Medicare When Self-Employed

For many people, turning 65 and starting to collect Social Security means being automatically enrolled into Medicare. There are exceptions to this and ways to put off enrolling into Medicare, such as if you are still working and have health insurance through your employer. But what happens when you are self-employed and you’re about to turn 65? Do you have to sign up for Medicare, or can you delay enrolling without facing a penalty? Being self-employed impacts your Medicare options, so it is important to understand how you can be fully insured and avoid any penalties.

How Medicare Works

the numbers 65 as candles that are lit
Normally, if you are collecting Social Security, then you will be automatically enrolled into Medicare when you turn 65.

Self-employed or not, as long as you have been paying income taxes in the U.S., you will be automatically enrolled in Medicare Part A when you turn 65, but only if you are already receiving  Social Security. If you are not receiving Social Security, then you will need to manually sign up for Medicare during your Initial Enrollment Period, which is the 3 months before your 65th birthday, the month of your 65th birthday, and the 3 months after your 65th birthday. You can sign up for Medicare Parts A and B at this time or you can choose to opt out of Part B; it is optional because it has a premium. If you decide to enroll in Part B later, though, you will pay a penalty on your premium for as long as you have Medicare. If you do decide to enroll into Medicare and you are still self-employed, then Medicare will be your primary insurance. 

Self-Employed With Marketplace Plan

If you are (or were) self-employed, you might have a Marketplace insurance plan if you aren’t covered by your spouse’s employer-based plan. When you turn 65, you have the option to cancel your Marketplace plan without a penalty and join Medicare, or you can choose to keep your Marketplace plan. If you do decide to keep your health insurance plan, then it will become secondary to Medicare, meaning Medicare will be your primary payer. Be aware that having a Marketplace plan does not qualify you to delay enrolling in Medicare without a penalty, so you will have to enroll in Medicare during your Medicare Initial Enrollment Period when you turn 65 in order to avoid paying extra on your Part B premiums. 

Self-Employed With Employer-Based Coverage

older caucasian man working on a saw table
If you are enrolled in an employer’s health plan, then you can wait to enroll into Medicare without penalty.

If you don’t have a Marketplace plan, but are covered through another job you have or through your spouse’s plan, then you might be able to wait to enroll into Part B and not face a penalty. If you or your spouse’s workplace has fewer than 20 employees, you will be required to sign up for Medicare at age 65, but if it has fewer than 20 then you will not have to. 

The number of employees at you or your spouse’s workplace also determines which insurance plan will be your primary payer. If you or your spouse’s workplace has 20 or more employees, the employer-based plan will be primary. If you sign up for Medicare and you also have an  employer-based plan through a business with less than 20 employees, then your employer’s health plan will become secondary coverage after Medicare.

Self-Employment & Medicare Premium Deductionscalculator laying on top of money bills and a notepad next to it

Since 2012, the IRS has allowed self-employed individuals to deduct all Medicare premiums from their federal taxes. This includes Medicare Part B and Medicare Part A premiums, Medicare Supplement Plan premiums, and your spouse’s Medicare premiums.  When deducting your Medicare premiums, your premium payments are subtracted from your gross income, which is different from doing an itemized deduction for medical expenses that are taken after your adjusted gross income (AGI) is calculated. In order to deduct your premiums, you have to report a profit from your business.

Using Your HSA

pink piggy bank with blocks underneath it that says HSA

If you are 65 or older and self-employed, you can open and contribute to an HSA as long as you meet these HSA eligibility requirements:

  • You’re covered by a HSA-qualified medical plan.
  • You’re not someone’s tax dependent.
  • You don’t have any conflicting coverage (including being enrolled in Medicare).

If you are enrolled in Medicare then you can no longer contribute to your Health Savings Account (HSA). However, you can continue to withdraw money tax-free from the account and use it to help pay your Medicare premiums, deductibles, copays, and coinsurance.

Understanding how Medicare works can be tricky. You need to make sure that you have all of your bases covered so you are insured and do not receive any surprise bills. EZ.Insure will go over all of your options and make sure that you are prepared to transition to Medicare, and we can sign you up for a Medicare Supplement Plan for extra savings if need be. To get instant, free quotes, enter your zip code in the bar above, or to speak to one of our licensed agents, call 888-753-7207.

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