Medicare and Employer Coverage: Who Pays First and When You Can Delay Part B

Twenty employees. If you're 65 or older and covered by a health plan through your own or your spouse's current job, that headcount decides who pays your medical bills first. At 20 or more, the job-based plan pays first and Medicare pays second. Under 20, Medicare pays first, and the employer plan may not cover what Medicare would have paid if you never signed up for Part B.

The costly mistake here starts with one assumption: "I have other insurance, so Medicare can wait." Sometimes it can. Whether it can depends on three things: whether the coverage comes from current employment, how big the employer is, and why you have Medicare in the first place (age, disability or kidney failure). Here's how each piece works, with the deadlines and forms.

Source: CMS, How Medicare Works with Other Insurance (02179, Feb. 2026); CMS, Medicare & You 2027, pp. 17-21.

Who pays first, by situation

"Primary" means that insurer pays first, up to the limits of its coverage. "Secondary" only pays if there are costs the primary payer left behind, and it may not pick up all of them.

Source: CMS, How Medicare Works with Other Insurance (02179, Feb. 2026), pp. 4-14; CMS, Medicare & You 2027, p. 21; 42 CFR 411.172; 42 CFR 411.204.

A few details in the rule text change real decisions:

• The spouse rule runs both ways. Under 42 CFR 411.172, Medicare is secondary for a 65-or-older spouse covered through the other spouse's current job at a 20+ employer, and the working spouse can be any age.
• Same benefits at 65. An employer with 20 or more employees must offer workers 65 and older the same health benefits, under the same conditions, as younger workers. Same for spouses 65 and older, if it covers spouses.
• Turning the plan down. If you or your spouse refuse the employer plan, Medicare becomes primary for you, and the plan isn't allowed to offer you coverage that supplements Medicare. You may not get another chance to join the employer plan later.
• Back at work after retiring. A rehired retiree covered because of the work they now do counts as covered "by reason of current employment," even if the employer offers the same plan to retirees.
• Small-employer multi-employer plans. If a plan covers several employers and at least one has 20+ employees, the 20+ rule generally applies to everyone in it. The plan can ask Medicare for an exception for people at a small employer. Ask your plan, in writing, whether it pays first or second for you.

Two more traps. If your job-based HMO or PPO pays first and you go out of network, it's possible neither the plan nor Medicare pays. And Medicare.gov tells anyone with job-based coverage to ask the employer whether they need Part A and Part B at 65, because if you don't sign up, your job-based insurance might not cover the costs. That risk is highest at a small employer, where Medicare is supposed to pay first. Questions about who pays first go to the Benefits Coordination & Recovery Center at 1-855-798-2627 (TTY 1-855-797-2627).

What counts as current employment coverage

This is where most people get hurt. Delaying Part B without a penalty only works if the coverage is based on current employment: you or your spouse are still on the job. "I'm still on the company plan" is not the same thing.

Source: CMS, Medicare & You 2027, pp. 18-19; Medicare.gov, Working past 65; Medicare.gov, When does Medicare coverage start?.

COBRA is the big one. It feels like your old job coverage continued, but for Part B it doesn't count. Medicare & You 2027 puts it plainly: after coverage based on current employment ends, you have 8 months to sign up for Part B without a penalty, whether or not you choose COBRA. When COBRA ends, you generally don't get a new window.

COBRA also pays second once you have Medicare because of age or disability, and Medicare.gov warns that COBRA may only pay a small portion of your medical costs in that case. If you're 65+ and on COBRA without Part B, you can end up with a plan that expects Medicare to pay first and no Medicare to do it.

The 8-month Part B window and the forms

If you skipped Part B because of coverage from current employment, you can sign up:

• any time while you're still covered by that group plan, or
• during the 8 months that begin the month after the employment ends or the coverage ends, whichever happens first.

The regulation, 42 CFR 406.24(b)(2), ends the window on the last day of the eighth month in a row with no current-employment coverage; the Part B Special Enrollment Period conditions are in 42 CFR 407.20. "Whichever happens first" matters when your last paycheck and your last day of coverage fall in different months: the earlier one starts the clock. Coverage generally starts the first of the month after you sign up. If you sign up while still working, or within the first full month after the coverage ends, you can ask for a Part B start date up to 3 months later, which is how you line Part B up with your last day on the employer plan. Medicare.gov suggests signing up about a month before employer coverage ends.

Here's how the dates stack up in one hypothetical case.

Source: Maru Insurance example applying CMS, Medicare & You 2027 (pp. 17-18, 81), 42 CFR 406.24, Medicare.gov, When does Medicare coverage start? and Medicare.gov, Special Enrollment Periods.

The paperwork. Form CMS-40B is the Part B application for people who already have Part A. Form CMS-L564, "Medicare Request for Employment Information," is the proof: you fill out Section A and your employer fills out Section B with the coverage and employment dates. The form itself spells out the conditions: you must have had group health plan coverage through your or your spouse's current employment since the first month you were eligible for Part B, and that coverage can't have ended more than 8 months ago. Both forms go to your local Social Security office by mail or fax. Social Security is at 1-800-772-1213 (TTY 1-800-325-0778).

