How does Medicare work?

Medicare Enrollment Guide

How does Medicare work?

Your Medicare information guide

"Can you sign up for Medicare at any time?"

"When should you apply for Medicare?"

"Do you automatically get Medicare when you turn 65?"

"What is the penalty for not signing up for Medicare?

"What is Medicare open enrollment?"

If you haven’t already, refer to my Medicare 101 guide, for a quick easy to read description of all of the different parts of Medicare.

 When and how to sign up for Medicare, Medicare Supplement Plans, Medicare Advantage Plans, and Medicare Part D Prescription Drug Plans can be a complicated endeavor. There are three different types of open enrollment periods, different time frames and dates to sign up for different plans, etc… If you don’t sign up at the right time you could face late enrollment penalties, be denied coverage, or have to wait months before coverage begins. Below is a guide on enrollment options to ensure that your coverage begins when you need it and penalty free. Should you have a question about eligibility or enrollment it is always best to contact an insurance professional, or the health care provider about your situation. However, this is an extremely comprehensive guide on the subject that will answer all of the above questions and more!


Jump straight to:

Original Medicare Automatic Enrollment

You will be automatically enrolled in both Medicare Part A and Part B the following circumstances:

  • If you have ALS (Amyotrophic Lateral Sclerosis) also called Lou Gerhig’s disease you will be automatically enrolled the month your disability benefits begin.
  • If you’re receiving Social Security Disability or certain disability benefits from the Rail Road Board (RRB) you’ll automatically be enrolled as of the 25th month that you’ve been receiving those benefits
  • If you’re getting benefits from Social Security or the Rail Road Board at least 4 months prior to turning 65 you’ll automatically be enrolled in Medicare the first day of the month that you turn 65, unless you’re born on the 1st of the month in which case you’ll receive it on the first day of the month prior to your 65th birthday.
You should receive a “Welcome to Medicare” package with your Medicare Card 3 months prior to your 65th birthday confirming your benefits.

Original Medicare Manual Enrollment

If you don’t fit into one of the above situations for automatic enrollment you will be responsible for enrolling in Original Medicare Part A and Part B on your own.

You have a few different ways to approach this:

Apply online at the Social Security Administration’s website

Visit the nearest Social Security Office

Dial 1-800-772-1213 to enroll by phone

Apply by mail

Delaying Enrollment

 

Delaying Part A

A majority of people will be eligible for premium free Part A and therefor usually enroll in it as soon as they are eligible. There isn’t really any reason not to except for:

If you have a Health Savings Account (HSA) because you’re enrolled in a High Deductible Health Plan (HDHP) you must delay your enrollment of Part A if you wish to continue contributing to your HSA. This is because in order to be eligible to contribute to a HSA you must not have any health coverage other than a HDHP, or you could face tax penalties. Should you choose to delay enrolling in Part A to continue contributing to your HSA, you’ll want to plan on giving yourself 6 months where you do not contribute to your HSA before enrolling in Part A. This is due to the fact that if you are eligible for premium free Part A, it generally starts retro active for up to 6 months which could cause you to be the subject of tax penalties. Good news is that you can use your HSA to pay for Medicare related expenses.

The Catch-22:

If you are currently receiving employer related health coverage AND your employer has fewer than 20 employees you generally need to have Medicare because it will be considered your primary coverage. Failure to enroll in Medicare may cause you to be in a situation where you have little to no health insurance because your employer sponsored plan isn’t required to pay until AFTER Medicare.

Unfortunately, the only way to delay enrolling in Original Medicare Part A is to delay enrolling to receive your Social Security Benefits as well.

 

 

Delaying Part B

Since Part B is not premium free you may want to consider delaying Part B if you are covered under a group health plan provided by you, or your spouse’s current employer, as long as that employer has more than 20 employees. For all other situations you would generally want to enroll when you’re first eligible.

