HOW TO AVOID MEDICARE PENALTIES
No one wants to pay more than they have to for any part of their Medicare coverage.
We hate seeing when clients get stuck having to pay these Medicare penalties, especially when they could have been prevented.
Of course, how can you prevent penalties when you don't know what they are?
Today, we are going to go over these Medicare penalties, and tell you how you can avoid them.
Part A Medicare Penalty
Most people qualify for premium-free Part A.
Therefore, this is the least common when it comes to Medicare penalties.
So how do you qualify for premium-free Part A?
In order to be eligible for premium-free Part A, you (or your spouse) must have worked and paid Medicare taxes for 10 years (forty quarters).
If you or your spouse have done so, you will become eligible when you reach age 65.
You will not pay a penalty if you choose to delay coverage for any reason, but ONLY if you meet the requirements for premium-free Part A.
What happens if you don't qualify for premium-free Part A?
If you do not meet the requirements for premium-free Part-A, you may pay up to $499 a month in 2022.
This may already feel like a penalty.
However, the penalty for not enrolling when you first become eligible will be 10% of your Part A premium.
Therefore, if you have to pay the entire $499 for Part A, adding 10% will equal $548.90 a month.
You will be required to pay this higher premium for double the amount of years that you delayed enrolling into Part A.
How to avoid the Part A penalty?
If you are not eligible for premium-free Part A and you have other creditable health insurance in place, you can delay your Part A enrollment when eligible.
This is usually a good decision if you or your spouse are still working and will eventually qualify for premium-free Part A.
However, you MUST make sure your current health insurance is creditable.
How to know if my insurance is creditable?
If your insurance is creditable it will offer at least the same amount of coverage as Medicare Parts A and B.
If you are receiving you insurance from an employer who has at least 20 employees, then your insurance is creditable.
If your employer is a smaller business, you may still have creditable coverage, but you should check with your HR department to verify.
Individuals who postpone enrollment without creditable coverage for 12 months or more will be penalized.
Part B Medicare Penalty
The penalty for Part B is similar to what we have gone over for Part A.
Anyone who does not enroll in Part B when they first become eligible will be penalized.
This penalty does not apply to individuals who have creditable insurance.
What is the Part B premium?
The monthly premium for Part B is $274 in 2022, and this is only if you get the standard premium.
Individuals with higher incomes will pay a higher premium
What is the Part B penalty?
Those who postpone coverage for 12 months, or without creditable coverage will be penalized.
This penalty is also an additional 10% of your monthly Part B premium.
The additional 10% for Part B will apply for every 12-month period you delayed coverage.
Therefore, if you delay coverage for 3 years, you will be penalized 30%.
Unlike the Part A penalty, the penalty you pay for Part B will not go away after time.
You will continue to pay the Part B penalty as long as you have Part B coverage.
How to avoid the Part B penalty?
Avoiding the penalty for Part B is the same as it is for Part A.
If you would like to delay your Part B enrollment, be certain that you have other creditable coverage in place.
You may speak with your HR department or benefits manager, you may also call your local Social Security office to verify your coverage.
Part B Medicare Penalty
The most common penalty that we see in Medicare is for Part D.
Many individuals enrolling in Medicare may not be taking any prescription drugs at the time.
Because of this, they do not feel they need to have the prescription drug coverage of Medicare Part D.
What is the Part D premium?
The Part D premium (national base beneficiary premium) changes each year.
In 2022 the premium for Part D is $33.
What is the Part D penalty?
The penalty for Part D is a little more tricky than it is for Parts A and B.
The penalty begins when you have gone 63 days without coverage.
This penalty is calculated by multiplying 1% of the national base beneficiary premium by the total number of months you delayed coverage.
Depending on how long you have delayed coverage this may not seem like much.
However, like the Part B penalty, this one will stick with you as long as you have a Part D plan.
How to avoid the Part D penalty?
As with Parts A and B, the way to avoid the penalty is the same.
Sign up for a Part D plan as soon as you are eligible.
There are Part D plans with a very low monthly premium.
You may delay Part D coverage if you have creditable insurance.
However, creditable coverage for Part D is not the same as it is for Parts A and B.
What is creditable coverage for Part D?
In order for you to have creditable coverage for Part D, your insurance must pay at least 60% of the prescription drug cost, cover both generic and name-brand medications, include coverage at multiple pharmacies, and have either a low deductible or no maximum amount.
Healthcare can quickly become expensive, even without these penalties.
Make sure you are aware of how you can be penalized in Medicare so you can avoid additional fees.
If you are unsure about delaying coverage, talk to one of our licensed agents who can help direct you to helpful resources.