Are any of your employees or retirees nearing their 65th birthday? If so, they will soon be eligible to enroll in Medicare.
As they get closer to being Medicare-eligible, it’s easy to feel overwhelmed by the number of deadlines, enrollment periods, and options out there. Knowing these common Medicare mistakes can help them do things right and avoid unnecessary fees in the long run.
The first time most people are eligible to enroll in Medicare is during their initial enrollment period (IEP). The IEP is a seven-month window that surrounds someone’s 65th birthday. It begins three months before their birth month, includes the birth month, and ends three months later.
For example, say your employee was born on July 10. Their IEP would begin on April 1 and end October 31.
To your employees and retirees, missing their initial enrollment period can have financial consequences—some of which stay with them forever.
For example, if they don’t enroll in Medicare Part B when they’re eligible, their premium will increase by 10 percent for every 12 months that they missed. This premium increase is permanent—so the longer they wait, the more they pay.
Similarly, Medicare Part D charges a fee for each month that an individual is eligible for Medicare but not enrolled or covered by creditable coverage. Creditable coverage, in this case, is prescription drug coverage that is comparable to or better than Medicare’s minimum standard of drug coverage. That is, their prescription plan must be equal or better in quality than Medicare.
The Medicare Part D late enrollment penalty is one percent of the year’s national base beneficiary premium, which changes each year. In 2023, the base beneficiary premium is $32.74.
For each month a Medicare-eligible individual goes without creditable coverage, they will be charged one percent of $32.74. Once they enroll in Medicare, they pay this fee every month for life. The total fee amount varies based on:
You want to avoid subjecting yourself to any late enrollment penalty. Once you are subject to the Part D late enrollment penalty, it sticks with you for life. You will pay an extra amount every month that you are on Medicare, regardless of the Original Medicare, Medicare Advantage, or Supplement coverage you choose.
If you choose to delay Medicare, you must be sure that you have creditable prescription drug coverage in the meantime. Working with a local advisor in Medicare can help you ensure that you’re on the right coverage for your unique needs and situation.
Even if your employee doesn’t need to enroll in Medicare when they turn 65, they need to take other steps. They may be able to delay Medicare enrollment without the risk of late fees or penalties. However, they should verify that their plan meets Medicare’s standards around their 65th birthday.
We suggest that your employees and retirees speak with a local advisor in Medicare to make sure they understand what their next steps should be in their unique situation.
Your retirees are not required to start collecting Social Security payments when they enroll in Medicare. While they can begin receiving Social Security benefits when they turn 62, they permanently lose a percentage of their benefits for every six months that they enroll prior to full retirement age.
Even if you’re enrolling in Medicare during your initial enrollment period, it may be in your best interest to wait to enroll in Social Security until you reach full retirement age. If you’re in a position to wait longer—until the age of 70, for example—you can earn even more benefits.
For each month you delay between full retirement age and age 70, your Social Security benefits will increase by two-thirds of a percentage point. This totals eight percentage points per year. However, delayed retirement credits stop accruing when you turn 70.
While there’s no benefit to waiting beyond age 70, it can be worthwhile to put off Social Security until then. Consider your situation and if delaying Social Security is right for you!
The transition to Medicare is significant, particularly for couples where one spouse’s employer group benefits insure both individuals. Unlike employer coverage, Medicare plans cannot have dependents. Each individual needs to enroll in the proper plan for their needs. Your employees should avoid assuming they will be covered by their spouse’s plan when their spouse enrolls in Medicare.
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Being on the same plan as your spouse may seem like a simpler way to enroll in Medicare. However, it could result in improper coverage for your own health care needs.
If you have different prescriptions, doctors, or health concerns, you need to find coverage that allows you to care for yourself properly, regardless of your spouse’s benefits. As you shop for a plan, be sure to check preferred pharmacies if you and your spouse like to have your medications filled at the same place. The easiest way to verify this is to let our advisors do the research for you.
As your employees and retirees prepare to navigate the world of Medicare, our advisors are here to offer guidance and support. Whether they have questions about the Part D late enrollment penalty or they need to find the right coverage for their needs, contact our advisors for local help with Medicare questions.
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