If You Delay Enrollment In Medicare Part B And Don’t Have Creditable Coverage Elsewhere You May Owe Late Enrollment Penalties For The Entire Time You Have Medicare
Medicare is America’s health insurance program for citizens age 65 and older, as well as those who qualify for medical reasons before turning 65. The Medicare program levies late penalties against beneficiaries who delayed signing up when they turned 65 without qualifying for a Special Enrollment Period .
Some of these penalties, like the one for Part B, you’ll owe for the entire time you have Medicare. But not everyone who delays Medicare enrollment has to pay a late fee. This article explains the Part B late penalty and how to avoid it.
What Is The Penalty For Not Taking Medicare Part B
The Medicare Part B penalty increases your monthly Medicare Part B premium by 10% for each full 12-month period you did not have creditable coverage. The penalty is based on the standard Medicare Part B premium, regardless of the premium amount you actually pay.
For example, if you pay a higher Medicare Part B premium based on your previous tax returns, your penalty will only be 10% of the base Medicare Part B premium. The penalty will not be 10% of your Income-Related Monthly Adjustment Amount premium.
For most, the Medicare Part B penalty never goes away. You must pay the additional premium cost as long as you have Medicare Part B. The only time the penalty goes away is if you are eligible for Medicare Part B prior to age 65 and pay the penalty before turning 65. Once you turn 65, the penalty is reset, and you will no longer be responsible for the additional premium.
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How Can I Avoid The Late Enrollment Penalty
The easiest way to avoid paying these fees is to sign up during your seven-month IEP window. If that ship has sailed, your next best bet is qualifying for a Special Circumstance. If you had coverage through an employer, a spouses employer, or you experienced a significant life change such as moving, you may be able to take advantage of a Special Enrollment Period. Finally, if you qualify for Extra Help, you do not have to pay late penalties.
If you need to learn more about your Medicare options, call us toll-free at 855-350-8101. One of our licensed agents can answer your questions and explain your options.
HealthPlanOne is a licensed and certified representative of Medicare Advantage HMO, PPO and PPFS organizations and stand-alone prescription drug plans with a Medicare contract. Enrollment in any plan depends on contract renewal.
Medicare supplement insurance is available to those age 65 and older enrolled in Medicare Parts A and B and in some states to those under age 65 eligible for Medicare due to disability or End Stage Renal disease. Medicare supplement plans are not connected with or endorsed by the U.S. government or federal Medicare program.
For a complete list of available plans please contact 1-800-MEDICARE , 24 hours a day/7 days a week or consult www.medicare.gov.
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You Want To Keep Contributing To An Hsa
You may also want to defer signing up for original Medicare if you currently have a health savings account . Once youre enrolled in original Medicare, youre no longer able to contribute funds to an HSA.
The money you put in an HSA increases on a tax-free basis and can be used to pay for many healthcare expenses.
HSAs are available to people with high-deductible health insurance plans. If your current health insurance meets Medicares requirements for creditable coverage, you wont incur a penalty if you defer for this reason.
What Is The Late Enrollment Penalty For Medicare Part B
Medicare Part B enrollment is complicated, and the wrong decision can leave you without health coverage for months and lead to lifetime premium penalties. Part B premiums increase 10 percent for every 12-months you were eligible for Part B but not enrolled. People who delay Part B because they were covered through their own or a spouses current job are exempt from this penalty, and can generally enroll in Part B without any delays.
However, people who delay Part B enrollment and didnt have current job-based health coverage can find themselves out of luck. They dont qualify for the Part B Special Enrollment Period and cant enroll in Part B until the next General Enrollment Period , which runs from January to March of each year, with Part B coverage beginning that July. The GEP for the current year may have passed by the time you discover you need Part B, potentially your Part B coverage effective date by an entire year.
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Medicare Late Enrollment Penalty For Part A
If you or your spouse have a qualifying work history of at least 10 years , then you likely paid Medicare taxes. Youre eligible for premium-free Part A if you did.
If youre not eligible for premium-free Part A, however, then you need to sign up during your IEP and pay for Part A. If you dont, you could face a 10% premium penalty for twice the number of years you could have had coverage but didnt enroll.
For example, if you were first eligible for Part A in 2019, but you didnt enroll until 2021, you would pay the 10% premium penalty for four years.
It can add up quickly. In 2022, the Part A premium for people with fewer than 30 quarters of qualifying work history is $499 a month, and $274 for people with 30 to 39 quarters of work history. If you had to pay the maximum penalty for just four years, youd lose almost $2,500.
