Medicare and Self-Employed – What You Should Know


Many seniors who are approaching their golden years decide to continue working and become self-employed to keep themselves active and involved. When you age towards Medicare, however, the only way that you can delay enrollment into Medicare without incurring penalties is if you have creditable health insurance. This isn’t a problem when you are working for someone else and are covered by that employer’s group health coverage.

When you are self-employed, though, the process is a little different. 

What is Medicare?

Back in 1965, the United States created a health insurance program for people 65 or older. Medicare provides two forms of coverage, which are known as Medicare Part A and Part B.

Part A is hospital insurance that will cover inpatient care costs, such as your room and board inside the hospital. Medicare Part A will also include your stay at a skilled nursing facility if needed. Medicare Part B covers a senior’s outpatient services, such as doctor visits, durable medical equipment, and surgeries.

Many self-employed seniors are not so sure if they must enroll in one or both of these parts of Medicare since they will be working past 65. Here’s what you need to know if you plan to work for yourself at age 65 or older.

Do I need to enroll in Medicare?

When you are self-employed and do not have creditable employer group health coverage, you must enroll in Medicare. Medicare does not consider individual health insurance plans as creditable benefits for Medicare Part A, Part B, or Part D. So if you fail to enroll in Medicare, you will likely face late penalties.

On the other hand, if you are working at a company 20 or more employees and have coverage through that employer, then that is when you can delay enrollment into Medicare without incurring penalties . With that said, if you are married and are on your spouse’s insurance and their company also has 20 or more employees, the same rules will apply, and you can delay Medicare without receiving a late enrollment penalty.

Outside of that employment scenario, then yes, you must enroll in Medicare.

What about my previous coverage?

Many self-employed seniors receive their insurance through the Health Insurance Exchange or Marketplace. When you have Marketplace insurance, you can continue it until you turn 65 and become eligible for Medicare.

Some seniors would prefer to keep their Marketplace insurance as they may be receiving a tax credit or subsidy from the federal government that greatly reduces the cost of their Marketplace plan. However, once you become eligible for Medicare, you are no longer eligible for that subsidy.

Enrolling into Medicare will then be far less expensive. Also, being enrolled in a Marketplace plan is not considered creditable coverage for Medicare. So, if you fail to enroll in Medicare during your 7-month Initial Enrollment Period, you will also incur late penalties later on down the road when you do enroll in Medicare.

As briefly mentioned earlier, when you are self-employed and receive creditable coverage from your spouse’s large employer, you can remain on their plan and delay your Medicare enrollment. 

However, if you are self-employed or working for an employer that has fewer than 20 employees, you must enroll in Medicare during your Initial Enrollment Period.

When to enroll in Medicare when self-employed

Many self-employed seniors believe they will be automatically enrolled in Medicare, but this is only the case if you have received Social Security benefits for at least four months. If not, then you must actively enroll yourself in Medicare during your Initial Enrollment Period (IEP).

The Initial Enrollment Period is based around your birthday so the dates will vary for each person. Your Initial Enrollment Period will begin three months before your 65th birthday month and end three months after your 65th birthday month. For example, if your birthday is in September, your IEP will start on June 1st and end on December 31st.

During your IEP, you must enroll in Medicare Part A and Part B to avoid any late penalties. If you do not enroll in Part B during your IEP, you likely will be subject to a late enrollment penalty. 

In 2020, the Part B premium for most is $144.60. The Part B late enrollment penalty is 10% for every 12-months you were not enrolled in Part B and should have been. For example, if you delayed enrollment for 12 months, you would have to pay an extra $14.46 every month until you are no longer on Medicare.

Being self-employed has many perks, but none of them exempt you from enrolling in Medicare when you become first eligible. After you enroll in Medicare, your next step is to decide whether a Medigap or a Medicare Advantage plan will fit you for additional coverage. Contact a Medicare broker today to find out which option could be the best one for you.

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