Don’t Make This Major Mistake When Signing Up for Medicare

It’s common knowledge that age 65 is when you enroll in Medicare. Failing to sign up at that time means that when you do enroll, you’ll be hit with late enrollment penalties that increase your Medicare premiums for the rest of your life.

But if you work past 65 and have creditable health coverage through your employer, or if you’re retired and are covered by your spouse’s employer health plan, you can delay enrolling, without penalty, until that coverage ends. That’s where mistakes can be made.


Special Enrollment Period (SEP)

When you lose the employer health plan, Medicare creates a Special Enrollment Period (SEP) that lets you enroll without penalty. You can only use this SEP while you are covered by job-based insurance or for eight months after the coverage ends. However, Medicare doesn’t consider retiree health insurance or COBRA as creditable employer insurance. If that’s what you have, then you need to sign up for Medicare when you turn 65 or you’ll be thrown into that late-enrollment penalty situation.


Who’s On First

Even when you have job-based insurance, some employers designate Medicare as your primary health coverage when you turn 65 and the company plan becomes secondary. If that’s the case, the employer plan will only pay a claim after Medicare has paid its portion. And if your employer coverage makes Medicare the primary insurance, you must sign up at age 65 if you want to avoid late enrollment penalties. Check with the human resources department to see who’s primary and who’s secondary.


Understanding the Late Enrollment Penalties

For every 12 months that you delay enrolling in Part B, which covers doctor visits, outpatient care, and other services, your monthly Part B premium may be 10 percent higher. The penalty won’t apply if you have job-based insurance or are still under your special enrollment period.

For every 12 months that you delay signing up for a Part D Prescription Drug plan, your monthly premium may be 1 percent higher. Part D plans cover prescription drug costs. You won’t have to pay the Part D penalty if you can show Medicare that you have drug coverage as good as that provided by a Medicare Part D plan.

Generally, you receive a letter from your employer or insurance plan in September each year letting you know if you have drug coverage comparable to a Part D plan. If you lose your drug coverage, you’ll be eligible for a two-month special enrollment period, during which you can sign up for a Part D plan without a penalty. Make sure you keep that letter. When it comes time for you to enroll in Part D you can prove to Medicare that you did have Part D-comparable prescription drug coverage.


One Exception to the Penalties

Late enrollment penalties usually last for as long as you have Medicare. But if you’re paying the late enrollment penalty and qualify for and enroll in a Medicare Savings Program or the Extra Help program, which helps low-income seniors pay for Medicare out-of-pocket costs, your penalty goes away.

Having job-based health insurance past age 65 is great. But there are things to watch out for. Know the details of the plan you have. It will keep you from being thrown into—The Penalty Zone!

Previous articleWeekly Market Pulse (VIDEO)
Next articleAnother Historic Social Security Cost of Living Increase is on the Way