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Anyone who gets health insurance through the public marketplace needs to remember a key part of reaching age 65: switching to Medicare.
Whether you are automatically enrolled — which happens if you are already receiving Social Security payments — or you need to actively sign up, there are rules to be aware of.
For starters, to avoid late-enrollment penalties that can last a lifetime, anyone who reaches age 65 should enroll in Medicare unless they have qualifying coverage elsewhere. And health plans through the Affordable Care Act exchanges, whether federal or state, do not count.
Here’s what to know.
Whether you’d pay more for your Medicare coverage depends on the specifics of your situation.
If you’re receiving subsidies (technically tax credits) that reduce your monthly premiums or other cost-sharing (i.e., deductibles, copays) for your ACA marketplace plan, the aid stops when you shift to Medicare.
“There are some people out there who get their ACA plan very inexpensively because they qualify for a subsidy that makes the plan really affordable for them,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.
For original Medicare, most beneficiaries pay no premium for Part A (hospital coverage), although there are associated deductibles and coinsurance. For Part B (outpatient care), the standard monthly premium (for 2022) is $170.10, although higher earners pay more (see chart above).
Part D (prescription drug coverage) also comes with monthly premiums that average about $33 this year. However, as with Part B, higher earners pay more for Part D (see chart below).
Some people stick with basic Medicare and pair it with a standalone Part D plan and, perhaps, a Medicare supplement plan (aka “Medigap”), which covers some deductibles and coinsurance associated with original Medicare and can cost anywhere from about $100 to $400 a month.
Others choose an Advantage Plan (Part C), which includes Parts A and B benefits and typically Part D, as well as some extras like limited dental and vision benefits. Those plans may or may not have a premium on top of what you pay for Part B.
If your income is low enough, you may qualify for Medicare programs that help with premiums or out-of-pocket costs.
What to watch for
When you enroll in Medicare, there is no automatic cancellation for your ACA plan, said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.
This means you need to disenroll from your coverage through the exchange.
“Be careful not to cancel early and leave a gap in coverage between the exchange and Medicare,” Gavino said. “You want the exchange plan to terminate the day before the Medicare insurance plan begins.”
Your initial enrollment period for Medicare begins three months before the month of your 65th birthday and ends three months after that (seven months total), but the effective date of coverage depends on when you enroll during that window. The earlier in your enrollment period you sign up, the faster you have coverage.
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“Start your research early so that you have time to get enrolled in Medicare and set up for Medigap and Part D or Medicare Advantage coverage in advance of when you need it and are not scrambling to understand all of the different moving parts at the last minute,” Roberts said.
Also, just because you have to move to Medicare doesn’t mean your family coverage through the exchange has to end.
“A member can remove just themselves from the exchange plan … without having to cancel the whole account,” Gavino said.
The price of enrolling late
There are late enrollment penalties associated with some aspects of Medicare.
For Part B, if you don’t sign up when you’re supposed to, you could face a penalty that amounts to a 10% higher monthly base Part B premium for each 12-month period you should have been enrolled but were not. And those penalties generally are life-lasting.
For Part D, you also can face a penalty if you decide you want coverage after not signing up when you were first eligible. That late-enrollment fee is 1% of the monthly national base premium ($33.37 in 2022) for each full month that you should have had coverage but didn’t. Like the Part B penalty, this amount also generally lasts as long as you have the coverage.
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