As individuals approach age 65, questions often come up about Medicare enrollment and the risk of being “penalized” for not enrolling on time. Whether you’re retiring soon or plan to work past your 65th birthday, we have the facts about late enrollment penalties.
Late enrollment penalties (LEP) are issued to individuals if there’s a lapse in their health care coverage once they are eligible for Medicare. The penalty amount depends on how long the person has gone without creditable coverage. This is added to their Medicare monthly premium for the duration of their Medicare plan enrollment. There are three types of LEPs:
Creditable coverage is any health care coverage that is comparable to or better than what is available through Medicare for prescription and/or medical coverage.
If you’re eligible for Medicare and are on an employer group health plan, check with your HR department to find out if your coverage is creditable. If you’re on a Medicare plan that includes prescription drug coverage, your plan is creditable.
The most common cause for someone to be issued an LEP is if they do not obtain creditable prescription coverage when they first become eligible for Medicare. For most people, this is when you turn 65.
Those who continue working past the age of 65 can remain covered under their employer group plan. However, it’s still important that they compare their plan to what’s available through Medicare. In most cases, employer group plans are creditable for medical coverage, but that doesn’t mean they’re creditable for prescription coverage. If you go more than 63 days without creditable prescription coverage, you’ll be assigned an LEP.
If there was a gap in your coverage and you are issued an LEP, you must continue to pay the penalty as a part of your plan’s monthly premium for the duration of your Medicare coverage.
If you’ve never had a gap in your coverage and received an LEP, you may have been assigned the penalty in error. This is typically the result of Medicare’s records simply needing to be updated. Unfortunately, whether the LEP is correct or not, you must pay the penalty until it is resolved. The LEP becomes a part of your plan’s monthly premium and if you do not pay it, your plan may be canceled. When the LEP is corrected, you will be reimbursed by your insurance company.
If you enrolled in Medicare after your 65th birthday, your insurance company will mail you a Declaration of Prior Prescription Drug Coverage form. You’ll need to provide proof that you had creditable drug coverage from age 65 until your new Medicare plan enrollment. After returning the form, call your insurance company to verify they received it. To prevent incurring lifetime penalties, you must complete and return the form. You may have provided similar information to Social Security when you first signed up for Medicare, but that initial information will not show on your Medicare plan.
Please keep in mind that if you started on Medicare when you first became eligible at age 65, you won’t receive this form from your insurance company and don’t need to complete these steps. This only applies to individuals who enrolled after their 65th birthday.
For more information about late enrollment penalties or to explore Medicare or individual health insurance plan options, contact us.