Medicare Enrollment: Hidden Traps
While enrolling in Medicare is not a complicated process, doing it at the wrong time or declining coverage when you should not can make deciding when to enroll and which parts to purchase a real headache -- creating financial and coverage problems that can continue indefinitely. Because of this, even people who are not now on Medicare should become familiar with the process so they will be prepared when they become eligible.
A person becomes eligible for Medicare generally when they turn age 65. Medicare also becomes available to persons collecting Social Security Disability benefits before they turn 65. This is a good time to review the enrollment rules in Medicare since the annual Open Enrollment period -- when Medicare beneficiaries are able to make changes in their Medicare coverage -- is currently ongoing.
In reviewing when a person may enroll or make changes to his or her Medicare coverage, one needs to understand the various parts of Medicare as eligibility periods and rules can vary:
Part A -- Hospital Coverage: This part covers stays in hospitals, convalescent care facilities, and hospices. People who have paid into the Medicare program in their working career through payroll taxes generally pay nothing for this coverage. People who have not may purchase Part A and pay for it themselves upon turning 65.
Part B -- Medical Coverage: This part generally covers the professional charges of physicians and other health care workers; doctors in or out of the hospital; X-rays, laboratory tests, durable medical equipment, etc. This part is considered "voluntary" and a premium, currently $99.90 per month, is charged to everyone enrolled in it.
Part C -- Medicare Advantage Plans: These are the alternate plans to "original" or "fee-for-service" Medicare. Offered by insurance companies, they include Medicare HMOs, PPOs, and other types of coverage. If elected, the beneficiary must seek medical care only through the plan; their Part A and B coverages are suspended while they are covered under a Part C plan.
Part D -- Prescription Drug Charges: These are plans that cover only prescription drugs. Authorized by Medicare, they are sold only through private insurance companies and must be purchased separately. Medicare Advantage Plans (Part C) typically include prescription drug coverage within their plans so separate coverage does not have to be purchased.
Medigap (Medicare Supplement) Plans: These plans fill in the "gaps" in the original Medicare Parts A & B due to the deductibles and co-insurance of Medicare. Although Medicare designs the plans which can be marketed, they are sold exclusively by private insurance companies. It should be noted that one may enroll in these plans anytime they have Medicare Parts A & B, but if they do not enroll during special open enrollment periods, they will be subject to medical underwriting which allows the carrier to decide whether or not to offer coverage based on an applicant's medical condition and health history.
Annual Open Enrollment Period
A Medicare beneficiary has the opportunity to make changes to their coverage during the Annual Open Enrollment Period. While the changes are not effective until the following January 1, they must be made between October 15 and December 7. During this period a person may:
- Change from Original Medicare to a Part C Medicare Advantage Plan;
- Change from a Part C Medicare Advantage Plan to Original Medicare;
- Change from one Part C Medicare Advantage Plan to another Part C Medicare Advantage Plan;
- Purchase a Part D Prescription Drug Plan; Late Enrollment Penalty: It should be noted that if you purchase a Part D Prescription Drug Plan some time after first becoming eligible to purchase one, with a few exceptions, your premium will be surcharged 1% for each month you could have been in a drug plan and didn't purchase one; or
- Switch from one Part D Prescription Drug Plan to another Part D Prescription Drug plan. Note: Even if your current Drug Plan has been serving you well, it is advisable to re-run the program at www.medicare.gov in case your medications have changed or your drug plan is revising its formulary or premiums for the coming year. The plans for 2013 are already up on the website at www.medicare.gov. Click on the link "Part D" and choose "Find a health or drug plan."
Annual Disenrollment Period
Beginning in 2012, Medicare began offering another annual opportunity for persons who are dissatisfied with their Part C Medicare Advantage Plan. Between January 1 through February 14, a Medicare beneficiary may:
- Leave a Part C Medicare Advantage Plan and switch to Original Medicare Parts A & B. Note: This will trigger an opportunity to add a Part D Prescription Drug Plan without penalty.
- That is all that can be done during this period. There is no longer an opportunity to switch from one Part C plan to another or switch drug plans as in former years. That must now be done in the October 15 - December 7 Open Enrollment.
