When to Apply for Medicare – Late Enrollment Penalties

checkmark Fact checked Reviewed by: Leron Moore, Medicare consultant - Published: June 2, 2021

 

If you do not sign up for a Medicare health insurance and drug plan when you become eligible to do so, you may have to pay late enrollment penalties for Medicare Parts A (hospital insurance), B (medical insurance), and D (drug coverage), unless you have other health and drug coverage that meets Medicare standards. Read on to learn more about when to enroll in Medicare to avoid penalties.

What you should know

  • 1 Consider signing up for Medicare during your initial enrollment period to avoid late enrollment penalties.
  • 2 You may be able to delay Medicare enrollment if your current health insurance and drug coverage is sufficient, according to Medicare rules.
  • 3 Find out if you are eligible for a special enrollment period and sign up for Medicare before that period ends.
  • 4 It is to your benefit to understand and avoid late enrollment penalties because they can add on to your monthly premiums for as long as you have Medicare.

The key to avoiding late enrollment penalties is to make sure that you do not have a gap in coverage for your health insurance and prescription drugs. Medicare considers group insurance that you have through your employer or union to be sufficient coverage in lieu of health insurance you can get through Medicare. Once that coverage ends, you can enroll in Medicare without late penalty fees.

If you have what Medicare calls creditable coverage for your prescription drugs, and then lose that coverage, you can enroll in a Medicare drug plan or a Medicare Advantage plan with drug coverage without penalty. The same holds true if you are receiving Extra Help.

When should I sign up for Medicare?

If you are close to 65, but NOT getting Social Security or Railroad Retirement Board (RRB) benefits, or if you do NOT have health coverage through an employer or union, you should sign up for Medicare. To avoid late enrollment penalties, you should sign up during your seven-month Initial Enrollment Period (IEP). This starts three months before you turn 65, includes your 65th birthday month, and ends three months after you turn 65.

Most people are eligible for premium-free Part A (hospital insurance) because they have worked and paid Medicare taxes for at least 40 quarters. If you are eligible for premium-free Part A but weren’t automatically enrolled, you can sign up for it any time during or after your IEP begins. Your part A coverage will go back retroactively six months from when you sign up, but no earlier than the first month you are eligible for Medicare. There is no penalty associated with premium-free Part A, even if you enroll late.

If you are eligible for Medicare, but you or your spouse is still working and you have employer or union sponsored health insurance, or if you have coverage through a government employer or the military, contact your plan’s benefits administrator to find out how your coverage works with Medicare. It may be to your advantage to delay enrollment in Part B (medical insurance) until your other coverage ends.

If you didn’t sign up for Part A (because you have to buy it) or Part B when you were first eligible because you have group coverage, you can sign up for Part A and/or Part B:

  • Anytime you are still covered by your group health plan, or
  • During the eight-month period that begins the month after the employment or group coverage ends, whichever happens first. This qualifies as a Special Enrollment Period (SEP), and you will not incur late enrollment penalty charges. (It is important to note that if you have COBRA, retiree or VA coverage or individual health insurance (like what you get through the health insurance marketplace), you are NOT eligible for a SEP).

If you miss your initial enrollment period, and you are not eligible for a SEP, you can sign up during Medicare’s General Enrollment Period between January 1 – March 31. Your coverage start date won’t be until July 1 of that year, and you may have to pay late enrollment fees for Parts A and B.

Information about drug coverage

If you have creditable drug coverage, you can choose to wait to enroll in Part D (drug coverage) or a Medicare Advantage Plan (Part C) that includes drug coverage, without incurring a late penalty. You can enroll in Part D or Part C for up to two full months after you lose your creditable drug coverage. You cannot go for more than 63 days in a row without drug coverage, or you will be subject to a late enrollment penalty. 

How can I avoid late enrollment penalties?   

  • Sign up during your IEP.
  • Contact your current health insurance plan before you become eligible for Medicare if you are unsure about whether or not you qualify for a SEP.
  • Enroll before your SEP ends.
  • Even if you do not take prescription drugs when you become eligible for Medicare, consider enrolling in a low-cost drug plan to avoid having to pay late penalty fees later.
  • Keep good records of your current health insurance notices of creditable coverage and any conversations you have with agents who offer you advice.

Is there any way to get out of late enrollment penalties?   

There are two possible scenarios:

1) If you receive bad advice from a federal employee about Medicare enrollment. 

You can request “equitable relief” from the Social Security Administration if you are charged late enrollment penalties for failing to enroll in Medicare due to erroneous advice you received from a federal employee. To do this, you should write a letter to your local Social Security office. Be sure to include as many specific details as you can, such as who you spoke to, the date and time of your conversation, any notes you took, and the actions you took as a result of the advice you received.

2) If you had creditable coverage, but your Medicare plan does not have a record of it.

If you receive notice from your Medicare drug plan or Medicare Advantage plan that you owe late enrollment penalties, you can request a review (generally within 60 days of the date of the notice) by completing the “reconsideration request form” you get with the notice. You can include whatever proof necessary to make your case, such as information you have about previous creditable drug coverage.

If you lose creditable coverage through an employer or through another source, your Medicare carrier will reach out to verify your prior qualifying coverage. Be sure to respond to any correspondence about verifying creditable coverage. Without a response, a penalty will be assessed and it can be difficult to appeal the decision.

Is there a penalty if I don’t enroll in Medicare at age 65? 

There may be, if you do not have group health coverage or creditable drug coverage/Extra Help in place when you become eligible for Medicare.

  • Late enrollment penalty for Part A that you have to buy because you do not qualify for premium-free Part A: You pay up to 10% more for your monthly premium for twice the number of years you could have had Part A but didn’t sign up.
  • Late enrollment penalty for Part B: Your monthly premium may go up 10% for each 12-month period that you could have had Part B but didn’t sign up. This late penalty will be in force for as long as you have Part B.
  • Late enrollment penalty for Part D: The cost depends on how long you did not have creditable drug coverage. The penalty is calculated by multiplying 1% of the national base beneficiary premium ($33.06 for 2021) by the number of full, uncovered months you didn’t enroll in a Medicare drug plan or Medicare Advantage plan with drug coverage when you could have, and you went without creditable coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium for as long as you have drug coverage through a Medicare health plan.
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Contributing Expert:

Leron Moore, Medicare consultant

Leron Moore has guided Medicare beneficiaries and their families as a Medicare professional for nearly 15 years. First as a Medicare provider enrollment specialist, and now a Medicare account executive, Moore works directly with Medicare beneficiaries to ensure they understand Medicare and Medicare Advantage Plans.