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When should you enroll in Medicare to avoid penalties?
Medicare’s sign-up window starts three months before your birth month when you turn 65 and ends three months after. You will have to enroll in Medicare during this sign-up window to avoid penalties unless you have creditable coverage (ex., employer health insurance plan).
You will also have guaranteed issue rights during your initial enrollment period; this means that insurance companies can’t deny you a Medicare Supplement insurance plan because of pre-existing health conditions or disabilities.
If you don’t enroll in Medicare in time, you most likely have to pay the penalty for parts B and D.
* Late Enrollment Penalty part B: Your monthly Part B premium could be 10% higher for every entire 12-month period that you were eligible for Part B.
That means one year is 10%; two years is 20%, three years is 30%, and so on.
*Late Enrollment Penalty part D: For each month you delay enrollment in Medicare Part D, you will have to pay a 1% Part D late enrollment penalty (LEP). The penalty is calculated based on 1% of that year’s national average Part D premium.
For example, the national average for 2023 is $31,50, so if you went 18 months without credible prescription coverage, your penalty would be as follows: $31,50 x 1% = $0.315 x 18 months = $5.67 penalty per month.
Medicare enrollment periods
- Initial Enrollment Period: Lasts for seven months; your sign-up window is from 3 months before your birth month when you turn 65 to 3 months later. You have to enroll in Medicare during this sign-up window to avoid potential penalties. If you don’t register in time, you may have to pay the penalty for parts B and D.
- Annual Enrollment Period: Anyone can use the AEP to make changes to their Medicare coverage – from October 15 to December 7
- Open Enrollment Period: January 1 to March 31
- Lock-in Period: April 1 to December 31
- Special Enrollment Period: Special circumstances within the year
- Medicare Birthday Rule: The Medicare birthday rule allows consumers to change to an equal or lesser benefit Medigap policy within a 60-day window without medical underwriting (not available in all states).
What if you had creditable coverage through your work or your spouse’s employer?
Depending on your plan through work, you may not need to enroll in Medicare part B or D. If you do have creditable coverage through work, keep the Certificate of Creditable Coverage in your records as proof. You will likely need to use this as proof that you had creditable coverage later. Plan and enroll before your employer coverage ends to avoid penalties due to a gap in your coverage.
What happens if you don’t have creditable coverage?
As soon as your coverage terminates, you have 63 days to enroll in new coverage, or else you begin to accrue the Part B and Part D penalties. If you are without credible coverage for 12 months, you will be assessed a premium penalty for Part B and Part D whenever you enroll. Medicare Advantage Prescription Drug (MAPD) plans will have a Part D penalty even with a zero-premium plan.
Your creditable coverage will end when you retire or change jobs. When it ends, you will need to enroll in Part B and/or a Part D prescription plan to avoid any late enrollment penalties.
Does your employer offer cobra?
*If you have COBRA before signing up for Medicare, your COBRA will most likely end once you sign up. You will have eight months to sign up for Part B without a penalty, whether or not you choose COBRA. If you miss this period, you’ll have to wait until January 1 – March 31 to sign up, and your coverage will start on July 1. This could cause a gap in your coverage, and you could end up with a lifetime Part B late enrollment penalty (medicare.gov).
* Generally, COBRA coverage is offered for 18 months (36 months in some cases).
What if you are on disability?
Being on Disability and Medicare Penalties
If you have a disability, you qualify for social security disability payments before 65. You will also be eligible to receive Medicare health coverage and will receive Medicare Part A (Hospital) automatically. The only thing you will need to do is; to determine if it is necessary to enroll for Part B/D during the initial enrollment period to avoid penalties or if you can delay your enrollment. If you don’t sign up or drop out before you turn 65, you will have to pay a late penalty. This is an additional 10% of the Part B premium for each year you didn’t have part B but were eligible for and for part D: for each month you delay enrollment in Medicare Part D, you will have to pay a 1% Part D late enrollment penalty (LEP).
When you turn 65, your initial enrollment period (on disability) will restart. You lose your eligibility for Medicare based on disability, and it will be based on your age; you will have the same enrollment period as anyone else who turns 65.
Your Medicare sign-up window is from 3 months before your birth month when you turn 65 to 3 months later.
Being on Disability and Paying a Part B Late Penalty
When you turn 65, the initial enrollment period you had before (while on disability) will restart. The Medicare coverage restarts as if you never had it before. Any late penalties for Part B or Part D (drug coverage) you had to pay when you were on disability will be waived; you will no longer have to pay those.
Disability and Guaranteed Issue Rights
After being on disability, you will be eligible for the guaranteed issue rights; this means that companies can’t deny your Medicare Supplement insurance plan application because of pre-existing health conditions or disabilities.
Everyone is eligible for the guaranteed issue rights during their initial enrollment period, even if they were denied before when they were on disability.
Make sure to compare medicare plans and prices and review your Medicare plan yearly.