90 from 2025's premium of $185.00. The Part B deductible rises to $283 for 2026. If you want prescription drug coverage through Part D, average premiums run about $46.50 monthly in 2025, though the good news is that out-of-pocket costs are now capped at $2,100 for 2026 thanks to the Inflation Reduction Act.
Whether Medicare or your employer plan offers better value depends on several factors. Look at your total monthly premiums, deductibles, copays, and out-of-pocket maximums. Compare your employer plan's prescription drug coverage to Medicare Part D. Consider whether your doctors accept Medicare. If you have a spouse or dependents on your employer plan, losing that family coverage might push them into more expensive individual coverage.
Some employers offer retiree health plans that coordinate with Medicare. These plans can be excellent deals, covering your Medicare premiums, deductibles, and copays. But remember: retiree coverage doesn't qualify as creditable coverage for delaying initial Medicare enrollment. You need to be on the employer plan as an active employee to use the Special Enrollment Period.
Part D and Prescription Drug Coverage Coordination
Medicare Part D has its own creditable coverage rules. If you go 63 days or more without Medicare drug coverage or other creditable prescription drug coverage after becoming eligible for Medicare, you'll face a Part D late enrollment penalty. Unlike the Part B penalty, this one is calculated based on how long you went without coverage and added to your premium permanently.
Your employer must notify you each year whether your prescription drug coverage is creditable for Medicare purposes. Keep these notices—you'll need them as proof when you eventually enroll in Part D. If your employer's drug coverage is creditable, you can delay Part D enrollment without penalties. If it's not creditable, you should enroll in Part D at 65 to avoid future penalties, even if you're keeping your employer medical coverage.
Making Your Decision: What to Do Before 65
Start planning at least six months before your 65th birthday. Contact your employer's HR or benefits department and ask specific questions: How many employees does the company have? Will they require you to enroll in Medicare? Is your prescription drug coverage creditable for Medicare purposes? Can they provide documentation of your coverage dates?
If you're keeping your employer coverage and delaying Medicare, you'll still want to enroll in Part A if it's premium-free (which it is for most people who've worked long enough). Part A covers hospital stays and has no monthly premium for most beneficiaries, though it does come with that HSA contribution restriction. Some people delay Part A to keep contributing to an HSA, which is perfectly legal if you're not receiving Social Security benefits.
The bottom line: turning 65 while still working gives you options, but those options come with rules that can trip you up if you're not careful. Take the time to understand your employer's size, whether your coverage qualifies as creditable, and how Medicare enrollment affects your HSA. Get documentation from your employer. And when in doubt, speak with a Medicare counselor or insurance agent who can review your specific situation. Making the right choice now can save you from costly penalties and coverage gaps down the road.
