Enrolling in Medicare

Open enrollment is very important since things like cost, coverage, and providers can change each year. Furthermore, new enrollees need to be aware of the possibility of late enrollment penalties that can continue for as long as you have Medicare coverage. If you are already a Medicare beneficiary, expect to receive materials such as “Evidence of Coverage” (EOC) and “Annual Notice of Change” (ANOC) in the mail or electronically (DHHS, 2014). The 2015 open enrollment period is from October 15, 2014 through December 7, 2014 for coverage that begins January 1, 2015 (DHHS, 2014; Medicare and the Marketplace, n.d.).

Automatic initial enrollment. Open enrollment is different than initial enrollment. Open enrollment is for people renewing their Medicare policies, while initial enrollment is for first-time Medicare beneficiaries. Some people will be automatically enrolled in Part A and Part B for their initial enrollment and others will need to enroll themselves. You will be automatically enrolled in Part A and Part B (DHHS, 2014):

  • If you are already receiving Social Security benefits (except in Puerto Rico – only Part A is automatic)
  • If you are already receiving benefits form the Railroad Retirement Board (RRB) (except in Puerto Rico – only Part A is automatic)
  • If you are under 65 and disabled and have received disability benefits for at least 24 months
  • If you have ALS (Amyotrophic Lateral Sclerosis/Lou Gehrig’s Disease)

If you have been diagnosed with ALS, you will automatically be enrolled in Part A and Part B the month your disability begins. If you are under 65 and disabled, your automatic enrollment will begin once you have been receiving disability benefits for 24 months.  If you are receiving Social Security benefits, you will be automatically enrolled as of the first day of the month you turn 65 unless your birthday is on the first day of the month, in which case you’ll start Medicare the previous month (DHHS, 2014). For example, if you turn 65 on June 5th, your automatic enrollment will begin on June 1st. If you turn 65 on June 20th, your automatic enrollment will also begin on June 1st. But if your 65th birthday is on June 1st, you will be automatically enrolled on May 1st.

If you are automatically enrolled in Medicare because you are receiving Social Security benefits, you will receive your red, white, and blue Medicare card in the mail approximately three months before your 65th birthday. If you are automatically enrolled in Medicare because you are disabled, you will be eligible for Medicare on the 25th month of your disability; therefore, your card will arrive approximately three months before the 25th month of your disability. Since Part B requires a premium, you do have the option to opt out of it, even if you are automatically enrolled. If you choose to decline Part B, follow the instructions you receive with your card and send your Medicare card back. If you do not send it back, you will automatically keep Part B and be responsible for the premium. In most cases, this will be deducted from your Social Security payment. It is also important to note that residents of Puerto Rico or foreign countries will never be automatically enrolled in Part B – only Part A (DHHS, 2014; SSA, 2014b).

Non-automatic initial enrollment. You will not be automatically enrolled if you are turning 65 and are not yet receiving Social Security benefits, Railroad Retirement benefits, or if you have end-stage renal disease (ESRD). For example, if you decided to wait until full retirement age or want to delay your Social Security benefits and therefore, are eligible to receive Social Security benefits at the age of 65 but are not actually receiving them yet, you will not be automatically enrolled in Medicare. If you are not automatically enrolled, you have seven months to enroll starting three months before your 65th birthday and ending three months after your 65th birthday; however, enrolling during those last four months will cause a delay in your coverage (DHHS, 2014). For example, if you turn 65 on June 10th and are not automatically enrolled, you can enroll anytime between March 1st and May 31st in order for your coverage to begin on June 1st. Your initial enrollment period will continue for four more months from June 1st through September 30th; however, if you enroll during this time period, your coverage will be delayed. Specifically, if your birthday is June 10th and you enroll in June, your coverage will begin in July. If you enroll in July, your coverage will begin in September. If you enroll in August, your coverage will begin in November and if you enroll in September, your coverage will begin in December (SSA, 2014b).

Special enrollment period. If you do not sign up during the seven month initial enrollment period, you may be subject to a late enrollment penalty. In some cases, a special enrollment period (SEP) is granted. For example, if you turn 65 and are currently enrolled in healthcare coverage through your employer’s (or your spouse’s employer’s) group health plan, you are not required to enroll in Medicare until the coverage ends. When this coverage ends or you leave that job, you have an eight month SEP. It is important to know that COBRA does not count as employer coverage and will not result in an SEP (DHHS, 2014). In other words, if you leave your job when you reach your 66th birthday, but keep COBRA coverage for one year until your 67th birthday, your SEP has ended and you are subject to a late enrollment penalty. Your SEP would have started when you left your job – not when your COBRA ended. You should be very careful and not assume you have a special enrollment period, as there are very specific rules. If you think you qualify, contact the Social Security Administration to make sure in order to avoid any late enrollment penalties. It is also important to note that the special enrollment period does not apply to those with end-stage renal disease (ESRD) (DHHS, 2014).

