How The Medicare Part A Late Enrollment Penalty Works
In this article, we will discuss the Medicare Part A Late Enrollment Penalty.
While this penalty can be costly, the good news is this will not impact most people. If you do not receive premium-free Medicare Part A then you should pay special attention to this article.
First, we’ll begin with who receives the free Medicare Part A coverage.
What Is Premium-Free Medicare Part A and Who Receives It?
Premium-Free Medicare Part A is essential coverage that you receive for free. People who have worked for most of their life will receive free Medicare Part A coverage. To get this coverage you will need 40 credits. Earning 40 credits typically takes about 10 years, therefore if you have worked this long and paid taxes you likely qualify for premium-free Medicare Part A.
If you receive Medicare Part A for free chances are you will not get a late enrollment fee. The reason is that you will likely be enrolled automatically into Medicare Part A once you turn 65 or qualify with a disability.
For anyone who won’t be automatically enrolled into Medicare Part A, the next section will explain when you can apply for the coverage.
When To Enroll In Medicare Part B
There are 3 times that you can enroll in Medicare Part A. Those enrollment periods include:
- Initial Enrollment Period (IEP)
- General Enrollment Period (GEP)
- Special Enrollment Period (SEP)
Initial Enrollment Period
The Initial Enrollment Period is your first chance to sign up for Medicare. Signing up during this time will help you to avoid any late enrollment fees. Your IEP typically happens around the time of your 65th birthday.
You will have 7 months to sign up for Medicare during the year of your 65th birthday. Those months include:
- 3 months prior to your 65th birthday
- 1 month of your 65th birthday
- 3 months after your 65th birthday
If a disability is the event that qualifies you for Medicare, your IEP will be after the 24th consecutive month that you have had a disability.
If you miss your IEP, you could face a penalty if you did not have sufficient health insurance on your 65th birthday. The most common example of sufficient health insurance is someone working past 65 and using their employer-sponsored health insurance.
Note: If you are working and approaching your 65th birthday, you’ll want to speak to human resources to ensure your employer health coverage is considered sufficient coverage by Medicare.
General Enrollment Period (GEP)
The General Enrollment Period is the 2nd window that you can use to enroll in Medicare. This period takes place every year from January 1st to March 31st.
Special Enrollment Period (SEP)
The Special Enrollment Period is a timeframe that you can use to enroll in Medicare when specific life events occur. Some of those events include:
- Switching from your employer health insurance to Medicare after the age of 65
- When you move out of your current plan’s service area
- If at no fault of your own you lose your current health insurance plan
- The current plan changes its contract with Medicare
- You become eligible for both Medicare and Medicaid
- You develop a chronic condition and want to switch to a Special Needs Plan or SNP
- Your chronic condition goes away which disqualifies you for the SNP
Once your SEP starts you will have 8 months to sign up for Medicare.
To learn more about qualifications for Special Enrollment Periods visit the Medicare special circumstances page.
Late Enrollment Penalty for Medicare Part A
The Medicare Part A late enrollment penalty will charge you an additional 10% of your monthly premium for each 12-month period that you were eligible but did not enroll. Unlike the Part B penalty, this one will only follow you for twice the number of years that you went without Part A.
If you missed your Initial Enrollment Period by 3 years, then you would pay the penalty for 6 years. For this reason, is still very important to sign up for Medicare during your Initial Enrollment Period.
Exceptions To The Late Enrollment Penalty
There are some expectations to the late enrollment penalty that can save you from an extra charge on your monthly Medicare Part A premium.
If you had a sufficient health insurance when you first became eligible for Medicare Part A, you may not have to pay the late enrollment penalty. Here is another example…
If you were still working on your 65th birthday and still had your employer health insurance then you may be protected from the late enrollment penalty. The key is having a sufficient health insurance plan during your initial enrollment period. If you were to retire 2 years later at 67, then you can enroll into Medicare Part A during your Special Enrollment Period and potentially avoid the late enrollment penalty.
How To Enroll In Medicare Part A
There are 3 ways to enroll in Medicare Part A. Regardless of the option you chose, you will go through the Social Security Administration because they manage this program.
- Visit the Social Security Administration website to complete an online application. This process takes less than 10 minutes.
- Visit a local Social Security office.
- Contact the Social Security Administration at 800.772.1213 any day Monday through Friday from 7 am to 7 pm
Unlike the Part B penalty, this one will not follow you for a lifetime. Despite that, you still want to avoid it, because it can also be very costly.
Medicare Part A late-enrollment fees will charge you 10% of your monthly premium for every 12-month period you could have had coverage. For those who do not qualify for the premium-free Medicare Part A plan, you can expect to pay anywhere from $252 to $458 per month for your coverage. If you are hit with a late enrollment fee you can add 10% of that premium to your monthly cost.
Each individual’s situation is unique therefore if you have questions regarding the late enrollment fee or any other topics regarding Medicare let me know in the comments and I will follow up with you.