It’s open enrollment time again. Ordinarily when someone turns age 65 they should sign up for Medicare, or else risk having a late enrollment penalty applied to future premiums. But the rules are quite different for people still working. I will attempt to simplify them as briefly as possible.

First, here are some basic Medicare rules:

• Part A covers inpatient hospital care, skilled nursing facility, hospice, lab tests, surgery, and home health care. It’s free.
• Part B covers ambulance services, durable medical equipment, outpatient medical care, and some tests and medications. You pay a monthly premium and there’s generally a 20% deductible for coverages.
• Medigap policies are used to reduce if not eliminate the Part B deductibles. They also have premiums.
• You have six months after enrolling in Part B to enroll in any Medigap policy without medical underwriting (that is, being evaluated and possibly rejected for an existing medical condition).
• Once you enroll in either Part A or Part B you can no longer contribute to a Health Savings Account (HSA) if you have one (although you can still utilize any funds remaining in it).
• Medicare Advantage plans (Part C) are an alternative to Parts A, B, and Medigap. However they only apply to specific healthcare providers and are outside the scope of this post.

Now, here are your three options if your employer has more than 20 employees:

1. Keep your company-provided group health plan and delay Medicare.
2. Opt out of the group plan and sign up for Medicare.
3. Continue with the group plan and additionally sign up for Part A, Part B, or both.

Your choice will depend upon your specific situation. If you have an HSA, option 1 might be preferable so that you can continue making contributions, especially if it’s your employer that’s making the contributions. And there will be no late enrollment penalties. If you’re concerned about major medical surgery with high deductibles through your group plan, you might consider option 2 or possibly option 3 together with Part A enrollment, depending on coverages and/or costs. With option 3 the Part A insurance will act as secondary to anything not covered by your employer’s plan and won’t include any additional premium. If you’re planning to use Medigap rather than Medicare Advantage after you retire, and you have a medical condition, options 1 and 3 could be problematic because you will likely have to undergo a medical evaluation at that time and run the risk of being rejected.

What if you work for a small company with less than 20 employees? In that case your employer gets to decide whether or not you need to enroll in Medicare on top of the employer’s coverage. In either case you can avoid medical underwriting for Medigap coverage as long as you apply within 63 days of retiring.

And by the way, the same rules apply to spouses of employees.

As you can see, this can be a complicated decision. Medicare provides lots of good detailed information on their website (www.medicare.gov), but if you’re looking for advice on what’s right for your particular situation, you can get help from your state’s Health Insurance Assistance Program (SHIP). In California the link for Medicare is https://aging.ca.gov/Programs_and_Services/Medicare_Counseling/. Your financial planner should also be a good source of information on this topic.