If you are eligible for automatic enrollment you can delay Part B by:

  • Following the instructions on the back of your card that comes with your “Welcome to Medicare” package
  •  Calling Social Security at 1-800-772-1213

If you are not eligible for automatic enrollment:

  • Don’t sign up

 

Delaying Part D

Just like part B the only time it really makes sense to delay enrolling in Part D Prescription Drug Plans whether through a stand-alone plan or a Medicare Advantage plan is if you already have creditable coverage elsewhere. Reasons being that you can incur late enrollment penalties and far worse. Just because you are healthy today, does not mean you will be healthy tomorrow. Should you put off enrolling in Part D without having other creditable drug coverage, not only will you have to wait until the Annual Election Period (AEP) to enroll, but you’ll also be responsible for the full costs of any prescription drugs that you have to obtain at a pharmacy until then.

Initial Enrollment Period (IEP)

The initial enrollment period is a 7 month window that begins 3 months prior to your 65th birthday and ends 3 months after. During this period you will have the option to enroll in:

  • Medicare Part A
  • Medicare Part B
  • Medicare Part C Medicare Advantage Plan
  • Medicare Part D Prescription Drug Plan.
  • Medicare Supplement Plan / Medigap Plan

During this time period you will have the option to opt out of both Medicare Part A & Part B.

If you elect to enroll in both Medicare Part A and Medicare Part B you will begin your Open Enrollment Period (OEP) for a Medicare Supplement Plan (Medigap) as well as your Initial Coverage Election Period (ICEP) for a Part C Medicare Advantage Plan.

During your Initial Enrollment Period (IEP) your coverage start date for Original Medicare is determined by when you enroll. If you enroll within the first 3 months of IEP, which are the first 3 months BEFORE you turn 65, your coverage will start on your 65th Birthday. If you wait until the month of you 65th birthday, which is considered the 4th month of IEP, or the last 3 months you will have a delay in the start of your coverage. Here’s a chart that illustrates when coverage begins if you wait until the last 4 months of your Initial Enrollment Period (IEP):

Two exceptions to this rule are:

  1.  If your birthday is on the 1st of the month, you’ll use the prior month as the month you turn 65 for calculation purposes. So if your birthday is on August 1st, then July would count as you “birthday month” and IEP would being 3 month prior to July, with July 1st being your earliest start date for Medicare. An example would be:

  2. If you qualify for premium free Part A it will be retro active up to 6 months, but no earlier than your 65th birthday.

Once this Initial Enrollment Period (IEP) ends, you may be subject to late enrollment penalties unless you qualify for a Special Enrollment Period (SEP). You should start your research as early as 6 months out from your 65th birthday to give yourself time to consider all of your options. I strongly recommend utilizing the expertise of an agent in the Medicare field to not only ensure that you are properly covered, but to also make sure there is no delay in the start of your coverage, or unnecessary late penalty fees.

Medicare Supplement Open Enrollment Period (OEP)

The terms Medicare Supplement Plan and Medigap are interchangeable. People commonly refer to Medicare Supplement Plans as a Medigap plan and vice versa, it’s just a matter of preference. The Medicare Supplement Open Enrollment Period, is a one time 6 month window that begins the month that your Medicare Part B becomes effective for the first time.

During your Medigap Open Enrollment Period:

  • The insurance company cannot deny you coverage based on medical underwriting such as pre-existing health conditions
  • You may be able to completely avoid, or at least qualify for a reduced waiting period for coverage on pre-existing health conditions. This is determined by the amount of months you’ve had creditable coverage prior to enrolling in a Medigap Plan. For each month you’ve had creditable coverage they will reduce your waiting period. Generally a waiting period is 6 months, so if you had creditable coverage for 5 months prior to enrolling, you would only have a waiting period of one month before coverage for pre-existing conditions begin. There also mustn’t be a gap of more than 63 days in the creditable coverage to qualify
  • You will pay the same as someone who is 100% healthy. They can not charge you MORE for any health issues, or pre-existing conditions
  • They CAN charge more for tobacco use, however

If you were to buy outside of your Open Enrollment Period and did not qualify for a Guaranteed Issue Right:

  • You could be denied a policy all together. You will have to pass medical underwriting in order to qualify
  • You may face higher premiums based on your health and pre-existing conditions
  • You may have a longer waiting period before pre-existing conditions are covered

