Medicare Considerations for Small Business Employers

Managing employee benefits can be especially challenging for small business owners—particularly when employees reach Medicare eligibility at age 65. Unlike larger organizations, small businesses often experience staffing changes that directly affect how Medicare interacts with your group health plan. Staying informed helps protect your business, maintain compliance, and empower employees to make smart coverage choices.

Understanding Medicare Eligibility in Small Workforces

Employees typically become eligible for Medicare at 65. For small businesses, even minor staffing fluctuations can shift Medicare rules from secondary to primary coverage—or vice versa. Keeping a close eye on employee counts is essential for compliance and smooth benefits administration.

Small Business Medicare Rules: What You Need to Know

• Under 20 Employees: Medicare usually becomes the primary payer. Employees must enroll in Part A and B, while group coverage serves as secondary.
• 20 or More Employees:Employees can generally stay on your group plan, with Medicare acting as secondary. Part B enrollment may be optional while employees continue working.

Tip: Even small staffing changes—such as seasonal hires or employee departures—can affect your obligations. Regularly monitoring headcount ensures compliance and helps avoid penalties.

Example:

A small marketing firm grew from 19 to 21 employees temporarily. A Medicare-eligible employee assumed group coverage was primary. After a claims audit, the firm faced significant repayment demands—a costly lesson in monitoring staff numbers and Medicare rules.

Dependent Coverage Matters for Small Businesses

Many small business employees make Medicare decisions with family coverage in mind:

• Employee as policyholder: Delaying Medicare may preserve dependent coverage but could trigger penalties if Medicare should be primary.
• Spouse as policyholder: Depending on your business size, Medicare may still need to be primary

Proactive guidance helps prevent coverage gaps, unexpected costs, and employee confusion.

Core Priorities for Managing Medicare as a Small Business

1. People

   Support employees and their families in making informed decisions. Clear guidance builds confidence, trust, and satisfaction.

2. Predictability

   Reduce uncertainty around benefits and costs. Understanding Medicare’s impact on your group plan helps prevent surprises and keeps operations steady.

3. Profitability

   Manage healthcare costs strategically. Proactive benefits planning helps your business maintain financial health and maximize resources.

4. Protection

   Safeguard your business against compliance issues and coverage errors. Staying on top of Medicare rules prevents penalties and administrative headaches.

Action Steps for Small Businesses:

• Provide resources and guidance for employees approaching Medicare eligibility
• Track workforce changes and understand how headcount affects coverage rules
• Communicate early and regularly about benefits milestones, including age 65 and open enrollment
• Align benefits planning with your business goals to support both employees and financial outcomes

Ready to take action?

Visit the OneDigital Advanced Health page to connect with our team and provide employees with the guidance they need, while keeping your small business compliant and financially healthy