Still working at 65 for a small company?

Part sixteen of Healthcare in Retirement. The usual disclosure: I am not an advisor. I am an engineer, so when I learned that the rule deciding who pays your medical bills at 65 turns on a head count, I went and read how the head count works. It is stranger than it sounds, and it matters most to the people who work somewhere small: the family business, the eight-person office, the practice with a front desk and three chairs. Part two of this series covered working at 65 for a larger employer. This is the other half.

Who pays first if I'm 65 and still working?

It depends on how many people your employer has, and the answer flips at 20. Medicare's own coordination page asks one question: does the employer providing your coverage have 20 or more employees, or is it part of a multi-employer plan where at least one company does? If yes, "The group health plan pays first, and Medicare pays second." If no, "Medicare pays first, and the group health plan pays second." The rule lives in 42 CFR 411.172, which makes Medicare secondary only when the plan belongs to "an employer that has at least 20 employees." Below 20, Medicare is the payer the work plan expects to go first. Everything else in this piece follows from that.

What happens if I skip Part B at a small company?

Usually not a penalty. Something worse: bills. This is the part people get backwards. The Part B Special Enrollment Period (SEP), the one that lets you sign up later without a late penalty, does not care how big your employer is. Social Security's own operations manual calls the work plan a GHP, a group health plan, and says "The GHP can be of any size," and Medicare's answer for a company under 20 says "You can sign up anytime while you or your spouse are still working for that employer, or up to 8 months after" the work or the coverage ends. But the very same answer carries the warning that matters: "Because the company has less than 20 employees, your job-based coverage might not pay for health services if you don't have both Part A and Part B." Medicare is first in line. If you never signed up, the first payer is missing, and a plan built to pay second may leave the first share unpaid. How your plan actually coordinates is written in its own plan document, so ask HR for that page in writing.

How does Medicare count to 20?

Not the way you would count your office. The regulation says an employer has 20 or more employees if it had "20 or more employees for each working day in each of 20 or more calendar weeks in the current calendar year or the preceding calendar year." CMS's own training material fills in the rest: "full-time and part-time employees must be included," "The 20 weeks do not have to be consecutive," and the count is employees, not people on the plan. The biggest surprise is that the whole corporate family counts: parent, subsidiaries, and sister companies. CMS's worked example is a 12-person subsidiary of an 18,000-person parent, and its answer is "the number of employees for this employer for Medicare Secondary Payer purposes is 18,012." One more asymmetry an engineer notices: once an employer reaches 20 for 20 weeks, the work plan must pay first "for the remainder of that year and throughout the following year even if the number of employees drops below 20." Growing flips the answer quickly. Shrinking flips it slowly.

What if my small company buys its plan through a larger group?

Then the answer can flip back, and this is the trap I would check first. Many small employers get coverage through an association or a group arrangement with other businesses. CMS says that if a small employer "participates in a multiple employer or multi-employer GHP and at least one participating employer has at least 20 full and/or part-time employees," the work plan pays first for everyone in it, including the people at the small employer. The exception is narrow. The plan itself has to request what CMS calls a small employer exception, approvals are prospective only, and the plan must notify each person it applies to. So the two questions for HR are plain ones: is our plan a multi-employer or association plan, and has it filed a small employer exception for me? The answer decides who pays first.

Why would my claims bounce between Medicare and my work plan?

Because Medicare does not know your employer's size unless someone tells it. Medicare's booklet on other insurance says it directly: "Medicare doesn't automatically know if you have other coverage." And CMS's own manual instructs Medicare's claims contractors to assume, "in the absence of evidence to the contrary," that an employer has at least 20 employees. So a small-company worker can end up with Medicare and the work plan each waiting on the other to pay first. The fix is one phone call to Medicare's Benefits Coordination & Recovery Center at 1-855-798-2627, with your employer's size and plan details in hand.

Is Part B worth it if I'm still covered at work?

At a small company, the arithmetic is short, and here is the work. The 2026 standard Part B premium is $202.90 a month, and the deductible is $283 for the year. After the deductible, Medicare usually pays 80% of the approved amount. The question is how big a bill has to be before Medicare's share covers a year of premiums.

