When you’re getting close to your 65th birthday, it’s a good idea to enroll in Medicare. This is because you may have to pay a penalty if you don’t enroll when you first become eligible. If you want to know more about eligibility for Medicare, then read here.
What to know about the Medicare Part A late-enrollment penalty
Most people qualify for premium-free Medicare Part A coverage. If you or your spouse paid Medicare taxes and worked for at least 10 years (or 40 quarters), then you likely qualify for premium free Medicare Part A.
If you do not qualify for premium-free Medicare Part A, you must sign up for it when you first become eligible. Not doing so may result in a late-enrollment penalty, which will be an addition to the Medicare Part A premium you have to pay. The amount you will owe is 10% of your monthly premium which will apply no matter the length of the delay. This penalty will apply for double the number of years you could have had Medicare Part A but did not enroll. So if you waited to enroll in Part A for three years, you could pay the 10% penalty for six years.
You may qualify to sign up during a Special Enrollment Period (SEP) for Medicare Part A without a penalty. This can happen if you qualify for certain conditions. Read on to learn more.
What to know about the Medicare Part B late-enrollment penalty
As said previously, you may have to pay a late-enrollment penalty if you don’t sign up for Medicare when you’re first eligible. However, many individual’s enrollment is automatic for both Medicare Part A and Part B (Original Medicare). Yet if you don’t qualify for automatic enrollment, it’s a good idea to sign up when you’re first eligible. The late enrollment penalty is a cost addition to the Part B premium. For every 12 months that you were eligible for Part B but didn’t sign up, the penalty could go up by 10%. This rule penalty may apply for as long as you have Medicare Part B. For instance if you delayed your enrollment for two years, then your penalty could be 20% of the premium. So for the years that you have Part B, you may pay the Part B monthly premium, as well as the 20% penalty.
If you qualify for automatic enrollment you may still have to pay this penalty if you drop Medicare Part B and enroll later.
Medicare Part A and Part B: The Special Enrollment Periods (SEPs)
You do not have to pay a late-enrollment penalty if you qualify for a Special Enrollment Period (SEP). You may be able to qualify for a Special Enrollment Period under certain conditions. Qualifying will allow you to bypass a late-enrollment penalty and sign up when you would like under certain rules. For instance, if an employer covers you or your spouse (or family member if you’re disabled) with a health plan, then you qualify for a SEP. Below is how you can qualify for a SEP for Medicare Part A or Part B:
- If your group plan coverage or your employment ends then you have 8 months of an SEP, after the month your coverage ends. For instance, if your group coverage ends on January 9 and your employment ends on January 28, then you have until September 9 to enroll (Part A and Part B).
- If the group or employment plan still covers you, then you can enroll at anytime you’d like.
The late-enrollment penalty will not apply to you if you are eligible for a SEP.
What is the Medicare Prescription Drug Plan late-enrollment penalty
A late enrollment penalty for Medicare Part D may apply to you if you don’t sign up during the Initial Enrollment Period (IEP). Medicare Part D (or Medicare Prescription Drug Plan) includes prescription drug coverage. A Medicare Advantage plan that includes prescription drug coverage can also have a late penalty if you don’t enroll when you’re first eligible. The following is how you can avoid paying this penalty:
- Become eligible for Medicare Extra Help.
- Never sign up for a Medicare Advantage Prescription Drug plan or a Medicare Prescription Drug plan.
- Sign up to the prescription drug plan when you’re first eligible or during the Initial Enrollment Period for Part D.
- Make sure your coverage is creditable with your insurance plan. This means your plan has to inform you each year if your prescription drug coverage is creditable. You may pay a late-enrollment penalty if you go 63 or more consecutive days without creditable coverage.
The longer you go without creditable prescription drug coverage, the more you will have to pay for the Medicare Prescription Drug Plan’s late-enrollment penalty. Here’s how the late enrollment penalty works:
- It’s calculated by multiplying the number of months you were eligible but did not sign up, by 1% of the “national base beneficiary premium.”
- The amount will round up to the closest 10 cents which will be an addition to your monthly prescription drug plan premium.
- The national base premium can vary every year which will result in the late-enrollment penalty changing.
You may have to pay a late-enrollment penalty for every year that you are a Medicare Prescription Drug Plan enrollee if you signed up late.
If you have any questions, contact one of our Medicare Insurance Quotes Co agents — our contact information is below.