Still working at 65 for a small company? Why Medicare pays first

That one number, twenty, flips everything. Which insurer goes first, whether skipping Medicare costs you a penalty or just costs you money, all of it.

Ian Schaeffer is very direct about that. He says this matters most to whoever's working somewhere small. The family business, the eight-person office, the medical practice with three chairs and a front desk. That's the audience.

It flips depending on which side of that line you fall on. If your employer has the larger workforce, your work plan pays first. Medicare sits behind it. For a smaller employer, Medicare pays first, and your work plan is expected to pick up whatever is left. Simple in theory, but the consequences of getting it wrong are not simple at all.

Here's where Ian Schaeffer puts it perfectly. He says people get this backwards. They think skipping Part B means a late penalty. But at a small company, it's not usually the penalty you should worry about. It's the bills.

It really is. Because Medicare is supposed to be first in line. If you never signed up for it, the primary payer is just missing. And a plan that was designed to pay second may simply leave that first chunk of the bill unpaid. Nobody pays it.

And the article says that literally happens, because Medicare doesn't automatically know your employer's size. Their own booklet says it: Medicare doesn't automatically know if you have other coverage. And their default assumption, in the absence of any information, is that your employer has at least twenty people.

Unless someone tells them otherwise, yes. A small-business worker can end up with both insurers waiting for the other to go first, and the fix is one phone call. The article gives the number for Medicare's Benefits Coordination and Recovery Center.

1-855-798-2627. You call with your employer's size and your plan details and you clear it up.

It's not how you'd count heads in your office, that's for sure. It's not just how many people showed up today. The rule is twenty or more employees for each working day in twenty or more calendar weeks, either this year or the year before.

No, they don't. And part-time workers count the same as full-time. And here's the one that made me do a double-take: it's not just your company. It's your entire corporate family. Parent company, subsidiaries, sister companies. All of them.

CMS's own training material has this scenario. Twelve-person subsidiary. Parent company has eighteen thousand employees. The answer from CMS: the employee count for Medicare purposes is eighteen thousand and twelve. The twelve people at that small office are playing by big-company rules.

Exactly. And then there's another wrinkle Ian Schaeffer flags. If a company grows past twenty and stays there for twenty weeks, the work plan has to pay first for the rest of that year and all of the next year, even if they shrink back below twenty later.

That's basically his phrase from the article. Which matters if you're watching your company downsize and wondering when the rules change for you.

This is a big one. A lot of small employers get coverage through some kind of group arrangement with other businesses. And if your plan is that kind of multi-employer setup, and even one employer in that group has at least twenty employees, the work plan pays first for everybody. Including you at your tiny company.

Unless your plan filed what CMS calls a small employer exception. And that exception is narrow, approvals are only going forward, and the plan has to notify each person it applies to. So the two questions to ask HR are: is our plan a multi-employer or association plan, and has it filed a small employer exception for me specifically?

The article says exactly that. Ask HR for the plan document page, and get it in documented form.

So the 2026 standard Part B premium is $202.90 a month. Full year, that's $2,434.80. And the deductible for the year is $283.

Ian Schaeffer does the arithmetic right there in the article. One approved outpatient charge of about $3,327, and Medicare's 80% share alone equals a full year of premiums. That's the break-even.

And then he shows what happens on a $10,000 procedure. Medicare's share is $7,773.60. And that $7,773 is the piece, he says, that a small-company plan might not pay if you skipped Part B.

And that's the standard premium. Higher earners pay more under IRMAA, the income-related adjustment. The article points to a previous installment for that math, and I'd note that for anyone wondering exactly where they land on that scale, that's a great question to bring to one of our advisors at American Retirement Advisors.

Two things you'll need. CMS-40B, that's your Part B application. And CMS-L564, which your employer fills out to confirm your coverage came through current work. You send them both to Social Security together.

Social Security has a backup list. Tax returns showing insurance premiums paid, W-2s with pre-tax medical contributions, pay stubs with premium deductions. Any of those can work.

Yes, and this tripped me up too. That annual letter your employer sends about whether your drug coverage is creditable, the one that arrives before October 15th. People hold onto that thing. Social Security says it is not proof of group health plan coverage for Part B enrollment purposes.

Not for that. And the other one: if your employer gives you a stipend to go buy your own insurance rather than offering a group plan, that individual coverage health reimbursement arrangement, an ICHRA, Social Security says that does not qualify for the Special Enrollment Period. You don't get the penalty-free window.

Very common in those shops. And the consequences of not knowing that are real.

For a long time the standard was 60%. A plan's drug benefit had to be at least that good to be considered creditable. The new bar is 73% for 2027, with 2026 as a transition year. So a plan that passed last year may not pass this year.

Read it. And if it says not creditable, the Part D late penalty is 1% of the national base premium for every full month you went without creditable coverage. For 2027, that base is $41.33 a month. It adds up.

For life. Also, the article has a warning before you act on that letter: if you have employer coverage and you add a Medicare drug plan, you may lose your employer coverage entirely. For yourself and your dependents. Ask HR before you enroll in anything.

The Medigap open enrollment period is six months. It starts the day you sign up for Part B. And here's the catch for small-company workers: if you take Part B at 65 while you're still working, that six-month window is probably going to close while you're still on your work plan. You might not even think about Medigap until you retire.

But there's a rescue. When your group coverage ends, and it was a plan that pays after Medicare pays, you get a guaranteed-issue right. A second chance. And you have up to 63 days from the latest of three dates: when coverage ends, when you get notice that it's ending, or when a claim denial first tells you it ended.

63 days goes fast. And you want to know the exact rules on guaranteed issue rights in your specific situation, that's one I'd bring to our team at American Retirement Advisors, because the details matter a lot there.

Yes. If you have a health savings account, you can use it to pay Part B premiums without tax. IRS Publication 969 says so directly. What you cannot do is use it for Medigap premiums. Part B, fine. Medigap, no.

He lists it out. They start with the count done Medicare's way, part-timers included, the whole corporate family, twenty weeks checked against this year and last. They ask about the association plan question and the small employer exception before anyone decides Part B can wait. They read the actual plan coordination language instead of assuming.

Part B, the Medigap window, the drug coverage letter, the 63-day right when you retire. It's a lot of moving pieces and they interact in ways that are not obvious until something goes wrong.

And that engineering mindset we mentioned? He took it all the way to the source -- the actual regulations, not just the summaries. His conclusion was basically: it's stranger than it sounds, and it matters most to people at small companies. Which is a lot of retirees.

And there are workshops coming up. October 2nd, two locations: Foothills Library in Glendale at 10:30 in the morning, and Mustang Library in Scottsdale at 2:30 in the afternoon. Both at no cost to you.

And read Ian Schaeffer's piece. The full article has the table with the Part B math, the exact regulation citations, and a lot of detail we moved through quickly today. It's worth having in front of you when you talk to someone.