Small-firm workers face steep Medicare penalties and coverage gaps after 65

Workers at firms with fewer than 20 employees who delay Medicare enrollment past age 65 face significant financial risk because Medicare becomes the primary payer, leaving their employer plan as secondary. If the worker has not enrolled in Medicare, the secondary plan pays minimal amounts, potentially leaving the worker liable for full billed charges.

Delaying Part B enrollment incurs a permanent 10% monthly surcharge for each year missed, applied to the 2026 standard premium of $202.90. This surcharge is permanent and attaches to a premium that the Centers for Medicare and Medicaid Services raises most years, meaning the cost burden grows over time.

The distinction in coordination rules carries real financial weight. At employers with fewer than 20 employees, Medicare is the primary payer and the group plan pays secondary. In contrast, at employers with 20 or more employees, the group plan is primary and Medicare pays secondary, which is why workers at larger firms can safely delay Part B until they retire and use the 8-month Special Enrollment Period without penalty.

A secondary payer pays only what remains after the primary payer has paid its share. If a worker at a small firm never enrolls in Part A and Part B, Medicare pays nothing because there is no Medicare coverage in force. The group plan, sitting in secondary, then pays only the sliver it would owe after a hypothetical Medicare primary payment. In practice, that can leave routine claims paid at a fraction of billed charges, and larger claims effectively rejected.

The 2026 standard Part B premium is $202.90 per month, up from $185.00 in 2025. The Part B annual deductible is $283 in 2026, up from $257 in 2025. A worker who delayed enrollment by three years while at a small firm faces a 30% permanent surcharge, every month, for life.

Part A is the piece most workers assume they have automatically. Most do, at zero premium, because they earned 40 quarters of covered employment. Approximately 99% of Medicare beneficiaries pay no Part A premium. But Part A pays only if the worker enrolled. Without enrollment, an inpatient stay gets processed with Medicare paying nothing and the group plan paying its secondary share of nothing meaningful.

The 2026 Part A inpatient hospital deductible is $1,736, up from $1,676 in 2025. Skilled nursing coinsurance runs $217 per day for days 21 through 100 in 2026. Those figures describe what an enrolled beneficiary owes. An unenrolled worker at a small firm can owe the underlying billed charges the plan declined to cover.

Workers are advised to verify their employer's headcount and enroll in Part A and Part B during their initial enrollment period to avoid these penalties and coverage gaps. The 20-employee threshold counts employees on the payroll, not only those enrolled in the plan. If enrollment was already missed, workers can apply for equitable relief through the Social Security Administration if a small employer or its insurer gave incorrect guidance about Medicare being unnecessary.