What Happens If You Don’t Qualify For A Special Enrollment Period
If you don’t sign up for Medicare during your Initial Enrollment Period AND do not qualify for a Special Enrollment Period, you have to wait until General Enrollment.
The GEP occurs every year from , with coverage beginning on July 1. This delay is what may lead to the 12-month coverage gap that can land you with a late fee.
For example, if you lose your current coverage on June 2, you have to wait until the following January to sign up during General Enrollment. With your Medicare coverage beginning on July 1, you’ll go a full 12 months without health insurance and will therefore owe the late fee for the entire time you have Medicare.
During the General Enrollment Period, you may sign up for Original Medicare . You then have from April 1 through June 30 to sign up for a Medicare Advantage or prescription drug plan. There is no late fee for Part C. However, if you go 63 consecutive days without creditable prescription drug coverage , you will likely owe the Part D late penalty.
Like Part B, you owe the Part D penalty for the entire time you have Medicare prescription drug coverage. The calculation, though, is based on how many months you go without a prescription drug plan instead of years. You’ll pay 1 percent of the national base beneficiary premium for every month you went without Part D coverage. The calculation looks like this:
X = Total
X = $8.676 = $8.70
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Is There Any Way To Get Out Of Late Enrollment Penalties
There are two possible scenarios:
1) If you receive bad advice from a federal employee about Medicare enrollment.
You can request equitable relief from the Social Security Administration if you are charged late enrollment penalties for failing to enroll in Medicare due to erroneous advice you received from a federal employee. To do this, you should write a letter to your local Social Security office. Be sure to include as many specific details as you can, such as who you spoke to, the date and time of your conversation, any notes you took, and the actions you took as a result of the advice you received.
2) If you had creditable coverage, but your Medicare plan does not have a record of it.
If you receive notice from your Medicare drug plan or Medicare Advantage plan that you owe late enrollment penalties, you can request a review by completing the reconsideration request form you get with the notice. You can include whatever proof necessary to make your case, such as information you have about previous creditable drug coverage.
If you lose creditable coverage through an employer or through another source, your Medicare carrier will reach out to verify your prior qualifying coverage. Be sure to respond to any correspondence about verifying creditable coverage. Without a response, a penalty will be assessed and it can be difficult to appeal the decision.
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Do I Pay A Penalty If I Don’t Enroll In Medicare And Why
As with any group insurance plan, Medicare needs healthy people paying premiums to help offset the cost of covering people who need to use more of its benefits.
If everyone waited until they needed a plan to enroll, costs would skyrocket. So you can delay enrollment in Medicare Part B or in a Part D prescription drug planand delay the monthly premiumsbut you may pay a higher premium once you decide its time to enroll.
Heres an overview based on the various parts of Medicare coverage:
- If youre not eligible for premium-free Part A based on your work history, your monthly premium may increase if you dont purchase it when you are first eligible
- In most cases, if you dont sign up for Part B when youre first eligible, youll have to pay a penaltyand not just upon enrollment. Youll continue to pay that penalty for as long as youre enrolled in Medicare Part B
There are exceptions to the rule, however. If you or your spouse is still working and has healthcare coverage through an employer or other creditable source, such as an individual healthcare plan or a state-established healthcare plan,1 you can wait to sign up for Part B or Part D without paying a penalty.
But once your employer coverage is gone, the only way to avoid a penalty is to enroll in Part B during whats called a Special Election Period . Thats an 8-month period that begins when your employer coverage ends or you stop working, whichever comes first.
Is There A Cap On The Medicare Part B Penalty
As of now, there is no cap when calculating the Medicare Part B late enrollment penalty. However, legislation has been introduced to cap the Medicare Part B penalty at 15% of the current premium, regardless of how many 12-month periods the beneficiary goes without coverage.
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As of now, all legislation to reduce the penalty is under review and has not been passed. However, it would save thousands of beneficiaries from the high cost of the Medicare Part B penalty.
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You Have Tricare Or Champva Coverage
If you are eligible for premium-free Part A, you must sign up for Parts A and B or you will lose your TRICARE or CHAMPVA coverage. If you don’t get premium-free Part A, then you may delay signing up. However, you’ll have to wait for the General Enrollment Period . Depending on your unique situation, this may cause a 12-month coverage gap that could still leave you owing the late fee.
Medicare Late Enrollment Penalty For Part D
Although enrollment in Medicare Part D coverage for prescription drugs is considered voluntary, you will still incur a Medicare Part D late enrollment penalty if you dont enroll in a Medicare prescription drug plan during your IEP.
