for Medicare are numerous and bewildering. What’s worse, the penalties for a
missed date can be irrevocable. Guide your clients through the bureaucratic maze
with this overview of the six enrollment periods and who qualifies for each.
Now that the Medicare eligibility age of 65 has been decoupled from the
Social Security full retirement age of 66, more and more people are at risk for
failing to enroll in Medicare in a timely manner and facing possible penalties
or gaps in coverage.
The following groups of clients are at risk of making a mistake:
- Clients who delay Social Security benefits to age 66 or later
- Clients who are still working and covered by health insurance at age 65
- Clients who leave their jobs and go onto COBRA
In fact, it is really only the people who have taken early Social Security
benefits and are automatically enrolled in Medicare at 65 who are not
at risk of messing up. Of course, they might end up with the wrong kind of plan,
since automatic enrollment puts them into the original fee-for-service Medicare
program with no supplemental coverage. But at least they won’t face Part B
premium penalties for failing to enroll on time.
Medicare enrollment periods
In addition to the initial enrollment period that gets clients onto the
Medicare rolls for the first time, it is also critical to understand the other
enrollment periods that may come into play for various reasons. The Medicare
enrollment periods are:
- Initial enrollment period
- General enrollment period
- Annual election period
- Special enrollment periods
- Medicare Advantage disenrollment period
- Open enrollment period for Medigap plans (not part of the official Medicare
open enrollment period)
Each of these enrollment periods has its own purpose and timeline. In each
case, a window is open for a specific period of time. When the window closes,
the opportunity is lost—sometimes forever, sometimes until it reopens the next
year. The consequences of not acting during the open window may be a permanent
penalty, a gap in coverage, or at the very least, an undesirable level of
coverage for some period of time.
Clients who are just starting to ease into retirement mode can’t possibly
keep up with all these rules. That’s why you have to guide them.
Medicare preparation meeting
Conduct a Medicare preparation meeting with all your clients at least a year
before their 65th birthday. The purpose of the meeting is to find out where they
will stand with regard to health insurance when they turn 65. Most clients will
fall into one of two groups:
- Clients who will want to go onto Medicare as soon as they are
eligible. This means their current coverage is more expensive or lacks
benefits they can get with Medicare. Maybe they’ve even been without coverage.This group also includes clients who plan to keep working for an employer
with fewer than 20 employees. Such employers are not required to offer coverage
at least as comprehensive as Medicare and may require employees to go onto
Medicare when they turn 65. They may or may not offer supplemental coverage
similar to a Medigap policy. If they do, it will be considerably less expensive
than the cost of primary coverage for an older employee.Included in this group might be clients who are self-employed, own a small
business, or work for a small employer that wants to save costs by switching
their age-65 employees over to Medicare. For these clients, see the section on
the initial enrollment period, below. - Clients who will be working past age 65 and plan to continue with
their employer’s group coverage. Employers with 20 or more employees
are required to provide Medicare-eligible workers with primary group coverage
(meaning it pays first and Medicare pays second). So the initial enrollment
period is irrelevant for these clients, unless they wish to sign up for Part A,
which is free for everyone who has worked the required 40 quarters (10 years)
for basic Medicare and Social Security eligibility.As long as the client is working and covered by insurance that is at least as
comprehensive as Medicare (known as creditable coverage), there is no penalty
for failing to sign up for Part B during the initial enrollment period. These
clients must pay attention to their special enrollment period (see
below).
Clients who do not fall neatly into one of these two groups include:
- Retirees who have retiree coverage through their former
employers. Retiree plans
are generally coordinated with Medicare. Medicare is the primary payer, while
the plan may offer additional benefits paid for by the client or his former
employer.Retirees with retiree coverage should talk to their benefits administrator
about what they need to do as they approach age 65. Retirees are not off the
hook for penalties for failure to apply during the initial enrollment period
just because they have retiree coverage. Only people who are actively working
may enjoy that exemption. However, retirees whose retiree coverage includes drug
coverage that is at least as comprehensive as the standard Medicare prescription
drug plan will not be penalized for failing to apply for Part D during the
initial enrollment period.It should be noted that retiree plans can be changed or canceled at any time.
