As a financial advisor, you play an important role in helping your clients avoid costly financial mistakes, but when it comes to Medicare penalties and rules, keeping track of the various deadlines, enrollment periods, and options can be overwhelming.
Knowing these common Medicare mistakes can help your clients do things right and avoid unnecessary fees and health care expenses in the long run.
If an individual misses their initial enrollment period, (the seven-month window in which most people can first enroll in Medicare), there could be long-term financial consequences. If they delay signing up for Medicare when first eligible and they do not have creditable health coverage, they will face fees and penalties that stick with them for life. If the client plans to delay Medicare, they need to verify that their current coverage meets Medicare’s standards for creditable coverage. If they work for an organization with fewer than 20 employees, they are required to enroll in Medicare Part A and B once they are eligible. Our advisors can talk them through signing up at the right time to make sure they avoid any late enrollment penalties or a lapse in coverage.
Depending on when they apply for Medicare, individuals who utilize a health savings account (HSA) will need to adhere to specific rules regarding when to stop HSA contributions. If they apply for Medicare prior to their 65th birthday month, they can contribute to their HSA up until the day before their Medicare effective date. If they sign up after turning 65, they should plan to stop contributing to their HSA up to six months prior to signing up for Medicare. Medicare Part A includes up to six months of retroactive coverage, so if an individual (or their employer) contributes to the HSA during that timeframe, they could be penalized. HSA contributions must be pro-rated the year in which Medicare Part A and/or Part B begins.
As your clients approach age 65, it’s in their best interest to explore their health coverage options with Medicare, even if they plan to continue working. It’s important for them to understand that their working status has no impact on their Medicare eligibility. Compared to employer coverage, Medicare may be more cost-effective, especially if the client has a high-deductible health plan (HDHP). Many Medicare Advantage plans offer lower out-of-pocket costs, low to $0 monthly premiums, and added savings through extra perks.
By the same token, clients who are already working past age 65 and on their employer group coverage should know that they don’t have to keep working just for health insurance – since they are already eligible, Medicare is an option worth exploring. If a spouse is tied to their coverage, individual health insurance plans are available to cover their spouse who is younger than 65. The potential savings are reason enough to make the time to compare options with an expert and see which path makes the most financial sense for them.
As your clients prepare to navigate the world of Medicare, our advisors are here to offer guidance and support. Whether they have questions about avoiding penalties or need to compare their employer coverage to Medicare, our local advisors can help them make an informed decision about what’s right for their unique situation and budget.
Share this article: