One of the reasons Caribou stresses the importance of enrollment periods for individuals eligible for Medicare is that if you don’t enroll at the right time, you can be subject to a late enrollment penalty (LEP) fee. This penalty is applied to your monthly premiums for the rest of your life. So timing your Medicare enrollment correctly is very important. If you are receiving Social Security retirement or disability benefits, you will be automatically enrolled in Medicare Parts A (hospital) and B (medical services). Unless you or your spouse is/are continuing to work past 65, you usually* have to actively enroll in Medicare Parts A and B when you become eligible.
* Depending on the size of your employer determines when you become eligible. If your or your spouse’s employer has less than 20 employees, you will generally be required to enroll in Medicare Parts A and B. Your employer coverage functions as your supplemental and drug coverage. This way, you won’t incur late fees when you lose your employer coverage. But if your employer has more than 20 employees, you may have more Medicare enrollment options through your employer.
See below for the LEP fees for each part of Medicare:
Part A is usually free and can coordinate with your current active employment coverage. It is often recommended to sign up when you are initially eligible at 65 since Medicare Part A usually doesn't have a monthly premium. If, however, you have access to coverage through an employer (yours or your spouse’s) with more than 20 employees, you can elect to delay your Medicare Part A coverage until you lose that employer coverage. One rationale for doing this is that you either prefer your employer coverage or would like to continue contributing to your Health Savings Accounts — which ends six months before you enroll in any part of Medicare.
If you don’t have coverage through active employer benefits and opt out of Part A, you still won’t incur any penalties if you are eligible for premium-free Part A when you do enroll. However, if you don’t have active employer coverage, opt out of enrolling in Part A when you turn 65, and are not eligible for premium-free Part A, your monthly premium will increase by 10% every year for twice the number of years that you went without signing up. For example, if you delayed enrollment for three years, then you will pay the late enrollment penalty for six years.
You will pay an extra 10% for your Part B premium for each year you were not enrolled after you were first eligible for Medicare if the following applies:
- If you or your spouse work for an employer with less than 20 employees and fail to enroll in Part B when you turn 65
- If you are on COBRA for more than eight months after losing active employer coverage
- If simply delay your Part B enrollment for other reasons
This penalty is not a one-time late fee and will be applied to every month's premium for as long as you have Part B coverage.
The penalty fee does not apply if you qualify for a special enrollment period. One example is if you are still covered under your employer’s active employee health coverage or if your employer active employee health coverage just ended. This allows you to sign up for Part B later without penalty, but you’ll have to contact SSA and prove you have creditable coverage.
If you miss your initial enrollment period for Parts A and B, and don’t have other coverage, you will likely have to pay for all health services out of your own pocket. You won’t be able to enroll until January 1st, which is when the General Enrollment Period is, and your healthcare coverage will start July 1st.
The late enrollment penalty for this coverage will be applied if you did not enroll in Part D during your initial enrollment period and you went more than 63 days without creditable drug coverage. Similar to the Part B penalty, the Part D penalty fee will be applied indefinitely, regardless of whether you change plans.
You will pay an extra 1% of the “national base beneficiary premium” for each month you did not have creditable drug coverage for as long as you do have Part D coverage. This national base beneficiary premium amount changes each year, and your penalty fee will be rounded to the nearest $0.10 and added to your monthly Part D premium.
You may decline Part D coverage if you have creditable prescription drug coverage that meets Medicare’s guidelines. For example, you may decline cover if you have employer or retiree coverage. Additionally, you will not incur the late penalty fee if you qualify for the Medicare Extra Help program for low-income individuals.
Medicare Advantage (MA) is an alternative to Original Medicare, which includes Part A and Part B. MA plans do not have LEPs. However, if you decide to enroll in an MA plan outside of your initial enrollment period, and you didn’t have prescription drug coverage in that gap period, you may be responsible for an LEP fee associated with your MA plan. Although most MA plans have drug coverage, please double-check this benefit when you enroll. Also, if you have an LEP for late Part B enrollment, the LEP will follow you to a Medicare Advantage plan in the same way IRMAA surcharges do, regardless of how one’s Medicare coverage is structured.
Appealing LEP Fees:
If you disagree with an LEP fee, you have the right to request a reconsideration for your prescription drug coverage with your Part D or Medicare Advantage plan or appeal with the Social Security Administration for a Part B LEP. Reconsiderations or appeals are typically considered when you have proof of coverage during what was considered a lapse in coverage by your plan.
Learn More:
How Do I Defer Medicare Coverage? | Healthline
Last Updated September 9th, 2022
