Anyone at age 65 should evaluate how — or if — Medicare will fit into their health-care coverage. Here's why – CNBC

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It’s not just retirees who need to think about Medicare.

Anyone who plans to keep working when they reach the eligibility age of 65 should evaluate how — or if — Medicare will fit into their health-care coverage.

The program’s general rule is that unless you meet an exception, you’ll face late-enrollment penalties if you don’t sign up during a seven-month window that starts three months before your 65th birthday month and ends three months after it. 

One of those exceptions is having qualifying insurance through your employer. Yet not all workplace coverage counts. And getting it wrong could cost you down the road.

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“The biggest mistake … is to assume that you don’t need Medicare and to miss enrolling in it when you should have,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.

Here’s what to know.

First, the basics

Basic Medicare consists of Part A, which is hospital coverage, and Part B, which is outpatient care coverage.

Part A has no premium as long as you have at least a 10-year work history of contributing to the program through payroll or self-employment taxes. Part B comes with a standard monthly premium of $170.10 for 2022, although higher-income beneficiaries pay more through monthly adjustments; see the chart below. 

More than 40% of beneficiaries choose to get their Parts A and B benefits delivered through an Advantage Plan, or Part C, which typically includes prescription drug coverage, or Part D, and may or may not have a premium.

The remaining beneficiaries stick with basic Medicare and may pair it with a so-called Medigap policy and a stand-alone Part D plan. Be aware that higher-income beneficiaries pay more for drug coverage; see the chart below.

Late-enrollment penalties last a lifetime. For Part B, that surcharge is 10% for each 12-month period you should have been enrolled but were not. For Part D, the penalty is 1% of the national base premium —$33.37 in 2022 — multiplied by the number of months you didn’t have Part D or creditable coverage.

Company size matters

The general rule for workers at companies with at least 20 employees is that you can delay signing up for Medicare until you lose your group insurance, i.e., you retire or otherwise leave your job. 

Many people in that situation delay Part B but sign up for Part A because it’s free as long as you have a 10-year work history of paying into the program through payroll taxes.

“It doesn’t hurt you to have it,” Roberts said.

However, she said, if you happen to have a health savings account, or HSA, paired with a high-deductible health plan through your employer, be aware that you cannot make contributions once you enroll in Medicare, even if only Part A.

Also, if you stay with your current coverage and delay all or parts of Medicare, make sure the plan is considered qualifying coverage for both Part B and Part D.

If you’re uncertain whether you need to sign up, it’s worth checking with your human resources department or your insurance carrier.

“I find it is always good to just confirm,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.

Meanwhile, if you have health insurance through a company with fewer than 20 employees, you generally should sign up for Medicare at age 65 to avoid penalties down the road.

This is regardless of whether you stay on the employer plan. If you choose to remain on it, Medicare would be your primary insurance.

Additionally, anyone who gets insurance through the public health exchange — either healthcare.gov or a state marketplace — is expected to switch to Medicare at age 65.