My advice on the L564: get HR to complete Section B before your last day. After you leave, you're asking a favor from someone who no longer has a reason to answer quickly, and the 8-month clock doesn't pause while you wait.

What missing the window costs. The Part B late penalty is 10% of the standard premium for each full 12-month period you could have had Part B but didn't (42 CFR 408.22), and it usually lasts as long as you have Part B. Medicare.gov's own 2026 example: two full years late means a 20% penalty, $202.90 plus $40.58, which rounds to $243.50 a month. Here's the same math at other lengths.

Source: Maru Insurance calculation from Medicare.gov, Avoid late enrollment penalties and the CMS 2026 Parts A & B premiums fact sheet; totals rounded to the nearest $0.10; ignores income-related adjustments.

Notice that 35 months costs the same as 24: only full 12-month periods count. The dollar amount also moves with each year's standard premium. CMS hasn't announced the 2027 Part B premium yet; last year's announcement came November 14. I'm tracking what we know about the 2027 Part B premium, and the full penalty rules, including Part D, are in my post on how all three late enrollment penalties are calculated.

Part A at 65 and the HSA trap

About 99% of people on Medicare pay no Part A premium because they have at least 40 quarters of Medicare-covered work, per CMS. That's why many people still working at 65 take premium-free Part A right away and delay only Part B. Part A costs nothing, and if your employer plan is primary, Part A sits behind it as secondary hospital coverage. The 2026 Part A hospital deductible is $1,736.

The exception is a Health Savings Account. Once you're enrolled in any part of Medicare, you can't contribute to an HSA. IRS Publication 969 says your contribution limit is zero starting with the first month you're enrolled in Medicare, and that rule applies to retroactive coverage. And premium-free Part A is retroactive: when you sign up after 65, or apply for Social Security benefits, Part A coverage generally starts 6 months back, though never before the month you turned 65.

Example, hypothetical: you turn 65 in May 2026, keep working with a high-deductible plan and HSA, and apply for Part A and Social Security in March 2027. Part A is backdated six months, to September 1, 2026. Contributions for September 2026 onward become excess contributions, and the IRS generally charges a 6% excise tax on excess contributions for each year they stay in the account, unless you withdraw them (and their earnings) by your tax filing deadline. Medicare & You 2027 gives the stop dates:

Source: CMS, Medicare & You 2027, p. 20; IRS Publication 969 (2025).

Two more HSA facts from Publication 969. The limit is prorated by month: the IRS's own example is someone who turned 65 and enrolled in Medicare in July 2025, whose limit (with the $1,000 catch-up) was $2,650, half of $5,300. And money already in the HSA can still pay Medicare premiums once you're 65, but not Medigap premiums. Medicare.gov's working-past-65 page says you and your employer should stop HSA contributions 6 months before you retire or apply for Social Security.

The tax side of this depends on your whole return, so confirm your HSA timing with an accountant or tax professional before you file for Medicare or Social Security.

Drug coverage: the creditable notice

Part D runs on a different test. It doesn't ask whether the coverage comes from current employment. It asks whether the drug coverage is creditable, meaning expected to pay on average at least as much as Medicare drug coverage. Your employer or union has to tell you every year whether it is. Keep those notices; they're your proof if a plan ever says you owe a late penalty.

If the coverage is creditable, you can wait to join a Medicare drug plan without a penalty, as long as you never go 63 or more days in a row without creditable coverage. When you leave employer or union coverage (COBRA included), you get a Special Enrollment Period to join a Medicare drug plan or a Medicare Advantage plan that lasts 2 full months after the month the coverage ends. If your COBRA includes creditable drug coverage, you get a window when COBRA ends, too. Miss that and the Part D penalty (1% of the national base beneficiary premium per uncovered month) generally lasts as long as you have Medicare drug coverage.

One warning from CMS's booklet How Medicare Works with Other Insurance: if you have employer or union coverage and add Medicare drug coverage, you may lose the employer or union health and drug coverage, for you and your dependents, and you may not be able to get it back. Call the benefits administrator before you add anything.

Delaying Part B also delays Medigap open enrollment

Your Medigap Open Enrollment Period is a one-time, 6-month window that starts the first month you have Part B and are 65 or older. During it, federal rules let you buy any Medigap policy sold in your state without medical underwriting. If you delay Part B because of coverage from current employment, Medicare & You 2027 says this period won't start until you get Part B.

That's usually good news: the window opens when you actually need a supplement. The flip side: signing up for Part B early "just to have it" while a 20+ employer plan is primary starts a Medigap clock you may not use.

A separate federal guaranteed issue right covers people who already have Original Medicare plus an employer group plan (including retiree, COBRA or union coverage) that pays after Medicare, when that plan ends. You generally have up to 63 days after the latest of three dates: the date the coverage ends, the date on the notice saying it's ending, or the date on a claim denial if that's how you found out. Washington adds its own Medigap rules on top of the federal ones; I walk through them in how Medigap works in Washington, and there's more on our Medicare Supplement insurance in Washington page.