End-stage renal disease (ESRD) patients. If you have end-stage renal disease, your enrollment and coverage periods are a little different. If you are already receiving Medicare coverage because you are over the age of 65 or because you are under the age of 65 and disabled, your Medicare coverage for dialysis will begin immediately. If you do not already have Medicare coverage and are diagnosed with ESRD, you need to apply for Medicare and your coverage will begin on the first day of the fourth month of your dialysis treatments. Most of the time you will be enrolled in Original Medicare; however, you will have the option of joining a Special Needs Plan (SNP) if an appropriate one is available in your area. In addition, if you are already a Medicare patient and have a Medicare Advantage plan, you can stay in that plan and not switch to Original Medicare. If you are only receiving Medicare because of ESRD (meaning you are not over 65 and you are not disabled for another reason), your Medicare coverage will end either 12 months after the month you discontinue dialysis treatments, or 36 months after the month of your kidney transplant (CMS, 2014c).

If you have ESRD, Medicare will help pay for dialysis treatments and related services, except for transportation to dialysis facilities. If you are enrolled in Original Medicare, you will be responsible for 20% of the costs for all dialysis-related services. To receive coverage for a kidney transplant, the transplant must take place in a Medicare-approved hospital; however, Medicare will pay for the entire cost of the transplant, including the full cost of care for the kidney donor (CMS, 2014c).

Extended open enrollment period for Medicare Advantage beneficiaries. One of the changes as part of the Affordable Care Act was the introduction of a special enrollment period for Medicare beneficiaries who currently have Medicare Advantage and would like to switch to Original Medicare. Specifically, MA enrollees are given an additional 46 days – from January 1st through March 15th – of each year. However, this only applies if the MA enrollee wants to switch to Original Medicare. It does not apply if the MA enrollee wants to switch to a different MA plan. It also does not apply to beneficiaries who want to switch from Original Medicare to Medicare Advantage (KFF, 2013, Wolters Kluwer, 2010).

            Medigap open enrollment period. If you are interested in purchasing a Medigap policy, it is important for you to know that the Medigap open enrollment period is not the same as the open enrollment period for the other parts of Medicare. In order to purchase Medigap, you must be enrolled in Medicare Part B; therefore, the Medigap open enrollment period is the six month period starting on the first day of the month in which you turn 65 and are enrolled in Part B. For example, say you turn 65 on October 9, 2013, but you did not purchase Part B until the general enrollment period (see below). Therefore, you will be 65 AND enrolled in Part B on July 1, 2015 – this is when the six month Medigap open enrollment period will begin. However, if you turn 65 on October 9, 2013 and are automatically enrolled in Part A and Part B (which would be effective on October 1, 2013), then your Medigap open enrollment would be from October 1, 2013 through March 31, 2014 (DHHS, 2014; Medicare supplement, 2013). Since Medigap is follows state-specific rules and is issued by private insurance companies, there are some exceptions to the open enrollment period rule. For example, in some cases a plan will allow you to sign up if you are going to turn 65 in six months or less and will be automatically enrolled in Part A and Part B, since you must be enrolled in both parts to be eligible for Medigap. In addition, some states will allow you to sign up for Medigap up to six months before your 65th birthday even if your Part A and B enrollment is not automatic if you intend to sign up for Part A and Part B. These two options are generally done so that the beneficiary can have Medigap go into effect on the same day as Original Medicare (Medicare supplement, 2013).

Medigap open enrollment is very important if you want to sign up for Medigap because of the “guaranteed issue right”. This means that the law requires insurance companies to sell a Medigap policy to beneficiaries without any consideration of your health. In other words, you will receive a standard price regardless of pre-existing health issues, you will be guaranteed coverage for pre-existing health conditions, and you will not be subject to an underwriting process which also means you cannot be denied coverage because of your health or any other reason. On the other hand, even though you can purchase Medigap after the open enrollment period, you are subject to the underwriting process, which could lead to higher premiums, and you could even be denied coverage (CMS/NAIC, 2014; Medicare supplement, 2013). Underwriting for Medigap policies can be defined as “the process that an insurance company uses to assess the eligibility of a customer to receive insurance coverage. Insurance underwriters evaluate the risk and exposures of potential clients and whether to approve or decline the application for coverage” (Medicare supplement, 2013, para. 4).

