By Marc Gilman
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Key Takeaways
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Turning 65 while still working doesn’t automatically require switching to Medicare. There’s no rule forcing a change at larger companies — the mandatory switch only applies if your employer has fewer than 20 employees. At companies above that size, you can stay on your workplace plan for as long as it works for you.
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Part A is usually worth signing up for either way, since it’s free for most people — even while staying on an employer plan. The real decision is whether to also enroll in Part B, which replaces your employer coverage for doctor visits, labs, and services like physical therapy.
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On paper, workplace coverage is often the cheaper option. A simplified illustration in recent reporting put typical employee costs (premium share plus average out-of-pocket spending) at roughly $2,309 a year for single coverage, versus roughly $3,000 a year for Medicare Parts A, B, and D alone — or about $5,500 a year if you add a Medicare Supplement (Medigap) plan.
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But Medicare’s appeal isn’t only about price — it’s about predictability and choice. With Medicare, there are no network restrictions and no prior authorization for most care; you generally won’t be balance-billed beyond your deductible and coinsurance. Workplace plans and Medicare Advantage plans typically limit you to a network and require approval for some procedures.
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Two deadlines matter regardless of which option you choose: missing Part D (or not having “creditable” drug coverage at work) can trigger a lifetime late-enrollment penalty, and you generally have 8 months after leaving or losing employer coverage to enroll in Medicare before penalties apply.
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A few details are easy to miss: enrolling in Medicare — even just Part A — stops HSA contributions; a younger spouse on your employer plan may not be able to go on Medicare until they turn 65 themselves; and high earners should factor in IRMAA surcharges before assuming Medicare will be the cheaper path.
Do You Have to Switch to Medicare at 65?
No — not automatically, and not for everyone. The rule that matters is the size of your employer:
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Fewer than 20 employees: Medicare generally becomes your primary coverage at 65, and your employer plan becomes secondary (or may no longer coordinate well with Medicare at all).
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20 or more employees: You can generally stay on your employer plan as your primary coverage for as long as you’re working there, and delay Medicare Part B without penalty until that coverage ends.
Because Medicare-related mail tends to ramp up heavily as people approach 65, it’s easy to assume something must change right away. It doesn’t — but it is worth a deliberate decision rather than a default one.
What Does Medicare Actually Cost?
Medicare comes in three relevant parts for this decision:
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Part A (hospital insurance): Free for most people if you’ve worked and paid Medicare taxes long enough, and it’s generally worth signing up for at 65 even if you’re staying on an employer plan.
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Part B (medical insurance): Replaces employer coverage for doctor visits, labs, and outpatient services. The standard premium is $202.90/month ($2,434.80/year).
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Part D (prescription drug coverage): Averages about $44/month, though it varies by plan and the drugs you take.
Put together, Part A, B, and D run close to $3,000 a year for an average individual. On top of that, Original Medicare generally pays 80% of covered doctor and outpatient expenses, with you responsible for the rest — plus separate deductibles for Part A (hospital stays) and Part B (outpatient care). For 2026, the Part B deductible is $283/year; the Part A inpatient hospital deductible is a separate, larger figure ($1,736 per benefit period) that applies only if you’re admitted to a hospital.
Because of that 20% gap and the hospital deductible exposure, financial planners commonly recommend pairing Original Medicare with a Medicare Supplement (Medigap) Plan G for anyone who can afford it. The national average Medigap premium for a 65-year-old was recently about $217/month, which brings the full Medicare + Medigap package to roughly $5,500/year.
Medicare Advantage is a separate path that’s often cheaper than the Medicare + Medigap combination, but it works more like a workplace plan — provider networks, and prior authorization requirements for certain procedures.
What Does Employer Coverage Actually Cost?
Workplace health plans are often less expensive on paper because employers cover a large share of the premium. According to KFF research cited in recent reporting, employers pick up about 84% of the cost on average, leaving employees paying roughly $1,440/year ($120/month) for single coverage. Add typical out-of-pocket spending — deductibles, copays, coinsurance — of around $869/year, and a simplified total lands near $2,309/year.
