Aging Options

Proposed Law Requires Medicare to Warn of Steep Late Fees

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We’re still in open enrollment season for Medicare – it continues through early December 2017 – and maybe you’ve decided, even though you’re 65, that you don’t need to enroll because you’re feeling fine and don’t need health insurance. Well, this recent article from the news website Reuters says you’d better do your homework, because you may not feel so good once you see the late enrollment fees you could be incurring.

The article, written by reporter Mark Miller, provides an important warning to those approaching age 65 about the high costs of delay in signing up for the popular government health care program for seniors. “Medicare enrollment is automatic if you already have claimed Social Security benefits before your 65th birthday,” writes Miller. There’s usually no premium for the hospitalization portion of coverage, called Medicare Part A. But here’s the kicker: generally when you turn 65 you can only decline what’s called Part B coverage – the one that takes care of doctor’s visits and more routine health care needs – as long as you’re still working for a qualified employer and receive your primary insurance through work. “Everyone else,” warns Miller, “needs to watch the deadlines. Unless you are exempted, Medicare requires that you sign up for Part B during a window beginning three months before your 65th birthday and ending three months after.”

What happens if you don’t enroll when you’re legally required to? You’ll pay a penalty – and not just a one-time penalty, but a premium hike that will last you the rest of your life. For each 12-month period you delay signing up, Medicare will boost your Part B premium by 10 percent forever. In other words, delay 5 years and your premium goes up 50 percent. According to the Congressional Research Service, about 750,000 Medicare beneficiaries were hit with fees in 2014, paying an average of 29 percent higher premiums than their peers. That may be a tiny percentage of Medicare enrollees, but if you’re a senior on fixed income a boost that large in your premiums will be a painful burden – and a gift that keeps on giving.

According to Reuters, the problem of late enrollment fees is compounded by the fact that Medicare does a generally poor job of warning those approaching 65 of the financial risks.  As Miller writes, when it comes to those burdensome and often unanticipated late fees, “a heads-up would be nice” – which is why both the U.S. Senate and the House of Representatives are considering a new piece of proposed legislation called the Beneficiary Enrollment Notification and Eligibility Simplification Act, or “BENES Act.” The bill actually enjoys bipartisan support, a rarity in Washington, D.C. these days. Reuters explains, “It would require the government to send a notification letter in the year before your 65th birthday – the first date of Medicare eligibility. The letter would explain the enrollment rules, and, importantly, how Medicare interacts with other insurance coverage you might have” (especially employer-provided medical plans).

Part of the late enrollment problem stems from the fact that full retirement age (for starting Social Security) and Medicare eligibility age used to be identical at 65. But for several years they have been “decoupled,” says Reuters, with people starting Social Security at any age between 62 and 70, while the Medicare eligibility threshold remains unchanged. This has caused misunderstandings, especially for those still employed. Generally you need to be working for an employer with more than 20 employees for your company plan to be considered primary, according to the article – if your employer is smaller than that, “you should enroll in Part B at 65 to avoid being underinsured.” (If you are exempt from Part B requirements because of coverage by your employer, you have a window of time after you quit working during which you need to get enrolled.)

The confusion about coverage was made worse, writes Mark Miller, with the advent of the Affordable Care Act, or Obamacare. Many older people not yet Medicare-eligible purchased coverage through the ACA exchanges, assuming they could keep those plans after they turn 65. “By law, however, an exchange insurance plan can refuse to cover your healthcare costs if you are eligible for Medicare. And if you sign up for Medicare late due to reliance on an exchange plan, late enrollment penalties will be applied.” In other words, you need to understand the Medicare rules or you’ll find yourself in a bind. Maybe, says Miller, the new BENES Act will help warn some people in time. “More workers will get caught needlessly in the late enrollment trap as the baby boomer age wave accelerates and as more people work longer,” he says. “Giving them a clear advance warning about the risks – and how to avoid needless extra cost – is not too much to ask.” We agree.

Right now there’s a lot going on in the health care calendar, and all the overlapping deadlines can be confusing. Open enrollment for coverage under the Affordable Care Act (in other words, Obamacare) is going on right now for those under 65, with a shortened ACA enrollment period that runs through December 15th.  Medicare open enrollment is also on now for those 65-plus but with a different end date: it closes December 7th.  There’s also an extended window of time in early 2018 for those seeking to opt back into Traditional Medicare – from January 1st through February 14th. We urge you not to wait to get the advice you need, or you could miss a deadline and end up paying costly penalties.

Whether it concerns Medicare, or Social Security, or a safe harbor trust, or any of a hundred other topics, we imagine you have plenty of questions about planning for retirement. Wouldn’t it be great to get solid, objective advice from a trusted source? That advice may be closer than you think. If you’re ready to learn how all the facets of your retirement can be combined into one solid and comprehensive plan, then you need to take the time to attend a free LifePlanning Seminar featuring Rajiv Nagaich. With a LifePlan, your financial, housing, legal, medical and family plans all come together – no more worrying about inadequate preparation or gaps in your planning. There’s nothing else like a LifePlan!

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(originally reported at



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