Can I Drop Employer Health Insurance for Medicare?

You can drop employer health insurance for Medicare at any time once you're eligible. No federal law requires you to keep your employer plan, though signing up for Medicare while covered by a private employer plan operates under different rules depending on whether your employer has 20 or more employees. At employers with 20 or more employees, the employer plan pays claims first while you're actively working, and Medicare pays second. At employers with fewer than 20 employees, Medicare pays first even while you're employed.   

Your next step depends on your situation: you can drop employer coverage immediately, wait until you retire, or run both plans at the same time. Each path carries different costs and deadlines, and the health insurance coordination rules with Medicare determine both your costs and your enrollment window.

Employer size directly controls which plan pays your medical claims first when you're eligible for Medicare. Employers with 20 or more employees must treat Medicare Part B as the secondary payer while you work, so the employer plan covers claims first and Medicare fills the gap. At employers with fewer than 20 employees, Medicare pays primary even while you're actively employed. At a small employer, delaying Part B enrollment leaves Medicare as the primary payer with no plan picking up the balance, which means you absorb 100% of costs Medicare doesn't cover.

The special enrollment period for Medicare Part B gives you 8 months from the date your active employment ends or your employer coverage ends, whichever comes first, to enroll without a late penalty. This 8-month clock starts on the end of active employment, not on the day you notify Medicare. Losing employer coverage counts as a qualifying life event that activates this window. Missing it means waiting for the Medicare General Enrollment Period, which runs January 1 through March 31 each year, with Part B coverage starting July 1.

Once you drop employer insurance, Medicare Part B costs $202.90 per month in 2026, a $17.90 increase from 2025. Most active employees contribute an average of 28% of their employer plan premium, since employers typically cover 70% to 80% of the total group cost, per the Agency for Healthcare Research and Quality (AHRQ), Medical Expenditure Panel Survey-Insurance Component (MEPS-IC), so switching to Medicare changes your premium structure. Adding the $38.99 average Part D premium brings the monthly baseline to roughly $242. 

High earners above $109,000 in modified adjusted gross income (MAGI) for individuals pay higher premiums through income-related monthly adjustment amounts (IRMAA). People who choose Medicare Advantage over Original Medicare trade some provider flexibility for lower monthly premiums, with many plans at $0 beyond the Part B cost.

Dropping employer health insurance for Medicare makes financial sense when your employee premium contribution exceeds what Medicare Part B plus a supplemental plan costs, when your employer has fewer than 20 employees so Medicare already pays primary or when you want to simplify coverage after retirement. Keeping employer coverage makes more sense when your employer covers 70% or more of the total premium and you're still actively employed at a company with 20 or more employees.

Retirees under 65 who haven't yet reached Medicare eligibility deal with a separate set of trade-offs, since their employer plan may end before their Medicare window opens.

You can drop employer health insurance for Medicare once you're eligible. Employer size determines whether Medicare pays primary or secondary while you work. The 2026 Part B premium is $202.90 per month. Act within the 8-month special enrollment period after your coverage ends to avoid a penalty that adds 10% per year, permanently.

These questions cover the most concerns about dropping employer health insurance for Medicare, including enrollment windows, penalties and coverage gaps: