With all the various parts and plans, it’s hard to fully understand Medicare. The good news is that learning just a few basics will help a lot in preparing you for enrollment, expenses, penalties, and regulations. You’ll need to know these key points of Medicare to ensure a smooth transition from your current insurance to your new insurance.
1. You Have to Pay for Medicare
Even though most Medicare beneficiaries receive Part A at $0 per month, that doesn’t mean it’s free. We pay into Medicare via taxes throughout our career. If you have worked the minimum 40 quarters in the United States, then you have paid enough in taxes to get premium-free Part A.
However, you still must pay for Part B regardless of how many years you’ve worked. In 2019, the average American will pay $135.50 a month to have Part B. The Social Security office figures your Part B premium by your taxes that were filed two years prior. If you made more than $85,000 individually or $170,000 jointly, you will pay more for Part B.
In addition to paying monthly premiums, you’ll have to pay cost-sharing expenses as well. Medicare has cost-sharing just like your group health plan does. There are deductibles, copays, and coinsurance that you will be responsible for whenever you use healthcare services.
2. You Have A Designated Initial Enrollment Period
Each Medicare beneficiary has their own initial enrollment period. When you should enroll in Medicare depends on your 65th birthday month. Your initial enrollment period starts three months prior to your personal birthday month and ends three months after. For instance, if you turn 65 in March 2019, your initial enrollment period begins December 2018 and ends in June 2019.
If you don’t have other coverage, then you will want to enroll in at least Part A, Part B, and Part D during this 7-month period to avoid being penalized in the future. While you can enroll anytime throughout your initial enrollment period, it’s best if you enroll before your birthday month.
If you enroll during your birthday month or anytime after, you will have delayed coverage. This could mean going a few months without any insurance coverage.
3. You Can Be Penalized If You Miss Your Initial Enrollment Period
If you fail to enroll in Medicare Part B and Part D when you’re first eligible, you will be assessed late penalties later on when you enroll in them. The penalties are determined by how many months or years you go without coverage.
For example, each year you go without having Part B, 10% of the average monthly Part B premium is tacked on. By the time you finally enroll in Part B, that penalty gets added to your monthly premium and you’ll pay that new amount for the entirety of your enrollment.
Part D’s penalty is permanent as well; however, it’s calculated a bit differently. Every month after your initial enrollment period you go without Part D coverage, 1% of the average Part D monthly premium is added to your penalty total. Currently, the national average Part D monthly premium is around $35.
4. You Might Be Able to Delay Enrolling If You Have Creditable Coverage
If you delayed enrolling in Medicare because you have creditable coverage, you may not have to pay those penalties mentioned above. An example of creditable coverage is a group health plan through your employer.
If you choose to continue active work past 65 and have insurance through your employer, you can delay enrolling in Medicare until you officially retire. However, your employer must have at least 20 employees. If you work for a small employer that has less than 20 employees, Medicare would be your primary coverage, so you would need to enroll in Part A and B and D at 65 to avoid the penalties we mentioned.
Note, COBRA is not considered creditable coverage. If you work past age 65 and then elect COBRA, you must still enroll in Part B within 8 months to avoid the late penalty.
5. The Annual Election Period Is Dedicated to Medicare Advantage and Part D Plans
Many beneficiaries get the Annual Election Period (AEP) confused with their Open Enrollment (OE). The AEP is specifically for Medicare Advantage plans and Part D drug plans only.
The Annual Election Period runs from October 15th until December 7th every year. The changes you make during this period will be effective January 1st of the following year.
You can enroll in either a Medicare Advantage plan or a Part D plan. You can change from one Medicare Advantage plan to another. You’re also able to change from one Part D plan to another. You can even change from a Medicare Advantage plan back to Original Medicare and a Part D plan, or vice versa. Nonetheless, this is not a period where you can enroll in a Medigap plan without going through underwriting. We will discuss more on that below.
6. Medicare Plans Can Make Changes Each Year
Because carriers can make changes to their plans each year, beneficiaries have the right to withdraw from their plan. The AEP was created to give beneficiaries an out when they are no longer satisfied with their plan. If you are looking to change plans to add features such as the Silver Sneakers gym benefit, you can do so during this time.
Every year insurance carriers are required to send out an Annual Notice of Change (ANOC) to their clients. This letter will list the changes the carrier plans to make on the plan for the following year. This will help you decide what changes you need to make during the AEP. The letter will arrive in your mailbox usually in September.
7. Open Enrollment Is the Best Time to Enroll In a Medigap Plan
Just like the initial enrollment period, the Medigap Open Enrollment (OE) is dependent on the person and when they enrolled in Medicare. Your Medigap open enrollment technically begins the day of your Part B effective date.
The reason why your OE is the best time to enroll in a Medigap plan is that this is when you can forgo medical underwriting. You can’t be turned down by the carrier for having a health condition. A Medigap plan is very beneficial because it can help cover and even eliminate your cost-sharing expenses such as deductibles and copays.
Your OE lasts for six months. After your six months is up, you may not have another chance to apply for a Medigap plan without answer health questions. It’s important to note that some states have additional open enrollment times.
8. Doctors That Accept Medicare Have to Accept Your Medigap Plan
Like we said earlier, it’s hard to know everything there is to know about Medicare unless you’re a Medicare expert. This means your doctor’s office probably doesn’t know everything about Medicare.
First, let’s explain why this can be confusing to doctor offices. Each doctor chooses whether he will participate in any Medicare Advantage plans. The doctor can pick which carriers he wants to contract with if any. Medigap plans, however, don’t have networks.
Thus, if a physician accepts Medicare at all, then he or she are required to accept your Medigap plan no matter which insurance company you bought it from.
If you are unfamiliar with how Medigap plans differ from Medicare Advantage plans, you can learn more here.