Can You Skip Medicare With Private Insurance? The Risks

Turning 65 brings a major decision about your health coverage, and a common misconception can lead to costly, permanent penalties. Many people with robust private insurance, whether from an employer, a spouse’s plan, or a retiree policy, wonder if they can simply skip Medicare enrollment without consequence. The short answer is: rarely, and doing so can be a financially devastating mistake. Medicare operates under strict federal rules with enrollment periods that don’t always align with your private coverage timeline. Understanding the interplay between these systems is not just about saving money now, it’s about securing affordable healthcare for the rest of your life and avoiding lifelong late penalties.

The Critical Difference: Medicare as Primary vs. Secondary Payer

Your ability to delay Medicare enrollment hinges entirely on whether your private insurance is considered “creditable coverage” and, more importantly, who pays first. Medicare has specific rules about being the “primary” or “secondary” payer. When Medicare is primary, it pays claims first, and your private plan may cover some remaining costs. When it’s secondary, your private insurance pays first, and Medicare may cover some gaps. For those aged 65 and older, the size of your employer determines this status, which directly impacts your enrollment requirements.

If you work for a company with 20 or more employees, your employer-sponsored group health plan is typically primary. Medicare would be secondary. In this specific scenario, you may have the option to delay enrolling in Medicare Part B (medical insurance) and Part D (prescription drug coverage) without penalty, as long as you maintain that group coverage. However, you should still enroll in Medicare Part A (hospital insurance) because it is usually premium-free and can work alongside your employer plan, potentially covering costs your primary insurance does not.

The situation changes dramatically if your employer has fewer than 20 employees. In this case, Medicare becomes the primary payer once you turn 65, regardless of your private insurance. Your small employer plan will pay secondary. If you fail to enroll in Medicare Part A and Part B when first eligible, you will have significant coverage gaps. Your private insurer may refuse to pay claims that should have been Medicare’s responsibility, leaving you with the entire bill.

Understanding Creditable Coverage and Late Enrollment Penalties

Not all private insurance qualifies to allow you to delay Medicare. The coverage must be deemed “creditable” by Medicare standards. Creditable coverage means the plan is expected to pay, on average, at least as much as Medicare’s standard plan. Your plan’s administrator (like your employer or union benefits manager) must provide you with a written notice each year stating whether your drug coverage is creditable. This notice is crucial for avoiding the Part D late enrollment penalty.

The penalties for missing your Initial Enrollment Period (IEP) are severe and permanent. For Medicare Part B, the penalty is 10% of the standard premium for each full 12-month period you could have had Part B but didn’t. This penalty lasts for as long as you have Part B. For Medicare Part D, the penalty is 1% of the “national base beneficiary premium” for each month you didn’t have creditable coverage. These amounts are recalculated annually and added to your premium forever. There is no cap on these penalties, making a delayed enrollment decision potentially very expensive over a 20 or 30-year retirement.

Consider this example: If you delay Part B for two years after your IEP ends because you mistakenly thought your individual market plan was sufficient, you will incur a 20% penalty. If the standard Part B premium is $174.70, your penalty is $34.94 per month, added to your premium every month for life. That’s an extra $419 annually, and that amount will increase as the base premium rises.

Special Scenarios: Retiree Insurance, COBRA, and Individual Plans

Navigating special insurance situations requires extra caution. Retiree health plans, COBRA, and individual Marketplace plans each have unique interactions with Medicare.

Retiree insurance is typically designed to supplement Medicare. It is almost never considered creditable coverage for the purpose of delaying Part B. If you drop Part B while on a retiree plan, the retiree plan may not pay any benefits. You must enroll in Medicare Part A and Part B to keep your retiree benefits active.

COBRA coverage is not considered creditable coverage for Medicare purposes. If you sign up for COBRA after your Medicare IEP, you will face late penalties. Your Medicare IEP is triggered by turning 65, not by losing employer coverage later. COBRA is also secondary to Medicare. If you have COBRA and are Medicare-eligible but not enrolled, Medicare will not pay, and the COBRA insurer can deny claims.