One approved outpatient charge of about $3,327 in a year, and Medicare's payment alone equals the whole year of Part B. On a $10,000 procedure, the $7,773.60 is the piece Medicare's own page warns a small-company plan "might not pay" if you skipped Part B. This is an illustration, not a quote: it uses the standard premium only (higher earners pay more under the Income-Related Monthly Adjustment Amount, or IRMAA, which part two walked through), and what a secondary plan pays is set by its own plan document.

What paperwork does a small shop need?

Two forms, and a backup plan if the business cannot sign. You apply for Part B with the CMS-40B, and your employer completes Section B of the CMS-L564 to show your coverage came through current work; you send both to Social Security together. If you are enrolling while still covered at work, the form lets you choose your start month. Small businesses close, sell, and change bookkeepers, so this is worth knowing: when the employer cannot provide the evidence, Social Security's manual accepts other proof, including "income tax returns that show health insurance premiums paid," "W-2s reflecting pre-tax medical contributions," and pay stubs showing premium deductions. Two cautions from the same manual. The drug-coverage letter your employer mails each fall "is not proof of GHP coverage" for Part B. And if your employer gives you a stipend to buy your own insurance instead of a group plan, that is not job-based coverage for this purpose; Social Security says the individual coverage health reimbursement arrangements known as ICHRAs "are not eligible for this SEP."

What about my drug coverage at work?

Read this year's letter, because the bar moved. Employers must tell Medicare-eligible workers "prior to October 15th each year" whether their drug coverage is creditable, meaning at least as good as Medicare's. Under the simplified test a plan can use, the bar is now "73 percent for 2027," up from the long-standing 60%, with 2026 as a transition year. A plan that passed last year may or may not pass this year, and the letter will say. If it says not creditable, the Part D late penalty is 1% of the national base premium for every full month you go without creditable coverage after your first chance to enroll, for as long as you have Part D; for 2027 that base is $41.33. Part four worked that math. One warning before you act on a letter: Medicare's own page says that if you have employer coverage and add a Medicare drug plan, "you may lose your employer or union health and drug coverage (for you and your dependents)." Ask HR before you enroll in anything.

Does signing up for Part B start any other clocks?

Yes, one that people rarely plan for. Your one-time Medigap Open Enrollment Period "starts once you sign up for Part B and lasts for 6 months, even if you sign up for Part B while you still have employer coverage." For a small-company worker who takes Part B at 65, that window will likely close while you are still on the work plan. Part five explained why that door matters. The rescue comes when that group coverage ends, often at retirement: Medicare's Medigap guide lists a guaranteed-issue right when "an employer group health plan ... that pays after Medicare pays" is ending, and you have no more than 63 days after the latest of three dates to use it: the day coverage ends, the date on any notice that it is ending, or the date of a claim denial that first tells you it ended. Put that date on the calendar the day you give notice. And one bright spot for anyone with a health savings account: among the premiums IRS Publication 969 lets you pay from the account without tax is "Medicare and other health care coverage if you were 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap)." Part B premiums qualify. Medigap premiums do not.

What a Certified Medicare Planner® does differently

They start with the count, done Medicare's way: part-timers in, the whole corporate family in, the 20 weeks checked against this year and last. They ask whether your plan is an association or multi-employer plan and whether it filed a small employer exception, before anyone decides Part B can wait. They read the plan's coordination language instead of assuming it. They time Part B, the Medigap window, and this fall's drug-coverage letter together, and they know the 63-day right that opens when you finally retire. The advisors are at 602-281-3898.

Friday, October 2. Foothills Library, Glendale, 10:30 AM. Mustang Library, Scottsdale, 2:30 PM. No cost. Register at 123easymedicare.com/medicare-workshop or call (877) 220-1089.

Next in Healthcare in Retirement: Open Enrollment starts October 15, and the phone will ring. Is that call really from Medicare? Who is actually allowed to call you, what the rules say, and the two sentences I say before I hang up.

This event is presented by 123EasyMedicare, a brand of American Retirement Advisors, an independent, private organization. It is not sponsored by, endorsed by, or affiliated with Medicare, the Centers for Medicare & Medicaid Services, the Social Security Administration, or any government agency. The libraries are not sponsors of, and are not affiliated with, this event. Educational only; not tax, legal, or insurance advice.

Disclaimer: This article is for educational purposes only. It is not sponsored, endorsed, or otherwise representative of Medicare or the federal Medicare program. American Retirement Advisors is not a government agency. For official Medicare information, visit medicare.gov or call 1-800-MEDICARE (1-800-633-4227).