Navigating Medicare’s options, enrollment deadlines, and requirements can be confusing. However, it’s important to know when you need to apply for coverage—especially if you have other health insurance coverage—so you don’t get hit with costly penalties. Here’s how Medicare works, what to consider when you already have health insurance, and how to avoid penalties for late enrollment.
How Medicare Works If You Have Private Insurance
If you have private insurance, you may want to sign up for Parts A, B, D—and possibly a Medicare Advantage plan (Part C) and Medigap once you become eligible. However, there are reasons both for and against it. Consider how the following types of coverage work with Medicare to help you decide.
Employer’s Health Plan
If you are covered under a health insurance plan at work, or a spouse’s plan, you can usually delay signing up for Part B without penalty. And as long as you have “creditable” prescription drug coverage, you can delay signing up for Part D without penalty. If you’re eligible for premium-free Part A, you may want to sign up when you’re first eligible. However, there are reasons to hold off. For instance, some people who are still covered under an employer’s insurance will delay signing up for Medicare Part A when they turn 65 because they want to continue contributing to a health savings account (HSA). An HSA allows you to set money aside for future health care costs, but you can’t contribute once you’re enrolled in Medicare Part A. If, like most people, you qualify for premium-free Part A, there’s no late enrollment penalty should you not sign up during your initial enrollment period. If you don’t qualify, your monthly premium may increase up to 10%, to be paid for twice the number of years you didn’t sign up. If you don’t sign up for Part B and you don’t have employer-provided health insurance, you could face an even stiffer penalty: a premium increase of up to 10% for as long as you have Part B. You can enroll in Parts A and B or a Medicare Advantage plan (Part C) during a special enrollment period if you lose or will lose your employer-provided coverage; you can enroll in Part D if you lose your creditable prescription drug coverage. You have eight months from the time your employment ends or your coverage ends (whichever comes first) to enroll in Part B. You have two months after the month your coverage ends to join Part D or a Medicare Advantage plan. If you don’t qualify for a special enrollment period, you can enroll in Parts A and B during general enrollment (January 1 to March 31), but will typically pay a late enrollment penalty for Part B. You can also enroll in Part D during open enrollment each year (October 15 to December 7).
COBRA
If your employment or coverage under a spouse’s plan terminates, you may be eligible for COBRA coverage for a period of at least 18 months. But even if you have COBRA, you have up to eight months to enroll in Medicare from when your employment or your employer-provided coverage ends, whichever happens first. Otherwise, you’ll probably incur at least one late enrollment penalty.
Retiree Coverage
If you will receive coverage after you retire from your employer, you should still sign up for Medicare when you become eligible. Most group plans require that you have Part A and Part B when you become eligible—otherwise, you may lose benefits.
Marketplace Coverage
If you have Marketplace health insurance coverage, you should enroll in Medicare when you become eligible so you can avoid late enrollment penalties. Once you’re eligible for Part A coverage, you will no longer receive premium tax credits for a Marketplace plan. You can keep your Marketplace plan, but you’ll have to pay full price for it. In many cases, it makes sense to cancel this plan once Medicare coverage begins.
Medigap
Another plan to think about is Medigap. If you want to supplement your Medicare coverage with a Medigap plan, the best time to get it is as soon as you have Part B. Purchasing a Medigap plan within the first six months of your Part B coverage offers the best prices and choices. Insurers won’t take your health into account when pricing or offering plans. If you wait to purchase a Medigap policy during open enrollment, you may pay more or not be able to get one, especially if you have health problems.
Primary and Secondary Payers
Your Medicare and private insurance benefits are coordinated, which means they work together. Typically, a primary payer will pay insurance claims first (up to plan limits), and a secondary payer will only kick in for costs not covered by the primary payer. The secondary payer may not pay all of the remaining uncovered costs, and you may be responsible for any additional balance. In many instances, if you are age 65 and covered by either a retiree plan or a plan with fewer than 20 employees, then Medicare is your primary payer, and private insurance is your secondary. If this is your situation, you should enroll in Part A and B, along with D if your private insurance plan doesn’t have creditable prescription drug coverage. If you’re covered by a plan with 20 or more employees, Medicare is often the secondary payer. Medicare may pay costs that your employer’s plan doesn’t.
How Medicare Works
Before diving into how Medicare works with your existing health coverage, it’s helpful to understand how it works on its own. Medicare has four main parts: A, B, C, and D. You can also purchase Medicare supplement insurance, known as Medigap.
Part A: Part of Original Medicare (traditional Medicare), Part A covers inpatient hospital care, hospice, and some skilled nursing facility and home health care. (It does not cover long-term care.) Most people don’t have to pay a premium for Part A. Part B: Also part of Original Medicare, Part B is generally optional and charges a premium. However, if you’re required to pay a premium for Part A, you must also enroll in (and pay the premium for) Part B. Part B covers medically necessary services used to diagnose, treat, and prevent conditions. In 2022, the premium for most people is $170.10, and for 2023, it’ll be $164.90 or higher, depending on your income. Part C: Also called Medicare Advantage, these plans are offered by private companies that contract with Medicare to provide Part A and Part B benefits; you must sign up for both Parts A and B to enroll in one. Some Medicare Advantage plans cost nothing, while others charge a monthly premium (in addition to the Part B premium), and these amounts can change every year. And many offer prescription drug coverage plus additional benefits, such as hearing, vision, and dental. Part D: Part D offers prescription drug coverage from private insurance companies. Part D is only available if you’ve signed up for Part A or Part B. Medigap Plans: These plans are supplemental insurance sold by private insurance companies that can help fill gaps in Medicare coverage like copays, coinsurance (the amount you may have to pay toward a claim), and any deductibles. You must have Parts A and B to buy a Medigap plan.
Medicare Enrollment Periods
Medicare has a few enrollment periods, but the initial enrollment period may be the most important. This is when you first become eligible for Medicare. And if you miss the deadline to sign up for Parts B and D, you could face expensive penalties. In the year that you turn 65, you have seven months to sign up for Medicare Part A (if you have to pay for it) and Part B. You also have seven months to sign up for Part D unless you have other prescription drug coverage considered acceptable by Medicare (“creditable” prescription drug coverage). The initial enrollment period begins three months before you turn 65 and ends three months after, including the month of your birthday. If you have insurance coverage and delay enrolling in Medicare, you may be able to enroll later without penalties during a special enrollment period or another enrollment period (such as open enrollment), depending on which Part you want to enroll in. Typically, you can take advantage of a special enrollment period if you lose your other insurance coverage.
