Medicare Coverage Rules When You Unretire and Work Again

Medicare coverage gives unretiring workers real choices when they head back to the workforce.

That is, depending on the size of your new employer, you may be able to take the company health plan and drop Medicare coverage, then re-enroll again down the road.

If you go this route, there are several rules and deadlines to know. Keeping your Medicare coverage may still raise your premiums because of the extra income from your job (more on that below).

Basic Medicare coverage is Part A (hospital coverage) and Part B (outpatient care). Some beneficiaries pair that with a standalone Part D prescription drug plan and a Medigap policy (which covers some costs that come with basic Medicare). Others get Parts A and B through an Advantage Plan (Part C), which usually includes Part D plus extras like dental and vision. Before you decide, review our annual screening checklist and dental options for seniors on Medicare.

Part A has no premium as long as you have a 10-year record of contributing through payroll taxes. For Part B, the standard monthly premium was $170.10 (for 2022) and Part D averaged $33.

Higher-income beneficiaries pay more for Part B and Part D premiums. So it is worth considering how extra earnings from a job could affect what you pay for Medicare coverage.

Working for a Small Employer

If you go to work for a small employer, you should keep both Parts A and B even if you enroll in the company health plan.

“If they go back to work for an employer with fewer than 20 employees, they should keep both Part A and B because Medicare coverage is primary and the group plan is secondary,” said Danielle Roberts, co-founder of insurance agency Boomer Rewards.

It also might not make financial sense to take the group plan instead of, say, a Medigap policy or an Advantage Plan.

“Sometimes health coverage at a small employer costs notably more,” Roberts said, adding that it is worth crunching the numbers before making a decision.

If the employer plan ends up being a good fit, you can disenroll from your drug plan if the group coverage is as good as or better than (“creditable”) Part D benefits.

If you are considering a health plan at a company with 20 or more employees, be aware of a couple of potential snags with Medicare coverage.

First, if the work-based coverage comes with a health savings account (HSA), you cannot contribute to it if you stay on any part of Medicare, including just Part A.

And canceling Part A only to use an HSA may not be practical.

“If they have already started taking Social Security retirement benefits, they cannot drop Part A without paying back all the benefits received from Social Security so far,” Roberts said.

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If you do want to use the employer health plan, you could drop Part B and save on those premiums. Confirm that your employer plan counts as creditable Medicare coverage for Part D. Your insurer should provide that information.

“These HSA options could be fine for Part B but not Part D,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker for Medicare plans.

Also, if you have a Medigap policy, you would have to drop that as well.

However, when you pick up Part B again later, you get a new six-month window to buy a Medigap plan with no underwriting, Roberts said.

“It is one of the very few ways a person can get a second Medigap open enrollment window,” she said.

Medicare Coverage Deadlines After Work Ends

There are other deadlines to know when you finally lose your employer coverage and want to switch to Medicare coverage, plus requirements for proof that you had qualifying coverage.

Once you stop working, you get an eight-month window to enroll or re-enroll in Part B. You could face a late-enrollment penalty if you miss it. For every full 12 months you should have been enrolled but were not, you pay 10% of the standard Part B premium.

To sign up for Part D, whether as a standalone plan or through an Advantage Plan, you get two months after your workplace plan ends. If you miss that window, you could face a late enrollment penalty of 1% of the base premium for every full month you could have had Medicare coverage but did not.

Similarly, if you want an Advantage Plan, you only get two months from when your work coverage ends to sign up. If you miss that, you must wait until the next enrollment period. For routine care between jobs, see what an annual physical exam includes.

For those who cycle in and out of the workforce and in and out of workplace coverage: every time you lose the coverage, the eight-month window restarts, according to the Centers for Medicare & Medicaid Services.

In other words, if you join another employer with qualifying coverage before that window runs out, you are in the clear. The next time you drop it, that window restarts. For drug coverage, the Part D late enrollment penalty window is two months.

As for proving prior workplace coverage: once you no longer have it through work, the insurer should mail you a letter showing the dates you were covered.

For Part A and/or B signup, you need to give the Social Security Administration an employer certification form confirming you were covered, Roberts said.