Medicare Advantage Initial Coverage Election Period (ICEP)

The Medicare Advantage Initial Coverage Election Period is dependent on when you enroll in Medicare Part B. For most people it will run along side your Medicare Initial Enrollment Period (IEP). Which is defined as a 7 month period that begins 3 months prior to you turning 65 and ends 3 months after. However, should you choose to delay in enrolling in Part B, your Initial Coverage Election Period will begin 3 months prior to your Medicare Part B coverage effective date. An example would be if you enrolled in Medicare Part B during the General Enrollment Period (GEP) your coverage effective date for Part B would be July 1st. This would mean your ICEP for Medicare Advantage would start on April 1st and end on June 30th. If you do not enroll in a Medicare Advantage Plan during your Initial Coverage Election Period, you will have another opportunity to do so during the Annual Election Period (AEP), or if you qualify for a Special Enrollment Period (SEP).

Annual Election Period (AEP) / Medicare Open Enrollment Period (OEP)

The Center of Medicare & Medicaid Services (CMS) defines the period of time where you can freely enroll and dis-enroll from Part C Medicare Advantage and Part D Prescription Drug Plans as the Medicare Open Enrollment Period. It is also commonly referred to as the Annual Election Period (AEP). I prefer the term AEP, due to the fact that you can not enroll in Original Medicare for the firs time during the Medicare Open Enrollment period. This frequently causes people to confuse it with the General Enrollment Period (GEP).

So, for those reasons, I will always refer to this time frame as the Annual Election Period (AEP).

When: October 15th – December 7th of each year.

What: The Annual Election Period (AEP) is a period of time where you can enroll, dis-enroll, or change your Medicare Part C Medicare Advantage, or Medicare Part D Prescription Drug Plan for the upcoming year. This means you can:

  • Enroll in a Medicare Advantage Plan if you currently have Original Medicare.
  • Dis-enroll from a Medicare Advantage Plan back to Original Medicare.
  • Switch from one Medicare Advantage Plan to another Medicare Advantage Plan
  • Enroll in a Part D Prescription Drug Plan
  • Dis-enroll from a Part D Prescription Drug Plan
  • Switch from one Part D Prescription Drug Plan to another Part D Prescription Drug Plan

Medicare Advantage Disenrollment Period (MADP)

As of 2019 the Medicare Advantage Disenrollment Period (DEP) is being replaced by the Medicare Advantage Open Enrollment Period (MAOEP). The Medicare Advantage Disenrollment Period ran from January 1st – February 14th of each year. This period of time allowed people to dis-enroll from their Medicare Advantage Plan back to Original Medicare with the option to purchase a Part D Prescription Drug Plan, but no Guaranteed Issue Rights for a Medicare Supplement Policy

Medicare Advantage Open Enrollment Period (MAOEP)

New for 2019 is the Medicare Advantage Open Enrollment Period (MAOEP) which replaces the Medicare Advantage Disenrollment Period (MADP).

When: January 1st – March 31st

What: The Medicare Advantage Open Enrollment Period is a period of time that allows you to make changes to your Part C Medicare Advantage plan.

This means you can:

  • Dis-enroll from a Medicare Advantage Plan back to Original Medicare with the option to purchase a separate Part D Prescription Drug Plan.
  • Switch from one Medicare Advantage Plan to another Medicare Advantage Plan

This may seem similar to the Annual Election Period (AEP), however there are some key differences.

During the Medicare Advantage Open Enrollment Period you CAN NOT:

  • Enroll in a Medicare Advantage Plan if you are currently enrolled in Original Medicare.
  • Enroll in a Part D Prescription Drug Plan if you are enrolled in Original Medicare.
  • Dis-enroll in a Part D Prescription Drug Plan if you are enrolled in Original Medicare with a stand alone Part D Prescription Drug Plan
  • Switch from one Part D Prescription Drug Plan to another Part D Prescription Drug Plan if you are enrolled in Original Medicare with a stand alone Part D Prescription Drug Plan.

