If you are one of the 12 million Americans who have health insurance coverage through the Health Insurance Marketplace – also called the ACA or Obamacare – and you are nearing 65, it’s time to start thinking about your transition to Medicare. If you miss the window that you are supposed to enroll in Medicare, it could end up costing you in penalties. The government can even bill you for any subsidy dollars you received toward your plan on the health exchange after you turned 65. While seniors with qualifying health insurance can opt out of Medicare without incurring a penalty, health plans purchased through federal or state exchanges do not count as qualifying coverage.
How To Avoid Expensive Mistakes If You’re Almost 65 and Have Insurance through the Health Insurance Marketplace
As you approach your 65th birthday, it’s time to get ready for your transition to Medicare. The initial Medicare enrollment period starts three months before the month of your 65th birthday and ends three months after it – giving seniors a total of seven months to register without incurring penalties.
One thing to keep in mind is that if you are already receiving Social Security payments or Railroad Retirement Benefits for at least four months before your 65th birthday, you will be automatically enrolled in Medicare Part A (hospital insurance) and Part B (medical insurance). This accounts for about 30% of seniors. If you fall into this camp, you will still need to remember to cancel your health insurance through the marketplace once your Medicare insurance kicks in.
Seniors who have qualifying employer-based health coverage when they turn 65 are not required to have Medicare Part B since it comes with a monthly premium. Seniors in this position can opt-out of Medicare Part B coverage and re-enroll in it when they no longer have qualifying coverage. In 2021, the standard monthly premium is $148.50 per month, but those with high incomes pay more. Seniors who are still working at 65, often choose to defer enrollment in Medicare Part B. Since most seniors receive Medicare Part A for no cost, there is no need to opt-out of this coverage.
If you have creditable prescription drug coverage, you do not need to enroll in Medicare Part D (prescription drug benefits). Once your creditable prescription drug coverage ends, however, you will have a window to sign up for benefits or face a Late Enrollment Penalty (LEP) when you do sign up.
Avoid Medicare late enrollment penalties
Some parts of Medicare come with late enrollment penalties if you wait too long to enroll.
Medicare Part B:
Kupuna who do not sign up for Medicare Part B when they are supposed to could be assessed a penalty for the life of their Part B insurance coverage. The penalty can add an extra 10% onto your monthly premium for each 12-month period you should have been enrolled but were not.
Medicare Part D:
Medicare Part D, which offers prescription drug benefits, is technically optional, but seniors will face a LEP if they want to sign up 63 consecutive days or more after their Initial Enrollment Period. This is true even if you opt for a Medicare Advantage Plan that includes Part D benefits. The late-enrollment fee is 1% of the monthly national base premium for each full month that you should have had coverage but did not. In 2021, this worked out to $33.06. Once the penalty is assessed, you will generally be stuck with it for as long as you have Medicare drug coverage.
Will I pay more when I switch from the Health Insurance Exchange to Medicare?
This question comes down to the circumstances of each individual because it depends on many factors, including whether your insurance plan on the marketplace was being subsidized or not and which type of Medicare plan you choose. On the other hand, if you qualified for free health insurance on the exchange under expanded Medicaid rules, then there is a reasonable chance that you will also qualify for help paying your out-of-pocket costs under Medicare.
To compare your Medicare insurance options and to determine the differences in cost from your marketplace plan; speak to a local Medicare agent. Consultations are always free.
Our independent insurance agents are dedicated to assisting people on Medicare and those who are ready to transition from employer coverage to personal retirement coverage. We help kupuna understand their benefits options and apply for additional coverage, as needed. Because we represent all the major Medicare Advantage and supplement plans in Hawaii, we are able to offer unbiased advice; all at no cost to our clients.
At PBC, our clients are our number one priority and we look forward to getting to know you and your needs. Call us today at (808) 738-4500 to see how we may be of assistance.