Aside from the open enrollment period, there are special situations in which Medigap is subject to the “guaranteed issue rights”. There are many types of situations, which generally have special rules, such as which type of Medigap policy you can purchase and how long you have to purchase Medigap. In addition, federal laws are the minimum necessary and some states have different laws. Most of the situations that allow you to purchase Medigap outside the open enrollment period while maintaining guaranteed issue rights involve losing insurance (i.e. Medicare Advantage, employer coverage, other Medigap coverage) through no fault of your own. If you think this may apply to you, you should contact your local Medicare or insurance agency, call 800-Medicare, or go to www.medicare.gov to find your local Medicare office (CMS/NAIC, 2014).

If you have Medicare for disability or other reason that allows you to have Medicare before the age of 65, you are allowed to purchase Medigap; however, federal law does not require insurance companies to sell Medigap to Medicare beneficiaries that are under the age of 65. Therefore, you may not be able to purchase the policy you want or purchase it from the company you prefer. There are some states that require insurance companies to sell Medigap to under 65 beneficiaries in addition to over 65 beneficiaries, but it is not a federal law. In addition, even if your state does not require companies to sell you Medigap, there may still be companies willing to sell you Medigap (CMS/NAIC, 2014; DHHS, 2014).

General enrollment period. If you are not automatically enrolled (or if you want Part D) and you do not sign up during open enrollment or during a special enrollment period (assuming you are eligible for a special enrollment period), there is also a general enrollment period. During this time you can sign up for Medicare between January 1st and March 31st and your coverage will begin on July 1st of that year. However, if you do this and you do not have any special circumstances like the ones previously mentioned, you will be subject to a late enrollment penalty. Late enrollment penalties work different for each part of Medicare. Just remember that carrying COBRA coverage does not exempt you from late enrollment penalties. Also remember that if you choose to receive Marketplace coverage instead of Medicare and later choose to get Medicare, you will be subject to late enrollment penalties (DHHS, 2014).

Late Enrollment Penalties (LEPs)

In general, all parts of Medicare have late enrollment penalties. These penalties generally apply if you do not sign up when you are eligible. Therefore, if you are automatically enrolled or enroll during your initial enrollment period or special enrollment period, you should not be subject to these penalties. Each part of Medicare has different penalty costs and rules as described below. If you are a current or future Medicare Advantage beneficiary and choose not to be in Original Medicare, you are still subject to the same late enrollment penalties.

Part A late enrollment penalty. Even though most people are eligible for premium-free Part A and many people are automatically enrolled, there are still many people who have to enroll themselves in Part A and pay a premium. If this applies to you and you do not enroll during your initial enrollment period or a special enrollment period, you are subject to a late enrollment penalty. The Part A penalty is 10% and is effective for twice the number of years you waited to enroll. For example, the 2014 Part A premium is $426 and the 2015 Part A premium is $407. If you enrolled in Part A in 2014, but were eligible in 2013 (1 year earlier), you will be required to pay a 10% penalty for 2 years, which is $468.60/month in 2014 and $447.70/month in 2015. After that you will pay the standard Part A monthly premium (Costs at a glance, 2014; DHHS, 2014; Part A late enrollment, n.d.).

Part B late enrollment penalty. The Part B late enrollment penalty is also 10%; however, the calculation of the penalty and the length of time you pay the penalty is different than Part A. For example, in both 2014 and 2015 the Part B premium is $104.90/month. Let’s say you were eligible for Part B on October 1, 2012 but you waited until December 1, 2014 to enroll. This means you waited 26 months to enroll, but it is only 2 full 12-month periods, which results in a 20% penalty (10% per each 12-month period). This would make your 2015 monthly premium $125.88/month. However, you will continue to pay the 20% penalty for the entire time you have Part B (DHHS, 2014; SSA, 2013). In addition, make sure you keep in mind the following:

  • You are eligible for Part A and Part B at the same time.
  • You can sign up for Part A but not Part B, but you will be subject to the Part B late enrollment penalty when you do sign up.
  • If you pay a higher premium because you have higher income, the penalty rate is applied to your higher premium. For example, if your income is $100,000, which makes your Part B premium $146.90, then your 20% penalty would increase your premium to $176.28 per month.
  • You can cancel your Part B benefits. However, if you do, you will likely only be able to sign up again until the General Enrollment Period and will have to pay the late enrollment penalty.

