Employer Coverage & Medicare Coordination

When you have both employer coverage and Medicare, the employer's size determines who pays first. Employers with 20+ employees: their plan pays primary, Medicare secondary. Fewer than 20 employees: Medicare pays primary. COBRA is NOT creditable coverage for Part B purposes - a common and costly misconception.

The 20-Employee Rule: Who Pays First?

When you have both employer coverage and Medicare, one is the "primary payer" (pays first) and the other is the "secondary payer" (pays after). The rules depend almost entirely on the size of your employer:

Large Employer (20+): Common Scenarios

If your employer has 20 or more employees and offers group health coverage:

• Your employer plan stays primary as long as you (or your spouse) are an active employee
• You can delay Part B enrollment without penalty because your employer plan is "creditable coverage"
• You should consider enrolling in free Part A unless you contribute to an HSA
• After leaving employment, you have 8 months Special Enrollment Period to enroll in Part B

Small Employer (Fewer Than 20): Medicare Is Primary

This is where many people get caught. If your employer has fewer than 20 employees:

• Medicare is your primary payer starting at age 65, even if you haven't enrolled
• Your employer plan only pays what Medicare would have paid - which means if you're not enrolled in Medicare, you have huge coverage gaps
• You MUST enroll in Parts A and B at 65 to avoid this problem
• Your employer plan becomes secondary, paying after Medicare

Many New Mexico small businesses, professional practices, and family-owned companies fall into this category. If you work for a small employer in NM and are approaching 65, this is the most important rule to understand.

The COBRA Myth

One of the most damaging misconceptions about Medicare is that COBRA counts as "creditable coverage" that allows you to delay Part B enrollment. It does not.

The rules:

• COBRA is not creditable coverage for Part B purposes
• If you leave your employer plan and take COBRA, your 8-month Part B Special Enrollment Period starts when employer coverage ends - not when COBRA ends
• If you don't enroll in Part B within 8 months of leaving employer coverage, you face the 10% per year permanent late enrollment penalty
• Medicare becomes primary while you're on COBRA, but if you haven't enrolled, you have huge coverage gaps

Federal Employees: A Special Case

Federal Employees Health Benefits (FEHB) follows the same current-employment rule. While you (or your spouse) are still working for the federal government, you can delay Part B and use the 8-month Special Enrollment Period when that job ends. FEHB as a retiree is not current-employment coverage: if you skip Part B after you retire, you can enroll later only from January 1 to March 31 and will pay a late penalty. FEHB is creditable drug coverage, so it does protect you from the Part D penalty. See our FEHB Medicare page for more.

Spouse Coverage Considerations

If you turn 65 first but your spouse still works at a large employer:

• You can stay on your spouse's employer plan as a dependent
• Their plan is primary, Medicare (if enrolled) is secondary
• You should consider free Part A (unless you have an HSA)
• You can delay Part B without penalty
• When your spouse retires or you leave their plan, you have 8 months SEP for Part B

See our detailed spouse coverage guide.

What Counts as Creditable Coverage?