Just because you are eligible to enroll in Medicare at age 65 does not mean that you have to do so. It may even be advantageous to delay enrollment in some situations. If you are turning 65 soon and contemplating Medicare enrollment, there are a few things you’ll need to consider.
Let’s discuss the situations that may allow you to delay enrollment and make sure you know how to avoid any late enrollment penalties.
Your Initial Enrollment Period
Your Initial Enrollment Period begins three months before your 65th birthday and extends to three months after your 65th birthday. This is the first window of time you have to enroll in Medicare Parts A and B. Individuals have one Initial Enrollment Period. After this time passes, you will have to wait for the General Enrollment Period unless you qualify for a Special Enrollment Period.
That’s a lot to remember, but we’re going to break each of these down so that you know which ones you’ll want to look out for if you delay enrollment past your 65th birthday.
The General Enrollment Period
The General Enrollment Period occurs each year from January 1 to March 31. If you enroll during this time, your coverage will begin on July 1 of that year.
This enrollment period is for individuals who missed their Initial Enrollment Period and did not qualify for a Special Enrollment Period. Chances are, if you are enrolling during the GEP, you’re going to be paying some late enrollment penalties. More on those later.
Special Enrollment Periods
If you did elect out of your initial enrollment period, we hope that you qualify for special enrollment as this will mean you have no late enrollment penalties to pay. There are a few situations in which this will apply.
- You have had other health insurance through your employer (or your spouse’s employer), that coverage was creditable, and that coverage is ending.
An insurance plan is deemed “creditable” if it offers the same (or more) coverage as Original Medicare (Parts A and B). Any employer who has 20 or more employees has creditable insurance, but it may also be seen in smaller companies.
In this situation, you have eight months to enroll in Medicare Parts A and B. The eight-month Special Enrollment Window begins either when you stop working, or your coverage ends – whichever occurs first.
- You may qualify for an SEP if you are a volunteer who is serving in a foreign country. To determine if you are eligible, you will need to contact the Social Security Administration.
- You may qualify for an SEP if you have TRICARE, but only in some situations. Contact TRICARE to find out if your situation makes you eligible for a Special Enrollment Period.
You do not qualify for a Special Enrollment Period in these situations:
- You retired and elected to enroll in COBRA or retiree coverage, and that coverage is ending. In this situation, you will have to wait until the General Enrollment Period to apply for Medicare Parts A and B.
- You have Marketplace insurance, and that coverage is ending. Marketplace insurance does not qualify as creditable insurance.
- You have End-Stage Renal Disease.
Penalties for Late Enrollment
We typically do not recommend delaying your Original Medicare enrollment unless you will qualify for a Special Enrollment Period. This is due to the penalties that you will otherwise have to pay.
Part A Penalty
Most people qualify for premium-free Part A. However, for those who do not and also choose to delay enrollment, a 10% penalty will apply. The maximum premium for Part A in 2021 is $471 per month. The 10% penalty would add just over $47 to your monthly premium. You will pay that penalty for twice the number of years that you delayed enrollment. (If you delayed enrollment for two years, you pay that penalty for four years.)
Part B Penalty
The Part B penalty is also an additional 10% of your monthly premium. The 2021 Part B premium is $148.50, so the penalty would add $14.85 to your bill. You’ll incur a 10% penalty for each of the 12-month periods that you delayed Part B enrollment. Unlike the Part A penalty, this one never goes away. You will pay the Part B penalty for life.
Part D Penalty
The Part D penalty is calculated by multiplying 1% of the national base beneficiary premium by the number of months you did not have creditable prescription coverage and were not enrolled in Medicare Part D. In 2021, the national base beneficiary premium was $33.06.
Like the Part B penalty, you will pay this penalty for life, or as long as you have Part D coverage.
Considerations for Delaying Medicare Enrollment
Now that you have an understanding of the different enrollment periods you may qualify for and the penalties you could pay, let’s discuss some other considerations.
If you would like to delay enrollment because your employer offers a creditable group policy, compare the benefits and cost between that plan and Original Medicare. Does your employer pay your premiums? If so, yes, you probably want to delay enrollment and avoid the Part B premium. If your employer doesn’t pay your premium and you’re paying more than the Part B premium of $148.50, you may consider switching to Original Medicare.
Do you have family members also on your employer’s plan? If you are the policyholder of that employer-sponsored plan and you have a spouse and/or other dependents on that plan, they will also lose coverage when you move to Medicare. You’ll need to think about what options they will have for healthcare coverage. (Medicare plans do not offer coverage to anyone but the enrolled individual.)
If you have the option to delay coverage, there are still many things for you to consider. Don’t make this decision lightly. If you need help wading through your options, Better Place Insurance would be happy to help. We cannot enroll you in Original Medicare, but we can help you decide if delaying enrollment is a viable option.
Make sure you understand the rules on Automatic Medicare sign-up. If you are drawing Social Security already you will be automatically enrolled in Medicare Parts A and B.