That’s meaningfully less than the Medicare + Medigap combination above. But two caveats matter:
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That $2,309 figure assumes a routine year. Federal law caps in-network out-of-pocket costs at $10,600/year, and while KFF research finds 72% of employees have limits no higher than $3,000, a serious health event can still cost substantially more than the “average” year suggests — and care outside your plan’s network can cost far more than that.
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Family coverage changes the math. Average workplace family coverage runs about $6,850/year. If both spouses eventually move to Medicare, each pays their own premiums separately, which can exceed that number depending on the specific comparison.
What Does Medicare Offer That Employer Coverage Doesn’t?
The financial comparison is only part of the picture. The other half is predictability and freedom of choice:
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No prior authorization for most care under Original Medicare, versus the approval requirements common in employer plans and Medicare Advantage.
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No balance billing — if a provider accepts Medicare, you won’t be billed above your normal deductible and coinsurance, no matter how large the charge.
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Freedom to see any provider who accepts Medicare, rather than being limited to an employer plan’s network.
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A predictable annual drug cost cap — no more than $2,100/year in covered drug costs under Part D’s catastrophic coverage stage.
For some people, that predictability is worth more than the dollar difference. For others — especially those in good health with a strong, low-cost employer plan — staying put makes more sense, at least for now.
What Else Should Factor Into the Decision?
A few details in the fine print can change the calculation significantly:
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IRMAA surcharges for higher earners. If your income is above $109,000 (individual) or $218,000 (couple), Medicare adds an Income-Related Monthly Adjustment Amount to both Part B and Part D premiums — anywhere from $284.10 to $689.90/month extra for Part B per person, and up to $91/month extra for Part D. This can meaningfully change whether Medicare is the cheaper option for a higher-income household.
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A younger spouse’s coverage. If your spouse is covered under your employer plan and is younger than 65, they generally can’t go on Medicare early and may lose eligibility for your workplace plan if you drop it. That alone leads many people to stay on employer coverage longer than they otherwise would.
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HSA contributions stop once you’re on any part of Medicare — including just Part A. If you’re actively contributing to a health savings account through a high-deductible employer plan, enrolling in Medicare (even only Part A) ends your ability to contribute, which is easy to miss since many people assume only Part B enrollment matters.
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Enrollment deadlines still apply. Delaying Part B while on qualifying employer coverage doesn’t create a penalty, but once that employer coverage ends, you generally have 8 months to enroll in Medicare before late-enrollment penalties kick in. Similarly, going without “creditable” drug coverage for too long can trigger a lifetime Part D penalty.
Where Does Insurance Planning Fit In?
This isn’t a one-time decision made correctly in perpetuity — it’s worth revisiting every year, especially during your employer’s fall open enrollment. A plan that worked well for several years in a row can change: a favored doctor leaves the network, a new prescription isn’t covered the way it used to be, or a health event changes what matters most. The financial comparison above is a reasonable starting point, but the right answer depends on your specific employer plan’s costs and network, your income (and IRMAA exposure), whether a spouse’s coverage is tied to your decision, and how much predictability is worth to you personally.
What To Do Next
Whether staying on your employer plan still makes sense, or it’s time to look seriously at Medicare, Medigap, or Medicare Advantage, we’re happy to walk through the actual numbers for your situation — not just the averages.
Questions? Call (800) 927-9326 or email
Prefer we reach out to you instead? Complete our Permission to Contact form and a licensed Gilman Agency agent will follow up.
Sources: The Wall Street Journal, “Should You Keep Your Employer Insurance or Go on Medicare?” by Gail MarksJarvis (October 1, 2026), citing KFF (Kaiser Family Foundation) employer health benefits research and Medicare Payment Advisory Commission (MedPAC) data on average Medigap premiums; Medicare.gov, 2026 Part A and Part B premium and deductible figures; Centers for Medicare & Medicaid Services, 2026 IRMAA income brackets and surcharge amounts.
This article is for general educational purposes and is not a recommendation regarding any specific insurance plan, and is not tax, investment, or legal advice. Costs, premiums, deductibles, and IRMAA thresholds cited are current as of publication and are subject to change. Individual costs will vary based on your specific employer plan, health needs, income, and the insurance products you select. This is a solicitation for insurance; not connected with or endorsed by the U.S. government or federal Medicare program. Consult a licensed insurance agent, tax advisor, or financial professional regarding your specific situation before making enrollment decisions.