Part D late enrollment penalty. The Part D late enrollment penalty is calculated completely differently than Part A or Part B, and is also much more complicated. In general, it is a 1% penalty for each month you do not have prescription drug coverage after 63 days (creditable coverage) after you are eligible for Part D. Since premiums differ across Part D plans, the 1% is based on the “national base beneficiary premium”. It 2014, that amount is $32.42, and just like other premiums, is subject to change annually, which can affect the penalty amount. Furthermore, just like the Part B penalty, you are subject to this penalty for the entire time you have Part D (DHHS, 2014).

Say that you are eligible for Part D coverage on your 65th birthday – September 12, 2012 – and you decide to enroll in a Part D plan during the 2014 general enrollment period, thus making it effective on July 1, 2014. Assuming you did not obtain any other drug coverage since you turned 65 and were eligible for Part D:

  • The penalty is based on full months of non-coverage, which is October, 2012 through June, 2014, or 21 months.
  • The penalty is 1% per month; therefore, it is 21%. (This means that it is not compounded interest – it is just 1% times the number of months you did not have coverage.)
  • The 2014 national base beneficiary premium is $32.42. 21% x $32.42 = $6.8082. This amount is rounded to the nearest 10 cents, making your penalty $6.80/month.
  • You will pay an additional $6.80 per month for the remainder of 2014. After 2014, you will pay a 21% penalty based on the newly determined national base beneficiary premium amount. This will continue every year you have Part D; therefore, the 21% will be calculated each year based on that years’ national base beneficiary premium amount (i.e. it will not stay at $6.80 per month, but it will not compound either.)
  • These penalties will be added to any Part D plan you choose, regardless of the plan’s cost.

Keep in mind that if you have creditable prescription drug coverage when you sign up for Part D, you can avoid the late enrollment period. In order to do this, you cannot go without creditable coverage for more than 63 days. For example, if your prior coverage ended on June 15 and you sign up for Medicare Part D to start on August 1, that is less than 63 days and you will not be subject to a late enrollment penalty. However, if you wait until January 1, that is longer than 63 days and you will be subject to a penalty.

In order to avoid a Part D late enrollment penalty, make sure that you sign up when required. This means that you need to have some sort of creditable coverage in the past 63 days. It is also important to remember that if at some point you want to cancel your Part D coverage and then later change your mind, you will be subject to a late enrollment penalty even though you used to have Part D. For example, say you signed up for Part D during your initial enrollment period, but during the next annual enrollment you decide that you no longer want it so you do not reapply. If later on you feel that you should have prescription coverage afterall and you sign up for Part D again, you will have to pay a late enrollment penalty if you cancelled your coverage for longer than 63 days (CMS, 2014a).

A special exception to the late enrollment penalty is if you qualify for Extra Help. If this is the case and you sign up late, you will not be subject to the penalty. In addition, if you cancelled your Part D and later signed up again, you still will not have to pay the late enrollment penalty as long as you qualified for Extra Help while you went without coverage (CMS, 2014a).

Assistance with Medicare Enrollment

Enrolling for Medicare can be complicated, especially with all the different enrollment periods involved. Beneficiaries who do not want to call their local Medicare office or go to Medicare.gov for help can use the State Health Insurance Assistance Program (SHIP), which is a “national program that provides local one-on-one counseling and assistance to Medicare beneficiaries and their families on Medicare and other health insurance issues” (NASUAD, n.d., para. 1). If you are eligible for Medicare, you are also eligible for free SHIP counseling, which includes assisting beneficiaries with prescription drug coverage, Medigap, Medicare Advantage, Medicare Savings Programs, Medicaid, long-term care, and low-income subsidies (NASUAD). Even though SHIP is funded by the federal government, it is an independent program and is not affiliated with the insurance industry (SRG, 2014). All states offer the program in addition to the District of Columbia, Guam, Puerto Rico, and the Virgin Islands. Of these, most of them are administered by state agencies on aging, while the others are located in their state Insurance Commissioners Offices (NASUAD, n.d.).

SHIP was formerly called the Information, Counseling and Assistance (ICA) Grants Program and was created under Section 4360 of the Omnibus Budget Reconciliation Act (OBRA) of 1990, which gave CMS the authorization to provide grants to SHIP programs. SHIP’s goal is to “provide beneficiaries with accurate, understandable, and objective health insurance information so they can make informed coverage decisions and understand their rights and protections” (NASUAD, n.d., para. 1). This can be done in person or over the telephone. The program also provides public education presentations and programs, as well as media activities (NASUAD, n.d.).