If a client wants to switch to a different Medicare plan, it must be done during
the general enrollment period (Jan. 1 to March 31). See below. - Spouses. Spouses will generally fall into the same category
as the spouse whose benefits are providing the coverage. They may need to file
during the initial enrollment period or the special enrollment period depending
on whether the spouse is switching over to Medicare or actively working and
continuing with the employer’s group plan.
Initial enrollment period
This is the seven-month period surrounding a person’s 65th birthday during
which he or she may enroll in Medicare. As mentioned, if clients are already
receiving Social Security when they turn 65, and if they want to enroll in the
original Medicare fee-for-service program with no supplemental coverage, they
don’t need to do anything. They will receive a package of materials that
includes their red and blue Medicare card. Coverage starts the first day of the
month in which they turn 65. So if the client’s birthday is April 15, coverage
starts April 1.
Conversely, clients who are still working for an employer that offers group
coverage do not need to do anything during the initial enrollment period. Their
time will come later, when the employer coverage ends and they switch over to
Medicare during their special enrollment period.
For all those clients who plan to go on Medicare as soon as they become
eligible, who are not automatically signed up through Social Security, and/or
who want something different from the original fee-for-service Parts A and B,
the initial enrollment period should be highlighted on their calendar, for they
will need to take action.
The ideal time to sign up is during the three months before their 65th
birthday. If they do it then, coverage will start the first of the month in
which they turn 65. They actually have seven months to enroll, but
procrastination may cause a delay in coverage. A client whose birthday is April
15 could sign up anytime between Jan. 1 through July 31. However, if clients
sign up after March 31, coverage won’t start until after their 65th
birthday.
| Sample Initial Enrollment Period If Birthday Is April 15 |
|||||||
| Initial enrollment period | 1st month |
2nd month | 3rd month | 4th month | 5th month | 6th month | 7th month |
| Month of enrollment | Jan | Feb | March | April | May | June | July |
| Effective date | 1st day of April | May 1 | Jul 1 | Sep 1 | Oct 1 | ||
Any client who misses this initial enrollment period and who does not have
creditable coverage from an employer group health plan will have to pay a late
enrollment penalty of 10% of the current Part B premium amount for each 12-month
period that enrollment was delayed. The penalty is permanent.
So, for example, if a client missed his initial enrollment period and had to
wait a full year until the next general enrollment period (Jan. 1 through March
31 of each year), when he did sign up, his Part B premium would start out 10%
higher and continue at that higher level for the rest of his life. On the
regular 2011 Part B premium of $115.40 for new enrollees (those not subject to
the hold-harmless provision relating to the 0% Social Security COLA), the
penalty would amount to an additional $11.54 per month, or $127 per year. As
Medicare Part B premiums go up in the years ahead, so would the 10% penalty.
Don’t let your clients get hit with this.
Another problem with failing to enroll during the initial enrollment period
is that a client might face a gap in coverage. If he misses the seven-month
window and signs up during the next general enrollment period from Jan. 1 to
March 31, coverage doesn’t begin until July 1. Depending on what kind of other
coverage he has (or not), this could cause him to go without health insurance
for several months.
Initial coverage election period for Part C
Some clients may prefer a Medicare Advantage plan (also called Part C) over
the original fee-for-service Medicare. These plans offer additional benefits,
similar to Medigap policies, but in an all-inclusive arrangement that includes
Parts A and B and sometimes D (drugs). Prices and benefit levels vary.
The initial coverage election period to join a Medicare Advantage plan
corresponds to the initial enrollment period for Parts A and B. So if clients
have already identified a Medicare Advantage plan they want to join, they can
enroll in Parts A and B and then immediately enroll in Part C. Ideally, this
should be done within the three months prior to a client’s 65th birthday.
