Can I defer starting Medicare if 65 and on COBRA after a lay-off? (HSA, COBRA, and Medicare)

Question

I turned 65 in February, am still working full-time, and have medical insurance through my company that qualifies me to defer signing up for Medicare. I've been contributing the maximum to my HSA account for years.

I was planning to retire on February 1, 2020, just before I turn 66 and to initiate my social security benefits at that time, but I've just been notified that I will be laid-off as of August 1 this year and will receive six months of salary as severance, paid bi-weekly. In addition, if I go on COBRA, my company will pay the company portion of the premium for the severance period. That means it will not cost me more than I'm paying now to go on COBRA for those six months, although my part of the premiums will no longer be before-tax.

I don't want to incur any kind of penalty and I plan to keep contributing to my HSA until I'm laid-off.

My question is this: if I keep my current high-deductible insurance plan through COBRA, will it continue to qualify me to defer enrollment in Medicare?

Are there any other implications I should be considering in this situation?

Answer 1

There are some things to consider with this scenario that you may not be looking at.

• How often do you go to the doctor?
• What are your COBRA Premiums?
• What are your out of pocket costs with your COBRA Plan?

You can continue to make withdraws from your HSA when you switch to Medicare, you just cannot continue to contribute to the account.

As far as penalties for not enrolling when first eligible, it depends on the size of your employer. If your employer has fewer than 20 employees, you will potentially receive a penalty for not enrolling in Medicare. Over 20 employees it depends on whether you have group coverage as defined by the IRS.

With Medicare you also have the option of getting a Medicare Supplement. Plan G for example covers all out of pocket costs except for a Part B deductible. This is something to consider when looking at whether you should leave your current plan or go to Medicare.

Sources:

• https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b/should-i-get-parts-a-b
• https://www.medicareinteractive.org/get-answers/medicare-health-coverage-options/supplemental-insurance-for-original-medicare-medigaps/medigap-purchasing-details-enrollment-periods-guaranteed-issue-and-more
• https://www.medicareinteractive.org/get-answers/coordinating-medicare-with-other-types-of-insurance/job-based-insurance-and-medicare/health-savings-accounts-hsas-and-medicare