Individual plans purchased on the Health Insurance Marketplace (under the ACA) do not provide an exception to Medicare enrollment rules. Once your Medicare Part A coverage starts, you are no longer eligible for Marketplace plan subsidies. If you keep a Marketplace plan instead of enrolling in Medicare, you will be responsible for full plan premiums and may still face Medicare late penalties when you eventually enroll.

A Step-by-Step Framework for Your Medicare Decision

To make an informed choice, follow this structured approach. First, identify your Initial Enrollment Period. This is a 7-month window that begins three months before the month you turn 65, includes your birthday month, and ends three months after. This is your main chance to enroll penalty-free, unless you qualify for a Special Enrollment Period (SEP).

Second, analyze your current coverage. Ask your employer’s benefits administrator two key questions: 1) Does this plan pay primary or secondary to Medicare for someone aged 65 or older? 2) Is the prescription drug coverage creditable? Get the answers in writing. Based on their response, you can determine your next steps.

If your employer has 20+ employees and your coverage is primary and creditable, you likely can delay Part B and PartD without penalty. You should still enroll in premium-free Part A. You will get an 8-month Special Enrollment Period to sign up for Part B and Part D when your employment or group coverage ends, whichever happens first.

If your employer has fewer than 20 employees, or if your coverage is not creditable, you must enroll in Medicare Part A and Part B during your Initial Enrollment Period to avoid gaps in coverage and lifelong late penalties. Here is a concise checklist for individuals with private insurance approaching age 65:

• Confirm your Medicare Initial Enrollment Period dates.
• Obtain written proof from your current insurer regarding primary/secondary status and creditable drug coverage.
• Enroll in Medicare Part A (hospital insurance) during your IEP, as it is typically free.
• Make a decision on Part B based on your employer size and coverage status: enroll if employer is under 20 employees, consider delaying if over 20 with primary coverage.
• Ensure prescription drug coverage meets Medicare’s creditable standard to avoid Part D penalties.
• Coordinate the start and end dates of all coverages meticulously to avoid any gap in protection.

Finally, document everything. Keep records of correspondence with employers, insurers, and the Social Security Administration. If you delay enrollment based on employer coverage, you will need to provide proof of that coverage when you later enroll in Medicare to avoid penalties.

Frequently Asked Questions

Can I keep my private insurance and not sign up for Medicare at all? Technically, yes, but it is extremely risky. Your private insurer can legally deny claims once you are Medicare-eligible, arguing Medicare should have paid first. You will also accrue permanent late enrollment penalties for Part B and Part D, making Medicare far more expensive when you eventually need it.

I have Veterans’ benefits (VA coverage). Do I need Medicare? The VA strongly encourages veterans to enroll in Medicare when eligible. VA coverage is not considered creditable for Part D purposes. More critically, VA benefits typically only cover services at VA facilities. Medicare gives you the flexibility to use non-VA doctors and hospitals without authorization, providing a crucial backup if you cannot access a VA facility.

What happens if I miss my Initial Enrollment Period and don’t qualify for a Special Enrollment Period? You will have to wait for the General Enrollment Period (January 1 to March 31 each year) to sign up for Part A and/or Part B, with coverage starting July 1. You will face lifelong late enrollment penalties for Part B and Part D. This can lead to a significant gap in coverage and much higher ongoing costs.

Is Medicare Advantage (Part C) considered private insurance in this context? No. Medicare Advantage plans are private insurance plans, but they are a substitute for Original Medicare (Parts A and B). You must be enrolled in both Part A and Part B to join a Medicare Advantage plan. Therefore, you cannot “skip” Original Medicare to enroll in an Advantage plan, it is part of the Medicare program.

The decision to enroll in Medicare while holding private insurance is one of the most important financial healthcare choices you will make at 65. The rules are complex, and the cost of error is high and permanent. While large employer group plans may offer a temporary delay option, for the vast majority, enrolling in Medicare on time is not optional, it is essential for comprehensive, affordable coverage. Proactive planning, verification of your current plan’s status, and timely action are the only ways to secure your health and financial well-being in retirement.