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Health Insurance Basics

The Costs of Missing Medicare Enrollment Deadlines

September 19, 2018

Medicare can be a tremendous benefit for those who qualify, but did you know that signing up late can result in penalties that could raise your monthly premiums indefinitely? Enrollment deadlines can vary, based on the type of coverage and your health insurance situation. All the variables can be pretty confusing, so let us try to clear some things up for you.

Medicare Coverage Basics

Original Medicare includes two types of coverage:

  • Medicare Part A, also called hospital insurance, helps pay for inpatient care in a hospital or skilled nursing facility following a hospital stay, as well as some home health and hospice care. This coverage is free for most people who have paid FICA taxes through payroll deductions or quarterly tax payments. Others can sign up for Part A coverage but may have to pay a premium.
  • Medicare Part B, also called medical insurance, helps pay for doctor visits and some other medical services. Anyone who qualifies for Medicare Part A is eligible for Part B. Participants pay a monthly premium for this coverage — in 2018, the standard premium is $134.00 for most individuals. Those with higher incomes pay more.

Other coverage is available through private insurers:

  • Part C, also called Medicare Advantage plans, combine Parts A and B into a single policy. Many also include vision, hearing, and dental coverage, membership to a fitness program, and/or prescription drug coverage (Part D). Part C participants pay the standard Part B premium, along with any additional premium the insurance company may charge.
  • Medicare Part D covers many prescription drug expenses. Premiums vary by plan.
Initial Enrollment and Special Enrollment Guidelines

Most people become eligible for all Medicare coverage at age 65. Your Initial Enrollment Period (IEP) begins three months before the month you turn 65, includes your birthday month, and extends an additional three months after, for a total of seven months. So, if your 65th birthday is in August, your IEP would begin in May and extend through the end of November. You can sign up any time during this period, without penalty, for Parts A, B and D — as well as for a Part C Medicare Advantage plan.

There’s an exception to this rule if you (or your spouse) are still working for a company with more than 20 employees when you turn 65 and are receiving coverage through that job or a union. In this case, you can:

  • Sign up for Parts A and B anytime you’re still covered by that plan, or
  • Sign up within eight months following the month in which this employment or coverage ends.

Both of these situations qualify as Special Enrollment Periods (SP) for Parts A and B, and there is no penalty for signing up during a SEP.

However, the SEP rules are different for Parts C and D, which can affect when you need to sign up for Parts A and B. You only have 63 days after your coverage or employment ends to sign up for Parts C and/or D — and you must sign up for Parts A and B first. This means your SEP is only 63 days for Parts A and B if you also want to sign up for Parts C and D without a penalty.

IMPORTANT: Because of this rule, if you think you might want Part D prescription coverage, you only have 63 days to sign up for Parts A and B as well, or you’ll face a penalty under Part D and have to wait until the next General Enrollment Period, January 1 through March 31 every year, to sign up.

Possible Late Enrollment Penalties

The penalties for missing your Medicare enrollment deadlines vary by coverage type, and none are one-time only. These penalties are added to your monthly premiums, as follows:

  • Part A penalties — 10 percent of the current Part A premium, if you haven’t worked long enough to qualify for free Part A coverage. You’ll pay this penalty for twice the number of years you were eligible for Part A but did not enroll. So, if you’re two years late enrolling for Part A, you’ll pay the penalty for four years.
  • Part B penalties — An additional 10 percent of the current premium for each 12-month period that you delay enrollment. Significantly, this penalty lasts for as long as you have Part B coverage, which could mean the rest of your life.
  • Part D penalties — 1 percent of the average monthly prescription drug plan premium, multiplied by the number of months you were late enrolling. The average monthly Part D premium is $35.02 in 2018. So, if you were 12 months late enrolling, your monthly premium penalty would be $4.20, paid in addition to the premium itself. This penalty also lasts as long as you have a Part D plan.
Potential Coverage Gaps

Financial penalties aren’t the only hazard of missing your IEP or SEP deadline — you might go without health coverage for a while, too. If you miss these deadlines, you’ll have to wait until the next General Enrollment Period (Jan. 1st – March 31st) to sign up for your Medicare coverage. This could leave you without any health insurance at all for some months. To avoid such a coverage gap — along with expensive penalties — be sure to add Medicare enrollment to your plans for your 65th birthday.