General Enrollment Period (GEP)

The General Enrollment Period (GEP) allows you to enroll in Original Medicare Part A & Part B. This time frame is for people who did not enroll during their Initial Enrollment Period (IEP), and do not qualify for a Special Enrollment Period (SEP).

When: January 1st – March 31st

What: The General Enrollment Period (GEP) is a period of time that allows you enroll to Original Medicare.

This means you can:

  • Enroll in Medicare Part A
  • Enroll in Medicare Part B

During the General Enrollment Period, you CAN NOT:

  • Enroll in a Part C Medicare Advantage Plan
  • Enroll in a Part D Prescription Drug Plan
  • Dis-enroll from a Part D Prescription Drug Plan
  • Switch from one Part D Prescription Drug Plan to another Part D Prescription Drug Plan

In summary, the General Enrollment Period ONLY applies to enrolling in Original Medicare.

Keep in mind that if you qualify for premium free Part A, you can enroll in that part of Original Medicare at any time.

Special Enrollment Period (SEP)

The Special Enrollment Period (SEP) is a period of time where you can enroll in Original Medicare, Part C Medicare Advantage, or a Part D Prescription Drug outside of the traditional enrollment periods. Special Enrollment Periods also allow you to avoid the late enrollment penalties that generally go along with putting off your enrollment in one of the above plans. Let’s break this into sections.

 Original Medicare Special Enrollment Period:

You could qualify for a Part A & B Special Enrollment Period:
  • If you or your spouse is working and you are covered under the current employer or union based group health plan.
  • You also qualify for an 8 month SEP that begins the month after that employment ends, or the month after the group health insurance with that employer ends, whichever happens first.*
  • If you’re a volunteer, serving in a foreign country returning to the United States.

* Note that COBRA and retiree health plans will not count as coverage based on that employer. So for example if your employment ends, even if you enroll in COBRA, the timer on your 8 month window for the Original Medicare Special Enrollment Plan still begins. It is not delayed based on your enrollment in COBRA because it does not count as employer provided health coverage.

Medicare Advantage / Part D Prescription Drug Plan Special Enrollment Period

You could qualify for a Medicare Part C Medicare Advantage or Part D Prescription Drug Plan Special Enrollment Period if:

  • You move outside of your plan’s service area and you notify them prior to your move, you will qualify for a SEP that starts the month before you move and ends 2 full months after you’ve moved. If you wait until after you’ve moved to notify your plan, your SEP begins the month you notify them and ends 2 full months after that. During that time you are eligible to switch from one Medicare Advantage or Prescription Drug Plan to another. You may also enroll in Original Medicare and a Medicare Supplement plan with Guaranteed Issue Rights for your Medigap plan.
  • You move within your plan’s service area AND there are new plan options available in your new area that were not previously available in your old area you will qualify for a SEP that starts the month before you move and ends 2 full months after you’ve moved. If you wait until after you’ve moved to notify your plan, your SEP begins the month you notify them and ends 2 full months after that. During that time you are eligible to switch from one Medicare Advantage or Prescription Drug Plan to another.
  • You were living overseas and return to the US your SEP will begin the month you moved back followed by 2 full months after where you can enroll in a Medicare Advantage or Prescription Drug Plan.
  • You are institutionalized, such as living in a Long Term Care (LTC) Hospital or Skilled Nursing Facility (SNF) you qualify for a SEP that lets you enroll in, dis-enroll from, or switch a Part C Medicare Advantage and/or Part D Prescription Drug Plan at any time during your stay in the institution and for up to 2 months after you leave.
  • You were previously incarcerated you have a Special Enrollment Period that ends 2 full months after the month you were released from jails in which case you can enroll a Medicare Advantage or Prescription Drug Plan.
  • You lose coverage, such as an employer provided health coverage plan, other creditable drug coverage, or dis-enroll from a Medicare Cost or PACE plan you will have a Special Enrollment Period that last 2 full months after the month you’ve lost one of the above coverage. During this Special Enrollment Period you will be able to enroll in a Medicare Advantage, or Prescription Drug Plan except for when you leave a Medicare Cost Plan, in which case you are only eligible to enroll in a Prescription Drug Plan.
  • You are eligible for both Medicare and Medicaid you may enroll, dis-enroll, or switch your Medicare Advantage and/or Medicare Prescription Drug Plan at any time throughout the year.
  • You become ineligible for Medicaid you will have the right to enroll, dis-enroll, or switch your Medicare Advantage or Prescription Drug plan as well as enroll in Original Medicare for 2 full months after the month you find out that you are no longer eligible. If you don’t lose your coverage until the following year, your Special Enrollment Period (SEP) will begin January 1st and end March 31st.
  • You are enrolling in an employer or union supplied health coverage plan, other creditable drug coverage, or a Program of All-Inclusive Care for the Elderly (PACE) you can drop your Medicare Advantage and/or Prescription Drug Plan at any time to do so.
  • You have a condition that meets the requirements for a Special Needs Plan (SNP) and there is one available. You will have a one time Special Enrollment Period where you can enroll. You can do so at any time, but once you do, your Special Enrollment Period ends.
  • You are currently in a Special Needs Plan (SNP) and no longer have a qualifying condition you may switch to a Medicare Advantage or Prescription Drug Plan starting when you lose your Special Needs status and up to 3 months after your grace period ends.

