How and when you should enroll in Medicare is largely dependent on your personal situation. Your eligibility, enrollment period and plan options can all be impacted by your employment situation, benefits you may already have, your health needs and more. The best way to make sure you understand what to do when is to speak with an expert. But we can help you understand the various scenarios that might apply to you.
How to Apply for Medicare
1. Determine whether you are eligible or not.
In short, you qualify for full Medicare benefits if:
- You are 65 or older
- You are a permanent legal resident who has lived in the United States at least five years or are a US Citizen; and
- You (or your spouse) are eligible for Social Security or Railroad Retirement Board benefits; or
- You (or your spouse) are a government employee or retiree who has not paid into Social Security but has paid Medicare payroll taxes while working.
2. Make sure you are signed up for Medicare Part A and Part B.
Usually, if you are approaching age 65 and are already receiving Social Security or Railroad Retirement Board benefits, you will most likely be automatically enrolled in Part A and Part B and will receive your Medicare card and a welcome packet three months before turning 65. If you are not receiving these benefits, you may have to manually enroll. Regardless, it is always a good idea to make sure you know ahead of time how your situation will work. Call or visit your local Social Security office for help with this.
3. Once you know that you are signed up for Medicare Part A and Part B, you should consider additional health plan options to meet your needs.
These options could include Medicare Advantage plans, Medicare Supplements, and/or Part D Prescription Drug plans. You have many options available to you, and they vary in benefit design, cost and flexibility. Not sure where to begin? Our advisors are experts in these plans and can walk you through, step by step, all the things you should consider and even provide a personal plan recommendation for you, based on your needs and wants.
When to Enroll in Medicare
Much like your eligibility situation, the time frame during which you should enroll in Medicare is largely dependent on your unique circumstances. Here is a general overview of the different types of enrollment periods and details on when they apply.
Initial Enrollment Period
Your Initial Enrollment Period (IEP) is the first time you are eligible to sign up for Medicare (Parts A, B, C and/or D). This time frame starts three months before the month of your 65th birthday, includes your birth month, and extends to three months after the month of your 65th birthday. So for example, if your birthday is June 15, your IEP would look like this:
- March 1: Your IEP begins, and you are officially eligible to enroll in Medicare Parts A, B, C and/or D
- June: You turn 65 this month
- September 30: Your IEP ends; by now you should have chosen and enrolled in the health plan that is right for you
Special Enrollment Period
Like the name implies, Special Enrollment Periods (SEPs) are granted due to special circumstances. These circumstances can include things like losing employer coverage. Let’s say you delayed (a.k.a. deferred) your Medicare IEP when you turned 65 because you were still working and received creditable coverage (does not include Veterans, retiree coverage, and/or COBRA) through your (or your spouse’s) employer. When you are ready to retire, you will be able to enroll in Medicare through a Special Enrollment Period (otherwise known as an SEP), which can begin either the month after your employment ends or the month after your current employer health insurance plan ends and lasts for up to eight months.
Because the rules around Special Enrollment Periods are very tricky and depend largely on your situation, we encourage you to call one of our licensed Benefit Advisors if you have specific questions.
General Election Period
If you don’t enroll during your IEP and you do not qualify for an SEP, but you need Medicare then you will enroll during the General Election Period which is January 1 – March 31. Because this may force you to go for a period without any health insurance, you will more than likely incur a late enrollment penalty (LEP). Once you have enrolled, your health care coverage will begin on July 1st.
Late Enrollment Penalties
Understanding these different enrollment periods and how they impact you is important because if you do not sign up for Medicare on time, you can incur penalties that add unnecessary expense and can stay with you for life. Here are a few to be aware of.
Medicare Part A Penalty
While many people do receive Part A “premium free,” there are some circumstances where you might be required to sign up for Part A manually. If this applies to you and you do not sign up for or delay Part A during your Initial Enrollment Period, you could incur a late enrollment penalty.
The Part A penalty is 10 percent of the current Part A premium. You will pay the Part A premium + the penalty for twice the number of years you were eligible for Part A but were not enrolled.
Example: Betty did not sign up for Part A until she was 67 and was assessed the Part A penalty. Since the 2017 monthly premium is $413, Betty must pay a $0 premium (she gets Part A free due to her work history) + $41.30 per month for the late enrollment penalty. Because Betty went two years beyond Medicare eligibility (age 65) without Part A, she must pay this late enrollment penalty every month for two years.
Medicare Part B Penalty
Like Part A, if you sign up late for Part B, you will receive a penalty. However, this penalty stays with you for the rest of your life in addition to your monthly Part B premium.
One exception to this rule is if you enroll in Medicare through a Special Enrollment Period. In this circumstance, you might not be required to pay this penalty.
The Part B penalty causes your Part B premium to go up 10 percent for each full 12-month period that you went without it.
Example: Roger turned 65 in 2016 and should have taken Part B but chose to retire and enroll in COBRA instead. Eighteen months later, Roger’s COBRA ended, and he discovered he would be penalized for not taking Part B. Because the 2018 Part B premium for his income level is $187.50, Roger will have to pay a penalty of $18.75 per month for every year going forward that he has Part B.
Medicare Part D Penalty
Due to confusion about what makes drug coverage creditable, the Medicare Part D penalty is especially tricky for retirees. However, it pays to make sure you take the appropriate steps with your drug coverage and avoid this penalty.
If you do not sign up for Part D coverage when you first enroll in Medicare Parts A and B, and you do not have creditable coverage, you will be penalized.
Like Part A and Part B, the Part D penalty is added to the regular premium for your drug coverage. The fee is calculated as 1 percent of the average monthly prescription drug premium times the number of months you were late, rounded to the nearest 10 cents. This penalty stays with you for as long as you carry Part D coverage.
Example: Steve thought his drug coverage through his employer was creditable but found when he went to retire at 66 that it was not. Because Steve went without creditable drug coverage for 12 months, his penalty would be 1 percent of the average monthly premium (35.02 for 2018) x 12 months = $4.20 per month. This penalty is then added to his drug plan’s regular monthly premium, which is $40 per month, meaning Steve will pay $44.20 per month for coverage. So, for the rest of his life, Steve will pay his Part D plan’s monthly premium (which can change each year) + $4.20 per month.