Medicare Enrollment Opportunities
Turning Age 65: A person turning 65 has seven months to enroll in Medicare without penalty, the three months prior to the month he or she turns 65, the month he or she turns 65, and the three months after the month he or she turns 65. It is strongly recommended that you enroll in Medicare in the three months before turning 65; if so, Medicare will be effective on the first of the month that you turn 65. Enrolling in the later four months will delay the Medicare effective date.
At the same time, you should find and enroll in a Part D drug plan as well as Parts A & B of Medicare without penalty. Understand the pitfalls of refusing either Part B or Part D at the time you enroll, outlined below. You also have a guaranteed right (without medical underwriting) to purchase a Medigap policy from a private insurance company.
Once enrolled in Parts A & B of Medicare you will have the opportunity during that seven month period to trade Parts A & B of Medicare for a Part C Medicare Advantage Plan.
Under Age 65 and Receiving Social Security Disability Benefits: Medicare benefits start on the 25th month of collecting SSDI benefits. No enrollment is necessary; the Medicare card will arrive in the mail about two months prior to the effective date of coverage. You will be automatically enrolled in both Parts A & B.
Exception: People receiving Social Security Disability benefits due to End Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant) or from Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig's disease) do not have the 24 month waiting period to get Medicare. They are eligible for Medicare upon being approved for Social Security Disability benefits.
While you may return the card and refuse Part B coverage, be sure you don't or won't need it as there are penalties for enrolling "late" in Part B. You will also have an open opportunity to add a Part D Prescription Drug Plan and also have the right to switch your coverage to a Part C Medicare Advantage Plan.
Federal law does not require insurance companies to accept Medicare beneficiaries under age 65 (disabled beneficiaries) for Medigap coverage on an open enrollment basis as they do for persons turning age 65. Many states, however, have filled that gap with a state statute requiring persons under 65 to be accepted without medical underwriting when first getting Medicare. In states without such legislation, a person under age 65 getting Medicare must go through medical underwriting before getting Medigap coverage.
A Word About Late Enrollment Penalties
Any insurance plan that will let someone join whenever they want without any repercussions won't last long as most people will simply wait to enroll until they know they will be using the plan benefits. This is the principal behind requiring medical underwriting of persons applying for individual health insurance as well as the Coverage Mandate in the new Affordable Care Act.
Medicare resolves this by imposing substantial financial penalties for someone delaying enrollment into Medicare coverages. For example, if you don't enroll in Medicare Part A when first eligible, you will pay a 10% surcharge on monthly premiums once you do enroll for as long as you are on Part A. Note this only applies to those persons who will have to pay a premium for Part A.
Medicare Part B is the same except the premium is surcharged 10% for each twelve month period you didn't enroll. Similar penalties apply to Part D Prescription Drug coverage.
There are Special Enrollment periods during which, due to special circumstances, you will be allowed to enroll late without penalty. However, those rules can be difficult to understand, and very expensive for you if you misread them.
For example, there will be no late enrollment penalties for enrolling late in Medicare Parts A, B, and D if you were covered under a group health plan through an employer due to the active employment of you, your spouse, or other family member and you enroll in Medicare within the eight-month period beginning the month after the employer-based health insurance is lost. Coverage continued under COBRA Continuation is not considered to be active employment. Penalties for late enrollment in Part D -- Prescription Drugs are waived if you provide a letter of Creditable Coverage from the terminating insurance plan that states their prescription drug benefits were as good or better than Medicare Part D.
Before declining or delaying enrollment in any part of Medicare, make sure that the coverage will not later be subject to late enrollment penalties. You can ask Medicare at 800.MEDICARE (800.633.4227). Medicare also has a 12-page publication titled Understanding Medicare Enrollment Periods. This can be found by typing the title above in the search box at www.medicare.gov.
Finally, when you are ready to apply for Medicare, in addition to going into a Social Security office, you can apply on line at www.ssa.gov.
Jacques Chambers, C.L.U., is a Benefits Counselor in private practice with over 35 years experience in health, life and disability insurance and Social Security disability benefits. He can be reached by phone at 323.665.2595, by e-mail at email@example.com, or through his website at www.helpwithbenefits.com.