5-Star Special Enrollment Period

Medicare has a 5-star rating system to help consumers in choosing a Medicare Advantage Plan, or Prescription Drug Plan. Much like browsing Amazon for the best rated products, or checking out Google for which restaurants provide the best food and service in your area, these Medicare Advantage and Prescription Drug Plans get rated on quality and performance based on information provided by consumers and health care providers.

When: December 8th – November 30th of the following year.

What: During this time period you will have the opportunity to enroll in a 5-star Medicare Advantage or Prescription Drug Plan. You may only exercise your right to switch once per time frame.

Medicare Supplement / Medigap Special Enrollment Period

This is actually referred to as a Guaranteed Issue Right, which is also known as Medigap Protections.

Guaranteed Issue Rights / Medigap Protections

Guaranteed Issue Rights give you similar benefits to your original Medigap Open Enrollment Period (OEP). During this time:

  • You can not be denied a Medicare Supplement Insurance Policy
  • There is no waiting period for coverage on pre-existing conditions
  • You will pay the same as someone who is 100% healthy. They can not charge you more for any health issues, or pre-existing conditions.

You may qualify for a Gauranteed Issue Right if:

  • Your Medicare Advantage Plan no longer offers coverage in your area -OR- you move outside of the service area for a Medicare Advantage, or Medicare SELECT plan you may enroll in the following plans: A, B, C, F, K, and L. You can make this purchase as early as 60 days prior to your Medicare Advantage Plan ending and as late as 63 days after the coverage ends. Regardless of when you do it, the Medicare Supplement plan may not start before your Medicare Advantage Plan ends.
  • You enrolled in a Medicare Advantage Plan, or a Program of All-Inclusive Care for the Elderly (PACE) when you were first eligible for Medicare Part A at age 65 and exercise your rights under the 12 month period defined as a trial right to return to Original Medicare, you may purchase ANY Medigap plan. You can make this purchase as early as 60 days prior to your Medicare Advantage Plan ending and as late as 63 days after the coverage ends. Regardless of when you do it, the Medicare Supplement plan may not start before your Medicare Advantage Plan ends.
  • You dropped a Medicare Supplement Insurance Plan in order to join a Medicare Advantage Plan or switch to a Medicare SELECT Plan for the first time and exercise your rights under the 12 month period defined as a trial right to switch back, you may enroll in the same Medigap policy you had before if the same insurance company you had before still offers it. If not, you may enroll in the following plans: A, B, C, F, K, and L. You can make this purchase as early as 60 days prior to your Medicare Advantage Plan ending and as late as 63 days after the coverage ends. Regardless of when you do it, the Medicare Supplement plan may not start before your Medicare Advantage Plan or Medicare SELECT Policy ends.
  • Your current Medicare Supplement Insurance policy ends due to no fault of your own, such as the Insurance Company going bankrupt. You may enroll in the following plans: A, B, C, F, K, and L. You must enroll in one of these Medigap plans no later than 63 days from the date your coverage ended.

