Delaying Medicare Part B: When Do You Enroll?

Choosing whether to enroll in Medicare Part B when you turn 65 can be a tricky business. It is evident that one should enroll in Medicare Part A upon turning 65; Part A (which provides hospital care and related benefits) is free for many over 65 or otherwise eligible for Medicare. There are a few situations in which Part A will not be free: if you or your spouse has not worked and paid Medicare taxes for at least 10 years or if you are under 65 and disabled, but returned back to work. If you buy Part A coverage, you may pay up to $426 per month (down $15 per month from 2013).

However, it is not as clear-cut when one should enroll in Medicare Part B coverage. Part B (medical insurance) is the part of Medicare that typically carries the highest premium. The premium is primarily dependent upon household income, marital status, and manner of filing tax returns, as is seen to the right. The greater one’s income, the more one has to pay for a Medicare Part B premium each month. For most people with Medicare Part B, this premium is $104.90 per month.

Why might you choose to delay your Medicare Part B enrollment past turning 65? For many who do not retire by the age of 65, employer group health plans are preferable to Part B. You and/or your spouse may choose to delay enrolling in Medicare Part B if your employer group health plans have better medical and prescription drug benefits and/or lower costs. It is a wise idea to speak with both your employer and insurance agent to help make the best decision.

It is possible to delay your Medicare Part B enrollment without penalties, but you must proceed carefully. You can sign up for Part B without penalty at any time that you have health coverage based on current employment or during the 8-month Special Enrollment Period that begins after employment ends or after the eligible group health plan coverage ends- whichever is earlier. Eligible health coverage based on employment does not include COBRA continuation plans.

If you delay Medicare Part B enrollment and fail to sign up during the Special Enrollment Period, you will be penalized. You will have to wait until the next General Enrollment Period for Medicare Part B- from January 1 until March 31 of each year; Part B coverage obtained through the General Enrollment Period is not effective until July 1 of that year. Also, not obtaining Part B coverage during your Special Enrollment Period will make you susceptible to the late enrollment penalty. This penalty is an extra 10% of your Part B premium added on for each 12-month period that you could have had Part B coverage but didn’t. 

Let us give an example: Sally was first eligible for Part B coverage upon turning 65 in December, 2009. However, she still was employed and chose to keep her employer group health plan until retiring. She knew that she would retire in January 2013, so she let the policy end in December 2012. She did not apply for Medicare Part B during her 8-month Special Enrollment Period, so she will have to wait until January 1, 2014 to apply for Medicare Part B coverage during the General Enrollment Period (with penalty). Since Sally had been initially eligible to obtain Part B coverage in December 2009, and since it is now December 2013, Sally had four full 12-month periods for which she could have had Part B coverage but chose not to. She fit into the lowest income bracket for Medicare, so Sally’s base Part B premium for 2014 is $104.90. However these four years without Part B gives a total of a 40% penalty ($41.96) added to the base premium each month. Hence, Sally will have to pay a total premium of $146.86 each month in 2014. The 40% penalty would be added to all of Sally's Part B premiums beginning on July 1, 2014 and continuing for the duration of her Part B coverage.

There are more factors to put in the equation when choosing whether to delay Part B enrollment. First, Medicare Part B processing can take up to 90 days. Also, one can only enroll into Medicare Part C (Medicare Advantage) or a Medicare Supplement policy after Medicare Part B coverage is in place. Delays in Part B processing could make it more difficult, or even make the beneficiary unable to obtain a Part C or Medicare Supplement plan at the desired time.

In delaying enrollment, one must also be wary of delaying Medicare Part D (prescription drug plans). If you are considering keeping an employer group health plan after turning 65, you should discuss with your provider whether your group health plan offers creditable drug coverage. If not, it is advisable to obtain a Part D plan during your initial enrollment period (around the time of turning 65). If your group health plan does provide creditable coverage, there is no penalty for not obtaining Part D coverage while maintaining your group health plan. As in delaying Part B enrollment, you must be careful of timing when delaying Part D enrollment. After your group health plan ends, you will have a 63-day Special Election Period during which you can obtain Part D coverage without penalties or a delay in coverage. If you fail to sign up for Part D coverage during your Special Election Period, you will have to wait until the next Annual Election Period (from October 15 until December 7 each year) to obtain Part D coverage. You will also be subject to a penalty of 1% of the premium for each month you delayed Part D enrollment.

