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.