Planning for retirement can feel overwhelming. You need to consider all your healthcare options, and that probably means looking into Medicare. This federal program provides healthcare coverage for Americans aged 65 and older, as well as some younger people with disabilities, covering over 65 million Americans at an annual cost of about $905 billion.
Now, if you ask yourself “Do I need to enroll in medicare if I’m over 65 and have job-based health insurance?” No, you don’t. If you’re still working, your company has more than 20 employees, and you have job-based health insurance, you don’t need to sign up for Medicare until your current insurance expires. When you stop working or if your employer stops offering group insurance, you have eight months to enroll in Medicare, regardless of whether you have COBRA or another health plan.
If you do enroll in Medicare while still having job-based insurance, your job-based insurance will pay first, and Medicare will pay second.
For those working at companies with fewer than 20 employees, it’s a good idea to talk to your HR department to understand your specific insurance plan. You might be able to delay Medicare enrollment, but some employers require those aged 65 and older to sign up for Medicare to get the company’s health insurance benefits.
In these smaller companies, Medicare pays first, and job-based insurance pays second.
When to Enroll in Medicare?
If you turn 65 and don’t have job-based health insurance, you need to sign up for Medicare during the seven-month initial enrollment period to avoid a penalty, which would make your premium more expensive.
To find out if you need to enroll in Medicare and when to do it, you can answer a few quick questions on the official Medicare website. For more detailed information, the Centers for Medicare and Medicaid Services provide a comprehensive fact sheet that outlines many possible scenarios for those deciding whether to enroll in Medicare at age 65.
The other regular question is the next: “is it possible to opt out of Medicare Part A completely?” Yes, it’s possible, but you’d have to give up all your Social Security benefits and repay any benefits you’ve already received.
Changing Medicare Plan After Enrollment
Yes, you can. During the Medicare Open Enrollment Period (OEP), also called the Annual Election Period (AEP), you can switch from Medicare Parts A and B to a Part C plan, or vice versa. You can also switch Part C plans or enroll in, drop, or change a Part D prescription drug plan. The open enrollment period runs from October 15 to December 7 each year, with updated coverage starting on January 1.
You can also make changes during Special Enrollment Periods (SEPs), which occur after certain life events like moving or losing other coverage. You can switch to a new plan if your current plan changes its contract with Medicare. You have 60 days from the life event to enroll in a new plan.
What Are the Penalties for Late Medicare Enrollment?
Late enrollment penalties for Medicare mean higher monthly premiums. If you qualify for premium-free Medicare Part A, there’s no late enrollment penalty, though you’d have to wait until the General Enrollment Period (January to March) to sign up.
If you need to pay for Part A and sign up after your initial enrollment period, your monthly premium increases by 10% for twice the number of years you delayed enrollment. For instance, if you enroll four years late, you’ll pay the extra 10% each month for eight years.
For Part B, late enrollment can cost you more, and the penalty lasts much longer. If you sign up late, you can only do so during the General Enrollment Period, and you’ll pay an extra 10% each month for every year you delayed enrollment. The Part B late enrollment penalty is permanent, meaning you’ll pay the higher premium every month as long as you receive Medicare benefits.
For Part D, you can delay enrollment if you have other prescription drug coverage, but penalties start accruing after 63 days without coverage. You’ll pay an additional 1% in monthly premiums for every month you delayed enrolling in Part D.
After enrolling in a Medicare plan, you’ll get a notice explaining potential penalties. If you disagree with any penalties, you can file an appeal within 60 days from the notice date.
How Does Medicare and Its Parts Work?
Medicare Original is made up of two main parts: Part A for hospital insurance and Part B for general medical insurance, plus private supplemental insurance for prescription drugs.
Part A: All Americans (and their spouses) who’ve had Medicare taxes deducted from their paychecks for 40 calendar quarters (10 years) get Part A coverage at no cost. If you don’t qualify for free Part A, you can buy it for $278 per month in 2024 if you’ve paid Medicare taxes for more than 30 calendar quarters, or $505 per month if you haven’t.
Part A covers surgeries, hospital stays, skilled nursing facility care, hospice care, inpatient rehabilitation, lab tests, and some home health services.
Part B: Everyone with Medicare pays a monthly premium for Part B, starting at $174.70 in 2024, which increases with higher incomes. The cost is deducted from your Social Security payment or billed quarterly. Part B is optional if you get Part A for free, but if you need to pay for Part A, you must also sign up for Part B.
Part B covers services from doctors and health providers, outpatient treatment, medical equipment, preventive services, and other medical and health services not covered by Part A.
Part C: Medicare Advantage plans (also known as Part C) are private insurance programs that must offer coverage at least equal to Medicare Parts A and B, and often include Part D benefits.
Part D: Medicare Part D is private supplemental insurance that adds prescription drug coverage. You need to be enrolled in Parts A and B to purchase a Part D plan.
Medigap plans are other private insurance plans that work with Medicare Parts A and B to provide additional benefits or coverage.