There is a better way to proceed when choosing to delay Part B and/or Part D enrollment: plan ahead. The trick to delaying these enrollment periods without penalty is knowing when you need coverage and planning ahead accordingly. If you know when you are going to retire or have your group health plan end, you should apply for Part B coverage a few months in advance, requesting an effective date corresponding to the date of your terminating coverage. This will prevent you from being hit with any penalties, and will also get you through the processing period before you actually need new coverage to begin. Furthermore, you can specify the desired effective date for your Medicare Part B coverage and any additional coverage, such as a Medicare Supplement and/or a Part D prescription drug plan.

For complete information on Medicare Enrollment, you can download the 2014 Medicare and You booklet here.

Until next time,

Andrew Herman, President
AH Insurance Services, Inc.

ObamaCare - Delays and Deadlines

This is a final reminder! Today is the last day for you to purchase health insurance through the Health Insurance Exchanges (HIXs) for a January 1, 2014 effective date! If you purchase insurance through the HIXs after midnight tonight, your effective date will be in February 2014 or later. After the first of the new year, your effective date on the exchange will be the first of the month following purchase. Open enrollment for 2014 ends on March 31.

Initially, the deadline to purchase health insurance on-exchange with a January 1 effective date was December 15. In November, this date was postponed to December 23 after technical difficulties continued with the online enrollment processes. Since the inception of the HIXs, the government’s healthcare website has been fraught with problems, which have affected both consumers and the insurance carriers offering health plans on-exchange.

While the federal website seems to be functioning at this time, certain components of the enrollment process still do not work. One of the most important aspects of purchasing health insurance - making the initial premium payment - is still problematic. On Friday, an internal manager at Humana reported to me that less than a third of their on-exchange applications have been able to process the initial premium payment at the time of application. Consequently, health insurance carriers are extending the deadline for the payment of the first month’s premium until January 10, 2014 for on-exchange policies effective January 1.

Difficulties with other aspects of the ACA have prompted concessionary actions. As non-grandfathered health insurance plans must, from 2014 on, provide the benefits, rights, and protections mandated in the ACA, many consumers have had their health insurance plans cancelled as of the end of 2013. On December 20, 2013, the government responded to this widespread loss of coverage: those who had insurance plans cancelled due to ACA provisions will be eligible for a “hardship exemption” in 2014. This exemption will make them exempt to the tax penalty imposed for not having health insurance in 2014. This exemption is also extended to those who would need to pay more than 8% of their household income on health insurance, those with incomes below the threshold required for filing taxes, those qualifying for religious exemptions, undocumented immigrants, those who are incarcerated, and members of Native American tribes. Some argue that the penalty for not having an insurance plan in 2014 should be rescinded entirely; but as of the date of this post no announcement to that effect has been made.

The implementation of ACA has been anything but smooth, as evidenced by continuing technological difficulties, mass cancellation of existing insurance policies and large premium increases (typically about double the current cost) for those purchasing ACA-compliant plans without any federal subsidy. Many consumers enrolling into on-exchange plans are finding that their preferred medical providers are not in the network, so they would need to change their doctor(s) to use their insurance policy. As far as how the ACA will play out over time is anyone's guess; but so far the delays and "adjustments" to the rules do not portend success of the program, at least to the extent envisioned by its creators.

Here is a brief summary of the delays and new deadlines to date:

 The Small Business Health Options Program, known as the SHOP exchange, will not offer online enrollment until November 2014. This is a one-year delay from the initially planned launch for last month; however, small businesses still have the option to purchase SHOP plans through a broker or agent.

Employers buying on-exchange plans for their workers in states with federally-run HIXs need to work through an agent, broker, or insurance company. Technical problems have rendered the government website well-nigh impossible to use for employers.

A Spanish-language sign-up tool was to be implemented for individuals purchasing insurance through HIXs. It has been delayed, and has not yet seen the light of day.

