Medicare Enrollment Requirements
Over the past couple of weeks, a few people who happened to be approaching their 65th birthday asked me the following question:
I will be turning 65, intend to continue working for several more years, and have medical coverage through my employer. Am I required to sign up for Medicare Part A (hospitalization coverage)?
No. You are not required to enroll in Medicare Part A but you probably should.
Since 10,000 Baby Boomers are retiring every day, It is surprising not to be asked this question more often.
Let’s begin by establishing that Medicare and Social Security are two separate programs even though a person can enroll in Medicare through Social Security.
Believe it or not, there are three distinct Medicare enrollment periods: initial, general, and special.
For the sake of this Update, let’s create a fictitious 65-year-old named Mike.
The detailed “when to enroll” answer for a 65 Year Old covered by a group plan
No one is required to “sign up” for Medicare benefits. If Mike does not enroll in the Medicare program at age 65 and then decides years later to enroll, he or she may be subject to costly penalties.
65 year olds (or spouses) like Mike who are employed and/or covered by an employer or union group medical plan are not technically required to enroll in Medicare Part A. Should Mike decide to delay enrollment past his “initial seven month enrollment period” (which begins three months prior to his 65th birth month), he will need to demonstrate continuity of coverage upon enrollment in the program. In other words, Mike cannot terminate group coverage, remain uninsured for a year or two and then sign up for Medicare without paying a penalty.
Mike may enroll in Medicare Part A at any point in time while covered under a group plan. Should Mike’s coverage expire, he will have eight months (referred to as the special enrollment period) to enroll in Medicare without being subject to penalties.
Natural follow-up question
So if a person is covered by a group plan and not technically required to sign up for Medicare at age 65, why do it?
Mike has worked for over 10 years and paid the 1.45% Medicare tax, so he will not pay a monthly premium for Medicare Part A (which could run as high as $407 per month). Ultimately, if Part A is already paid for, why should Mike go through the bother of having to prove continuity of coverage? And, Medicare Part A may actually offer superior (or supplemental) coverage to his group plan, which may lower his out-of-pocket costs.
Be aware that firms typically have a corporate policy for employees (or spouses of employees) who become eligible for Medicare. If this is the case, Mike should spend some time evaluating and comparing group-plan benefits/costs to Medicare Parts A, B, and D. In some cases, companies modify coverage for Medicare eligible employees. Additionally, if an employer plan becomes the secondary insurer/payer, Mike should enroll in both Medicare Parts A and B.
In order for Mike to effectively coordinate coverage under two separate plans, I strongly recommend that he discuss options with his human resources department. It would then be wise for him to review the details with Medicare prior to making a final decision because mistakes can be costly and irreversible.
What if a 65 year old is not covered by a group plan?
If Mike does not have coverage and wants to avoid potential penalties, at a minimum he should sign up for Medicare Parts A during his initial enrollment period. During this time, and since he enrolled in Part A, Mike may also obtain Medicare Part B (doctor visits) at a monthly cost of $104.90. (It is worth noting that based on Mike’s annual income, Part B premiums could increase by as much as 220%).
If an uninsured Mike does not enroll in Medicare during the initial enrollment period, he may do so in future years during the “general enrollment period” from January 1st through March 31st. Coverage will subsequently begin on July 1st. (Note that unless Mike can prove continuity of coverage, he will be responsible for a 10% premium bump for each year he failed to carry insurance for the rest of his life.)
Part D (prescription drug coverage) enrollment mirrors Part B: Mike must have both Parts A and B to qualify for Part D. The 2015 prescription drug premium national average is around $47.50 per month and, based on his income, this may increase by an additional 187%. Of course, rules concerning continuity of coverage (“credible coverage”) and penalties also apply. As a matter of fact, in order to meet continuity of care requirements, Mike must show that current coverage is at least equivalent to the Medicare drug plan being considered.
A few other considerations
• If a 65-year-old, or his or her spouse, is covered by an employer’s group health plan with 20 or more participants, Medicare will become the secondary payer.
• From a Medicare perspective, COBRA is not considered a health insurance plan and thus cannot be used to show continuity of coverage.
• Upon enrolling in Medicare, a plan participant is no longer eligible to contribute to a health savings account (HSA).
• A person currently receiving Social Security benefits will automatically be enrolled in Medicare Parts A and B at age 65.
• If a retiree wants health care coverage, Medicare is pretty much the only game in town.
After an analysis of the enrollment process, one thing is crystal clear; federal entitlement programs are complicated, and being uniformed can be costly. The best advice I can give is know your options and coordinate coverage between your employer/union and Medicare. Finally, if you have worked for 10 or more years, there is simply no benefit to delaying signing up for Medicare Part A.