Who Pays First: The Employer-Size Rule
When you have Medicare and other insurance, one pays first (the primary payer) and the other pays second (the secondary payer), covering only costs the first did not. Medicare.gov sets out the rules for people 65 or older with group coverage based on current employment, theirs or a spouse’s:
| Your situation | Pays first |
|---|---|
| 65+, employer has 20 or more employees | The group health plan |
| 65+, employer has fewer than 20 employees | Medicare |
| Under 65 with Medicare due to disability, employer has 100 or more employees | The group health plan |
| Under 65 with Medicare due to disability, employer has fewer than 100 employees | Medicare |
| COBRA, 65+ | Medicare |
| Retiree coverage from a former employer | Medicare |
Multi-employer plans count the group: if at least one employer in the plan has 20 or more employees (100 for disability), the larger-employer rule applies. Tell your doctors you have both kinds of coverage so bills go to the right place.
Part A, Part B or Both?
At a larger employer (20+): you can usually delay Part B without a penalty while you have coverage through current work. Many people still take premium-free Part A at 65, because it costs nothing and can pay secondary on hospital bills. The exception is people who contribute to a Health Savings Account (see below).
At a small employer (under 20): Medicare pays first, so the job plan pays second and may pay very little if you have not enrolled in Medicare. In most cases you should sign up for Part A and Part B during your Initial Enrollment Period. Ask your benefits administrator how the plan works with Medicare before deciding.
Not sure which applies to you? Our answer page on whether you need Medicare while working at 65 is a quick summary, and the enrollment window finder helps with dates.
The 8-Month Special Enrollment Period
If you delayed Part B because you had group coverage based on current work, you get a Special Enrollment Period to sign up later without a penalty. It lasts 8 months and starts the month after your employment ends or the month after your group coverage ends, whichever comes first.
Two cautions. First, the 8 months run from the earlier date, even if you elect COBRA. Second, Part B starts the month after you sign up in this window, so sign up before your job coverage ends if you want no gap. You will usually need your employer to confirm your group coverage dates, so allow time for paperwork.
Miss the 8 months and you are back to the General Enrollment Period (January 1 to March 31) and a possible penalty. See our late enrollment penalties guide.
COBRA and Retiree Coverage
COBRA lets you keep your employer’s plan for a period after leaving, but it can cost up to 102% of the plan’s cost, according to the U.S. Department of Labor. For Medicare purposes it is not coverage based on current work. If you are 65 or older with COBRA, Medicare pays first, and COBRA may pay only a small portion. It does not extend your 8-month window. One useful exception: if COBRA includes creditable drug coverage, you get a Special Enrollment Period to join a Medicare drug plan without a penalty when COBRA ends.
Retiree coverage from a former employer is also secondary to Medicare. Many retiree plans expect you to have Part A and Part B. Read your plan’s rules before you retire.
Health Savings Accounts
Once you are enrolled in any part of Medicare, you can no longer contribute to an HSA, although you can keep using the money already in it. Watch the backdating rule: when you sign up for premium-free Part A after 65, coverage starts up to 6 months back from when you sign up or apply for Social Security benefits, but not before the month you turned 65. If Part A overlaps months when you contributed, you may owe a tax penalty, so Medicare.gov suggests you and your employer stop contributions at least 6 months before you apply for Medicare. The same backdating applies when you apply for Social Security benefits after 65, because that also starts Part A. Ask your tax professional about your situation.
Drug Coverage While You Are Working
If your job’s drug coverage is creditable, meaning similar in value to Medicare Part D, you can delay Part D without a penalty. Your employer should send a creditable coverage notice each year; keep them. When the coverage ends, you have a Special Enrollment Period to join a drug plan. If the coverage is not creditable, a Part D penalty can build once you go 63 days or more without creditable coverage after your Initial Enrollment Period. Our Part D guide explains the plans.
A Simple Plan for Leaving Work
- About 3 months before your last day, confirm your employer’s size and your coverage end date.
- Ask HR for written confirmation of your group coverage dates, and sign up for Part B so it starts the first of the month after your job coverage ends.
- Choose your coverage: Medicare Advantage, or Original Medicare with Medigap and Part D. Your 6-month Medigap open enrollment starts when Part B begins, so this is often your safest chance to buy Medigap without health questions. Compare in Medicare Advantage vs. Medigap in Idaho.
- Stop HSA contributions in time, and keep copies of every coverage letter.
Planning your retirement date?
We can line up your Part B start, drug coverage and Medigap or Advantage choice with your last day at work, so there is no gap and no penalty.
Request a free comparison Call 208-350-9933Frequently Asked Questions
Do I need Medicare if I am still working at 65?
Not always right away. If you have group health coverage through your own or your spouse’s current job at an employer with 20 or more employees, the group plan generally pays first and you can usually delay Part B without a penalty. With fewer than 20 employees, Medicare generally pays first, so you typically need Part A and Part B at 65.
How long do I have to sign up for Part B after I retire?
You get an 8-month Special Enrollment Period that starts the month after your employment ends or the month after your group coverage ends, whichever happens first. Signing up while you still have the job coverage, or in the first full month after, avoids a gap.
Does COBRA count as employer coverage for Medicare?
Not for delaying Part B. COBRA is not coverage based on current employment, so it does not extend your 8-month Part B Special Enrollment Period. If you are 65 or older with COBRA, Medicare pays first, and COBRA may pay only a small part of your costs.
Can I keep contributing to my HSA after I get Medicare?
Once you have any part of Medicare, you can no longer make new HSA contributions, though you can still spend the money already in the account. Because premium-free Part A can be backdated up to 6 months when you sign up later, stop contributing 6 months before you apply for Part A or Social Security.
Should I take Part A at 65 even if I keep my job insurance?
Many people do, because premium-free Part A costs nothing and can act as secondary hospital coverage. The main exception is people contributing to a Health Savings Account, since having Part A ends HSA eligibility. Check with your HR or benefits administrator about how your plan works with Medicare.
Related Guides
Coverage pages for this topic: Medicare Advantage · Medicare Supplement · Medicare Part D. Other topics in the Learning Center: Health Insurance (ACA), Life Insurance, Final Expense, Annuities, Long-Term Care, Disability Insurance, Supplemental Health, Short-Term Medical, Travel Insurance.
Sources
- Medicare.gov — Who pays first (coordination of benefits)
- Medicare.gov — When does Medicare coverage start?
- Medicare.gov — Avoid late enrollment penalties
- Medicare.gov — Joining a plan (enrollment periods)
- Medicare.gov — What’s Medicare Supplement Insurance (Medigap)?
- U.S. Department of Labor — COBRA continuation coverage
Figures are labelled with the year they apply to and were checked against the official sources above on the review date. Rules and amounts change; confirm current figures with the agency that publishes them. This guide is general education, not individual advice.