 The last day to sign up for insurance effective January 1 was delayed from December 15, 2013 until December 23, 2013.

 The last day to pay the first month’s premium for an on-exchange policy effective on January 1 is January 10, 2014.

 The last day to sign up for insurance without penalty was delayed by six weeks (originally February 15, 2014 and now March 31, 2014).

 The Open Enrollment Period for 2015 coverage has been delayed by a month; it shall now open on November 15, 2014 and end on January 15, 2015.

Employers with more than 50 employees will have until 2015 to provide ACA-complying insurance without penalty.

Until next time,

Andrew Herman, President

AH Insurance Services, Inc.

Beware Part D Late Enrollment Penalties

The Part D Late Enrollment penalty is a penalty for not having a prescription drug plan (Medicare Part D) or some equivalent prescription drug coverage for more than 63 days any time after your initial enrollment period for Medicare is over. The late enrollment penalty will hit you if you have chosen not to obtain a Part D plan for some period of time after your initial enrollment period (perhaps due to a perceived lack of need), if your employer stops providing a plan with equivalent prescription drug coverage and you do not obtain another plan within 63 days, or even if you simply forget to or choose not to get a Part D plan in a given year.

The Part D late enrollment penalties will kick in when you (re)obtain Medicare Part D coverage. At that point, the penalty will be added to your Part D premium for the rest of eternity. The penalty is calculated as following:

(number of months without Part D coverage)*1%*(national base beneficiary premium)

The national base beneficiary premium is $32.42 in 2014, and it is projected to increase every year. Hence, the longer one waits, one will not only have to pay a higher percentage of the premium, but the higher percentage of a higher premium.

Let’s give an example: Mrs. Smith’s initial enrollment period for Medicare Part D ended January of 2009. However, she decides in January 2014 that she wants to get a Part D plan. Since she went for 5 years (60 months) without adequate prescription drug benefits, her penalty will be 60% of $32.42: this amount is $19.45. However, the late enrollment penalty is rounded to the nearest ten cent increment, so she will actually pay $19.50 per month. This amount will be added on to her Part D monthly premium perpetually.

The Medicare website gives a few tips on how to avoid a late enrollment penalty:

1.      Sign up for a Part D plan during your initial enrollment period.

2.      Don’t go for more than 63 days without a Part D plan or creditable coverage. Your plan must tell you each year if your drug coverage is creditable coverage.

3.      If you change plans, make sure to tell your new plan about all coverage, especially drug coverage, that you have had.

You do not have to pay a late enrollment penalty if you qualify for the Low Income Subsidy (LIS) program, also known as Extra Help. This is a program that provides people with low incomes with subsidies for drug plan premiums, deductibles, and copayments. For example, drug costs for LIS beneficiaries in 2013 were no more than $2.65 for a generic drug or $6.60 for a brand name covered drug.

You will automatically get Extra Help if you have both Medicare and Supplemental Security Income or both Medicare and Medicaid. If you automatically get Extra Help under these situations, your insurance provider should send you an LIS rider around September.

If you do not automatically get Extra Help, you can still complete an application if you fit the following criteria:

1.      You have Medicare Part A and/or Medicare Part B insurance.

2.      You live in one of the 50 states or in the District of Columbia.

3.      You have:

a.       Less than $26,580 in combined real estate, savings, and investments (not including your house, vehicles, personal possessions, life insurance) if married and living with your spouse.

b.      Less than $13,300 in combined real estate, savings, and investments (not including your house, vehicles, personal possessions, life insurance) if unmarried or if not living with your spouse.
c.   An income lower than 150% of the Federal Poverty Level ($17, 235 individually or $23,365 if married and living with your spouse).
 

If you meet the above criteria, you may apply for Extra Help at this site.

            It is ultimately your decision whether you obtain a Medicare Part D prescription drug plan. If you feel it is not beneficial at the time, you can save money on premiums in the short-term scope. However, you are likely to have heavier penalties if you delay getting a prescription drug plan for a significant period of time. It is also important to note that whatever penalty you may accrue would need to be paid every month perpetually.

Until next time,

Andrew Herman, President

AH Insurance Services, Inc.