Here’s what changes everything: Unlike large employers, Medicare becomes your primary insurance when you turn 65 if your company has fewer than 20 employees. Your employer plan drops to secondary coverage, whether you like it or not.
The Critical 20-Employee Rule
This isn’t just bureaucratic fine print, it’s a rule that can make or break your healthcare coverage. According to Medicare guidelines, if your employer has fewer than 20 employees, Medicare must be your primary insurance once you’re eligible.
What does this mean practically? Your employer plan can legally refuse to pay claims that Medicare should have covered as primary. We’ve seen people receive letters from their small employer insurance plans stating exactly this.
The bottom line: You generally must enroll in Medicare Part A and Part B when you turn 65, it’s not optional if you want proper coverage.
Three Key Factors to Consider
Before making any decisions, evaluate these critical elements:
1. Employment Status
You need active employer coverage through current employment (yours or your spouse’s). COBRA, retiree insurance, individual marketplace plans, or VA coverage don’t count for Medicare delay purposes.
2. Company Size
- Fewer than 20 employees: Medicare becomes primary at 65
- 20+ employees: You can typically delay Medicare without penalties
- Under 65 with disability: The magic number becomes 100 employees instead of 20
3. Prescription Drug Coverage
Your employer must provide annual written notice confirming whether your prescription coverage is “creditable” for Medicare Part D purposes. This determines if you can delay Part D enrollment without penalties.
The Real Costs: A 2025 Breakdown
Let’s talk numbers. Here’s what you can expect to pay:
Medicare Part B Premium: $185/month (base rate for 2025)
- High-income earners may pay more due to IRMAA adjustments
Comparing Your Options (Monthly Premiums):
- Medicare Advantage plans: Typically $0
- Medigap Plan G: $80-$150
- Average individual employer premium: ~$115
Out-of-Pocket Costs:
- Medicare Advantage: $0-$250 deductible, ~$5,500 max out-of-pocket
- Medigap Plan G: Just the $257 Part B deductible for covered services
- Small employer plans: Average $2,500 deductible, $3,000-$6,000 max out-of-pocket
What About Your Family?
This is where things get complicated. Unlike large employers, small companies aren’t required by federal law to offer COBRA continuation coverage. Your dependents typically have three options:
- Stay on your employer plan (if you keep it as secondary)
- Purchase individual insurance through the marketplace or elsewhere
- Switch to their own employer’s plan (if available)
Pro tip: If your spouse works for a large employer (20+ employees), it might make sense for both of you to switch to their plan and delay Medicare entirely.
The 2025 Game-Changer: Prescription Drug Costs
Starting in 2025, Medicare prescription drug coverage has a $2,000 yearly cap on out-of-pocket costs for covered medications. This significant change makes Medicare drug coverage much more attractive than in previous years.
However, be aware that prescription co-pay discount cards often terminate once you enroll in Medicare drug coverage. You may still qualify for patient assistance programs, but those manufacturer discount cards likely won’t work anymore.
Critical Timing: Your Medigap Window
Here’s something many people miss: Your Medigap Open Enrollment Period starts the first month you have Part B at 65 or older regardless of whether you actually buy a Medigap plan.
This 6-month window is “use it or lose it.” You can enroll in any Medigap plan without health questions during this time. Miss it, and you may face medical underwriting later.
Example: If you turn 65 in October and enroll in Part B because of your small employer plan, your Medigap window runs from October through March even if you keep your employer coverage as secondary.
Health Savings Accounts: What You Need to Know
Once you enroll in any part of Medicare (even just Part A), you can no longer contribute to an HSA. This includes employer contributions. You can still use existing HSA funds for qualified medical expenses, but no new money can go in.
Working with an Independent Broker Makes the Difference
Navigating Medicare coordination with small employer coverage isn’t something you should tackle alone. The rules are complex, and the financial consequences of mistakes can be severe.
At Dalton Insurance, we work with clients across the United States to help them understand their specific situation. Unlike captive agents who represent just one company, we’re independent brokers who can compare all your options and help you make the best decision for your unique circumstances.
We can’t determine your exact employer coordination rules (that’s between you and your employer), but we can help you understand your Medicare options and make informed comparisons.
Ready to get clarity on your Medicare decisions?
Contact Dalton Insurance for a free consultation.
Call us at 334-489-3624 or email tyler@daltoninsurance.biz.
Don’t let confusion about Medicare and small employer coverage leave you vulnerable to unexpected medical bills.
Medicare rules are complex and change frequently. This information is for educational purposes only. Always verify current rules and your specific situation with Medicare at medicare.gov or by calling 1-800-MEDICARE.