Disability and kidney failure: different rules

Under 65 with a disability. The threshold is 100 employees, not 20. If you have Medicare because of a disability and coverage through your own, your spouse's or another family member's current job at an employer with 100 or more employees (or a multi-employer plan where at least one employer has 100+), that "large group health plan" pays first. Below 100, Medicare pays first. Most people get Medicare after 24 months of Social Security or Railroad Retirement Board disability benefits; people with ALS don't wait 24 months.

End-stage renal disease. ESRD ignores employer size and employment status. Once you're eligible for Medicare because of permanent kidney failure, there's a 30-month coordination period during which your group or retiree plan keeps paying first, even if you're retired and even if the plan says it pays second to Medicare. COBRA pays first during that period too. After 30 months, Medicare pays first.

Two ESRD wrinkles. The 8-month Part B Special Enrollment Period doesn't apply to Medicare based on ESRD. But Medicare.gov says that if your group plan pays most or all of your costs, you may choose to delay Medicare until the 30-month period is over, and your Part B premium won't be higher because you waited in that situation. If the group benefits shrink or end during those 30 months, sign up right away. And if you had Medicare because of age or another disability before ESRD, whichever coverage was already paying first keeps paying first.

Source: CMS, How Medicare Works with Other Insurance (02179, Feb. 2026), pp. 11-14; Medicare.gov, End-Stage Renal Disease; Medicare.gov, When does Medicare coverage start?; 42 CFR 407.20.

What to do in Washington

These are federal rules, so they work the same in Spokane as in Seattle. Two Washington-specific points:

• PEBB retirees. The Health Care Authority says that as a PEBB retiree, you and your covered dependents are required to enroll in both Medicare Part A and Part B as soon as you're eligible, and send HCA proof of Medicare to enroll in a PEBB Medicare plan. That matches the federal rule that retiree coverage doesn't let you delay Part B. If you're a state or school employee nearing retirement, check HCA's Medicare and turning 65 page for its deadlines.
• Free, unbiased help. SHIBA (Statewide Health Insurance Benefits Advisors), run by the Office of the Insurance Commissioner, gives free Medicare counseling at 800-562-6900, 8:30 a.m. to 4:30 p.m., Monday through Friday. CMS's own booklet suggests talking with your state's counselor before you take COBRA, because COBRA, Part B and Medigap deadlines can overlap.

For 2026, the standard Part B premium is $202.90 a month and the Part B deductible is $283. The 2027 numbers aren't out yet.

What I'd do, in order, if you're 64 or older and still on a job-based plan:

• Ask HR, in writing, how many employees count for Medicare purposes and whether the plan pays first or second for you once you're 65. If it's under 20, assume you need Part B on time.
• Ask whether the drug coverage is creditable, and file the yearly notice somewhere you'll find it.
• If you or your employer put money in an HSA, plan the last contribution before you touch Part A or Social Security.
• Two or three months before you retire, get Form CMS-L564 signed by HR and send it with Form CMS-40B.
• Put the end of the 8-month window, the 2-month Part D window and the 6-month Medigap window on a calendar. COBRA moves none of them.

For more on choices once Medicare starts, see Medicare in Washington.

Your own plan documents, Medicare notices and federal rules control your situation. Confirm the details with a licensed agent, SHIBA, Social Security or 1-800-MEDICARE before you act, and talk to an attorney for legal questions.

Sources

1. CMS: How Medicare Works with Other Insurance (Product No. 02179, Feb. 2026)
2. Medicare.gov: Who pays first?
3. CMS: Medicare & You 2027 handbook
4. Medicare.gov: Working past 65
5. Medicare.gov: When does Medicare coverage start?
6. Medicare.gov: Avoid late enrollment penalties
7. Medicare.gov: Special Enrollment Periods
8. Medicare.gov: End-Stage Renal Disease (ESRD)
9. CMS: Choosing a Medigap Policy (Product No. 02110, March 2026)
10. CMS: 2026 Medicare Parts A & B Premiums and Deductibles fact sheet (Nov. 14, 2025)
11. CMS: Form CMS-L564, Medicare Request for Employment Information
12. CMS: Form CMS-40B, Request for Enrollment in Medicare Part B
13. eCFR: 42 CFR 411.172, Medicare secondary to group health plan benefits (working aged)
14. eCFR: 42 CFR 411.204, Medicare secondary to large group health plan benefits (disability)
15. eCFR: 42 CFR 406.24, Special enrollment period related to group health plans
16. eCFR: 42 CFR 407.20, Part B special enrollment period related to group health plans
17. eCFR: 42 CFR 408.22, Part B premium increase for late enrollment
18. IRS: Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
19. Washington Health Care Authority: Medicare and turning age 65 (PEBB retirees)
20. Washington Office of the Insurance Commissioner: Medicare help and SHIBA