As with Part B, the Part D late enrollment penalty is based on the amount of time you were without coverage. The penalty applies for as long as you are enrolled in a Part D plan.
The Medicare Part D penalty is 1% for each month you went without prescription drug coverage, rounded to the nearest $0.10. The national base Part D premium is around $33. If you were without creditable prescription drug coverage for 26 months, for example, your premium would be nearly $10 higher than the national base. This late enrollment penalty is added to the currently monthly premium that you pay for your chosen drug plan.
Since the premium penalty is pegged to the national base Part D premium set each year by the CMS, it will go up every time the Part D premium increases. For more details on how Medicare calculates your Part D late enrollment penalty, visit Medicare.gov.
This is why its a mistake to pass on prescription drug coverage as soon as youre eligible. Even if you dont take many prescription medications right now, enrolling in a drug plan eliminates a future penalty that would stick with you forever.
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How Is The Part B Late
You generally need to sign up for Medicare parts A and B during your initial enrollment period , which begins three months before the month you turn age 65 and ends three months after the month you turn 65.
You may be able to delay enrolling in Medicare if you or your spouse is still working and you have health insurance through either of your employers. But after losing your job-based coverage, you have to sign up during the special enrollment period while youre working or within eight months of losing your health insurance.
If you dont sign up during your IEP or a special enrollment period, you will face two consequences:
Since Part B premiums usually rise each year, your late-enrollment penalty will rise, as well. The penalty lasts for as long as you have Medicare Part B, whether you have coverage through original Medicare or a Medicare Advantage plan.
Medicare Part B Late Enrollment Penalty
If you are newly eligible for Original Medicare and do not enroll in Medicare Part B, you may have to pay the Medicare Part B penalty. The Medicare Part B penalty results in a higher premium every month you have Medicare Part B. Unfortunately, this penalty never goes away.
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How Much Is The Part D Late Enrollment Penalty
For each month you dont enroll or have creditable coverage, youll accrue a 1% penalty of the average monthly drug plan cost.
Lets assume you went four years without taking drug coverage. Youll receive a 1% penalty that compounds monthly. You would have a 48% penalty. The current average Part D premium is a little more than $33. Your Part D penalty would be about $14 a month.
No matter which drug plan you were to enroll in, you would pay an additional $14 a month on top of your plans premium for the rest of your life.
I Have An Employer Health Plan Through My Job
You may be able to delay Part B enrollment if all of the following statements are true.
You may qualify for a Special Enrollment Period when your employer coverage ends if you meet these qualifications. Youll have eight months to sign up for Part B without penalty. You can also and sign up for Part A if you havent already.
If you have coverage from a small company with fewer than 20 employees, youll likely need to enroll in Medicare Parts A & B when you turn 65. Small workplaces are not required to continue your health care coverage once youre eligible for Medicare.
NOTE: If you have health coverage through your spouses employer, regardless of the employers size, you may need to enroll in Medicare in order to stay on the employer plan as a dependent. Check with the employer about their rules for covering Medicare-eligible spouses.
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B Late Enrollment Penalty
- Generally, you wont have to pay a Part B penalty if you qualify for a Special Enrollment Period. Learn more about Special Enrollment Periods.
- Youll pay an extra 10% for each year you could have signed up for Part B, but didnt.
- You may also pay a higher premium depending on your income.
$170.10 + $34.00
$204.10 will be your Part B monthly premium for 2022. This amount is rounded to the nearest $.10 and includes the late enrollment penalty.
Medicare Part D Late Enrollment Penalty Exceptions
If you qualify for the Extra Help program, you will not have to pay a late penalty. The Extra Help subsidizes the cost of Part D prescription drug coverage for low-income individuals. It also eliminates any penalty, even if youve gone without creditable coverage for more than 2 months.
However, keep this in mind: YOU are responsible for later proving that you had creditable coverage from a former employer. That means saving the letter of creditable coverage that your employer group health insurance company sends you after you quit your job. This letter should arrive within two weeks of the last day of your coverage.
BE SURE THAT YOU SAVE THEM. This is not something that your Medicare insurance agent can help you produce later on, so you must be diligent about saving evidence of your coverage. When you finally retire and enroll in Part D, you will have to prove to your new Part D carrier and Medicare that you had creditable coverage for all of the months since you turned 65. That proof of coverage is the only way to get out of paying a Part D late penalty.
You can also avoid the late enrollment penalty for Part D with creditable prescription drug coverage through an employer, union, or other source, such as VA drug coverage.
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