Can my husband stay on his small business’s group plan after 65 — without later facing a penalty?

In this week’s column, Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and co-author of the updated edition of How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security, answers a reader’s question about the healthcare plan offered by her husband’s small business.

Can my husband stay on his small business’s group medical plan after he turns 65 — without later facing the 10% late enrollment penalty for Part B?

Question: Here’s my question and it’s a dandy! So far, it has stumped two medical insurance “experts” who are insurance brokers, a human resources consultant, two financial advisors, and me, despite hours of research:

• My husband is the proprietor of his own business (a medical practice, ironically).
• He presently has only two employees (including me).
• We have small group medical insurance.
• He just turned 65.

We understand that employers with less than 20 employees may choose not to continue coverage for their employees once they turn 65. My question is whether they also can choose to still offer this coverage as primary health insurance?

More specifically, can my husband, as his own employer of such a small business, stay on our group plan assuming we make this a companywide policy covering everyone, including people who have turned 65? Can we do so without later facing the 10% per year late enrollment penalty for Part B once he does enroll? Or, since we have fewer than 20 employees, will he face that penalty if he does not enroll now?

Further — and I guess this means I really have more than one question — if he is able to stay off Medicare Part B: 

• What do we have him do about part A (delay or enroll)?
• Can he still continue to contribute to his health savings account (HSA)?

Thank you so much!
Cynthia

Answer: I am reluctant to enter a fray already populated by so many experts! However, there is no Medicare rule I have ever seen that would prevent a small employer from continuing to offer all employees employer health insurance as their primary insurance regardless of their age.

If your husband continues to have employer coverage as his primary health insurance, he would not be subject to subsequent late-enrollment penalties when he later does get Medicare.

Before dancing happily off into the sunset, however, he should make sure his group plan permits this. Some plans are underwritten based on the assumption they will cease offering primary coverage to people when they turn 65. If that’s the case, he would need to explore a different insurance plan, which would likely cost more. 

As for Part A, he does not need it now and should not get it because it would prohibit continued tax-free contributions to his HSA. IRS rules prohibit HSA contributions from anyone enrolled in Medicare and getting Part A — even though it charges most people no premiums — is still part of Medicare.

People age 65 or older receiving any type of Social Security benefits must, by law, be enrolled in Part A. If your husband does not plan on receiving Social Security, this won’t be a problem. When he eventually does enroll in Social Security, he would need to stop HSA contributions if he is still working.