Employer Health Costs Are Projected to Jump 8.2%. At 65, Moving to Medicare Means Her HSA Contributions Have to Stop

Quick Read

• Employer health costs per worker are projected to rise 8.2% in 2027, the steepest increase since 2003, prompting 65-year-olds to weigh Medicare.

• Enrolling in any part of Medicare ends HSA contributions starting that month, with the annual limit prorated by eligible months remaining.

• Filing for Social Security after 65 triggers automatic Part A backdating up to 6 months, potentially creating taxable excess HSA contributions with a 6% annual excise tax.

• Two retirees, same $1 million, same 4% rule, buy one finished with $1.4 million, the other hit $0 in 12 years. Our free reader guide explains the flaw that separated them, and the income-first method built to avoid it.

A 65-year-old still working opens her benefits packet and sees the number every HR department is bracing for. Employer health-benefit costs per employee are projected to rise 8.2% in 2027, the steepest hike since 2003 and the fifth consecutive year of increases, according to preliminary results from Marsh's 2026 National Survey of Employer-Sponsored Health Plans. To hold the increase even to that, 59% of employers plan cost-cutting changes to their health benefits. Without any mitigation, employers estimate their current plans would cost 11% more.

That is a cost-per-employee projection, not a forecast of what any one worker's payroll deduction will do. But rising workplace costs give her a concrete reason to compare the company plan with Medicare and pick the cheaper one. That comparison is worth doing. The trap is what happens to her health savings account the moment she signs up.

This is a narrow, high-stakes window: someone who is 65, still covered by a large-employer plan, still funding an HSA, and now watching her share of costs climb. Anyone already enrolled in Medicare falls outside its scope.

Medicare Enrollment Mechanics

Enrollment in any part of Medicare, including premium-free Part A, ends HSA eligibility beginning with the month Medicare coverage takes effect.

The 4% Rule is Broken, Built On A World That No Longer Exists

Every retiree knows about the 4% rule, but it frames retirement as a slow liquidation and still causes retirees with seven-figure accounts to agonize over a dinner out.

There's a different way to run the math that makes more sense today. Build an income floor — dividends, interest, and Social Security that cover your essential bills every month — and you never have to sell shares into a down market just to pay them.

Our free reader guide, The 4% Rule Is Broken, walks through it in about 15 minutes. Access the report here.