Late Enrollment Penalties

Failure to enroll in Medicare Part A, Part B, or Part D at the right time could result in late enrollment penalties.

I will break down:

  • How much the late fee is
  • How long you have to pay the late fee
  • How to calculate the late fee

Part A Late Enrollment Penalty

You may be subject to a late enrollment penalty if all of the following apply:

  • You don’t qualify for premium-free Part A.
  • You don’t enroll during your Initial Enrollment Period (IEP) and maintain coverage
  • You don’t qualify for a Special Enrollment Period (SEP)
 
The fee is calculated as follows:
10% increase on your Part A premium for twice as long as you went without Part A coverage while eligible.
 
 

Here’s an example:
Your cost for Medicare Part A is $232 and you went 7 years without coverage after your Initial Enrollment Period (IEP) ended.

To calculate your late fee:
(Medicare Part A premium x late penalty)

$232 x .10 (10%) = $23.20

To calculate your total premium:
(Medicare Part A premium + late fee)

$232 + $23.20 = $255.20

Your total cost for your Medicare Part A coverage is $255

To calculate the length of time:
(Years without coverage x 2)

7 x 2 = 14 years

You will pay $255 for 14 years.

Part B Late Enrollment Penalty

You may be subject to a late enrollment penalty if all of the following apply:

  • You don’t enroll during your Initial Enrollment Period (IEP) and maintain coverage
  • You don’t qualify for a Special Enrollment Period (SEP)
 
The fee is calculated as follows:
10% increase for every 12 months you go without coverage while eligible. Unlike Part A, this penalty is attached to your Part B premium for as long as you have it.
 

Here’s an example:
Your cost for Medicare Part B is $187.50 and you went 5 years without coverage after your Initial Enrollment Period (IEP) ended.

To calculate your late penalty:
(Years without coverage x 10%)

5 x .10 (10%) = 50%

To calculate your late fee:
(Medicare Part B premium x late penalty)

$187.50 x .50 (50%) = $93.75

To calculate your total premium:
(Medicare Part B premium + late fee)

$134+ $67 = $281.25

Your total cost for your Medicare Part B coverage is $281

Part D Late Enrollment Penalty

You may be subject to a late enrollment penalty if all of the following apply:

  • You don’t enroll during your Initial Enrollment Period (IEP) and don’t maintain creditable drug coverage
  • You don’t qualify for a Special Enrollment Period (SEP)
The fee is calculated as follows:
1% of the National Base Beneficiary Premium (NBBP) multiplied by the number of full months you did not have creditable drug coverage. The premium is then rounded to the nearest $.10 cents and added to your Part D premium.
 

Heres an example:

Your Medicare Part D premium is $25.10. In 2019 the NBBP is $33.19 and you went 27 months without creditable drug coverage.

To calculate your late penalty:
(Months without coverage x 1%)

27 x .01 (1%) = 27%

To calculate your late fee:
(NBBP x late penalty)

$33.19x .27 (27%) = $8.96

You would round that up to the nearest $.10 cents.

To calculate your total premium:
(Medicare Part D premium + late fee)

$25.10+ $9 = $34.10

Your total cost for your Medicare Part D coverage is $34.10

 

How to Avoid Late Enrollment Penalties

To avoid Late Enrollment Penalties you must know and understand the rules of enrollment and eligibility as it applies to Medicare. The most sure fire way to avoid them is to sign up as soon as you are eligible. However, that is not always the best option because there are situations where it makes sense to delay your enrollment in Part A, B, or D. I wrote this guide in an attempt to educate you and help minimize your exposure to receiving a late enrollment penalty. As always, your best bet is to speak with an Insurance professional that specializes in Medicare. This will save you a lot of time and energy, while also minimizing the chance for an expensive mistake such as going without health coverage or paying a late enrollment penalty.

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Sean Senseman

Sean Senseman

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