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Everything You Need to Know About Medicare Late Enrollment Penalties
According to experts, you should enroll in Medicare as soon as you are eligible to avoid incurring late enrollment penalties. If you fail to enroll for Medicare, late enrollment penalties for Medicare Part A, B and D can add up to thousands of dollars in the long run. Ideally, most people become eligible for Original Medicare on their 65th birthday. However, one can become eligible earlier if they have a disability or suffer from end-stage renal disease (ERSD) or Lou Gehrig’s disease.
The initial enrollment period starts three months before turning 65 years (including your birthday month and three more months after your birthday). Ergo, the enrollment period is around seven months to give you ample time to choose the ideal Medicare plan. It is essential to understand that there are a few scenarios one cannot incur a penalty after delaying an enrollment. However, in most cases, you will pay more if you fail to enroll for a Medicare plan when you become eligible.
Medicare Late Enrollment Penalties and How to Avoid Them
Part A Late Enrollment Penalty
If you or your spouse have a qualifying work history of at least a decade (40 quarters), you qualify for Medicare Part A because you have paid the Medicare taxes. However, if you are not eligible, you need to sign up during the initial enrollment period (IEP) and pay to avoid a 10% minimum premium penalty for twice the number of years you did not enroll. For instance, if you were eligible for Medicare Part A in 2018 but did not enroll until 2021, you will pay a 10% premium penalty for six years.
In 2021, the premium penalty for people with fewer than 30 quarters of qualifying work history is $471 a month, but for those with 30 to 39 quarters of work history, the premium is $259. The premium penalty can add up quickly, especially if you fail to enroll for a few years.
Is there a late penalty exception for Medicare Part A?
If you had qualifying coverage via your employer or spouse’s employer and delayed your Medicare Part A, you do not have to pay the penalty. Also, you can avoid the late penalty if you qualify for a Special Enrollment Period (SEP).
Medicare Part B Late Enrollment Penalty
In 2021, the Centers for Medicaid and Medicare Services (CMS) set the standard penalty for Medicare Part B to $148.50 per month. However, those with higher incomes can face the Income Related Monthly Adjustment Amount (IRMAA).
Failure to enroll in Medicare Part B during the IEP attracts a 10% late enrollment penalty. The penalty is imposed for every year you delay enrolling in Medicare Part B. The penalty is also cumulative for each year you were eligible and fails to enroll. This means you pay 30% higher if you put off enrollment for three years. It is crucial to understand that you pay the additional penalty amount as long as you have Medicare coverage.
The late enrollment penalty for Medicare Part B is based on the standard premium for each year. If the premium increases on Medicare Part B, the late enrollment penalty also increases. The late enrollment penalty does not affect your eligibility to enroll in Medicare supplements.
Not sure what Medi-gap plan to enroll in, or if an Advantage plan is better, contact our office!
Exceptions for Late Enrollment Penalty for Medicare Part B
If you have health insurance coverage from another source, you can delay enrolling in Medicare Part B. However, the other source should be qualifying, i.e., from a large employer group health plan. Typically, most people delay enrolling in Medicare Part B until they retire to avoid paying for Medicare while still working. For small employers with less than 20 employees, you need to enroll in Medicare Part A and B during the initial enrollment period. Here, Medicare is considered the primary insurance option.
Medicare Late Enrollment Penalty for Part D
Although Medicare Part D is considered voluntary, you will still incur a late enrollment penalty if you fail to enroll during the IEP. The penalty is based on the amount of time you did not have the coverage. You will pay for the penalty as long as you have Medicare Part D coverage.
The late enrollment penalty is 1 percent ($0.1) for each month you did not have Part D coverage. The national base premium for Part D Medicare is about $41. Remember, the rate increases every time the premium increases. Please contact our office, to find out if you have credible Part D Coverage.. It is advisable to enroll in Medicare Part D even if you do not take any prescription drugs to avoid future penalties.
Exceptions for late Enrollment Penalty for Medicare Part D
Penalties are exempted to those who qualify for the Extra Help Program. The Extra Help Program is ideal for low-income individuals. With the Extra Help Program, individuals do not incur any penalties if they did not have creditable coverage for more than two months. However, it is your responsibility to prove that you had creditable coverage from your employer. To achieve this, you have to produce a letter sent from your employer’s health insurance company after quitting your job.
If you fail to produce these letters, you will have to pay the late enrollment penalty. Typically, the letter is sent by the insurance company within two weeks. After retiring and enrolling for Medicare Part D, you need to produce these letters to prove you have had coverage since you turned 65.
If you have prescription drug coverage from a union, employer, or any other source, for example, VA drug coverage, you can avoid the late enrollment penalty.
Final Words
Since most people are not familiar with the late enrollment penalty rules, they pay thousands of dollars as the Medicare late enrollment penalty. On the other hand, some people do not feel the need of enrolling to Medicare Part A, B, or D because they are healthy. Even if you feel okay and do not feel the need, you should enroll in Medicare to avoid incurring hefty penalties over time. Finally, thorough research and seeking help from Medicare insurance brokers such as NYC Business Group, will help find the right coverage when turning 65.