Initial enrollment period for Part D
This enrollment period is the same as for Parts A and B. If a client fails to
enroll in Part D during the initial enrollment period and does not have
creditable coverage for drugs (that is, prescription drug coverage that is at
least as good as Medicare’s Part D benefit), the client can enroll only at the
end of the year during the annual election period (Nov. 15-Dec. 31).
The penalty for failure to sign up during the initial enrollment period is 1%
of the average national premium for every month he was eligible and did not sign
up. (The average national premium is about $32.) Signing up for a Medicare
Advantage plan that includes drug coverage constitutes enrollment in Part D.
Open enrollment period for Medigap policies
Clients who prefer the original fee-for-service Medicare over Medicare
Advantage may wish to supplement their coverage with a Medigap policy. These
policies are sold by private insurance companies and offer varying levels of
benefits at varying prices. Although sellers of Medigap policies are free to
impose waiting periods or exclude people with pre-existing conditions, they must
take anyone who applies during the six-month period that starts on the date
their Medicare Part B becomes effective.
So, for a client with an April 15 birth date who signs up for Part B sometime
between Jan. 1 and March 31 and whose Part B becomes effective April 1, the
six-month open enrollment period for Medigap policies would start April 1.
However, it would be preferable to sign up for the Medigap policy before then
and specify an April 1 effective date in order not to have a gap in
coverage.
General enrollment period
Anyone who did not enroll in Part A or B during their initial enrollment
period may enroll in either or both parts during the general enrollment period,
which is January 1 through March 31 of each year. However, benefits do not begin
until July 1. Also, clients who enroll at this time may have to pay the Part B
late enrollment penalty mentioned above.
Special enrollment periods
Clients who remain covered by an employer’s group plan past their 65th
birthday may stay with the plan as long as they remain employed and eligible.
Once they stop working, or if coverage ends, they have eight months from the end
of employment or cessation of coverage, whichever comes first, to enroll in
Medicare. If they fail to sign up for Part B during this special enrollment
period, they may face the 10% penalty mentioned above.
As noted, the open enrollment period for Medigap policies starts on the day
Part B becomes effective and extends for six months.
Medicare Advantage annual election period
Medicare Advantage plans have an annual election period during which clients
may switch MA plans or go from the original fee-for-service Medicare onto a
Medicare Advantage plan. In 2010, the annual election period is November 15 to
December 31. In 2011 it changes to October 15 to December 7. There is also an
annual Medicare Advantage disenrollment period, from January 1 to February 14,
during which clients may disenroll from a MA plan and go back onto the original
fee-for-service Medicare program. However, there is no assurance that a client
will be able to get a Medigap policy, since the open enrollment period for
Medigap policies may have passed.
Watch out for COBRA!
Clients who go onto COBRA that extends past their 65th birthday could find
themselves with a gap in coverage due to Medicare enrollment restrictions. As
noted, if a client stops work or if employer group coverage ends, the special
enrollment period is triggered, giving him eight months to sign up for Medicare.
But the special enrollment period does not apply to COBRA. If a client goes
off COBRA after his initial enrollment period has passed (three months after his
65th birthday), he will have to wait until the next general enrollment period
(Jan. 1-March 31) to sign up for Medicare. Then coverage does not start until
July 1. This could leave him without coverage for some period of time and also
lose the Medigap guarantee.
If you have any clients who are on COBRA and approaching their 65th birthday,
warn them of this dilemma and make sure they sign up for Medicare during their
initial enrollment period.
There’s a lot more to Medicare than the initial enrollment. The bigger part,
of course, is choosing the right plan, whether a client opts for the original
Medicare with a Medigap policy, or a Medicare Advantage Plan. You may or may not
want to get involved in helping clients evaluate their coverage options. But the
one thing you definitely can help them get right is their signup date in order
to avoid penalties and gaps in coverage.
