The Early Bird Gets the Worm: How Enrollment Timing Keeps Medicare Costs Down
There are two critical periods for enrolling in Medicare: your initial enrollment period (IEP) and, for some, your special enrollment period (SEP).
Your initial enrollment period is a seven-month period, beginning three months before the month of your 65th birthday and ending three months after that month.
For instance, if are turning 65 in October, your initial enrollment period would run from the prior July through January of the next year. Enrolling during your IEP will allow you to begin your Medicare coverage as soon as possible. If you delay signing up for coverage after your initial enrollment period, you will likely pay higher premiums for Part B coverage.
If you are 65 or older and have employer covered health insurance from your job or your spouse’s, you will have a special enrollment period when that coverage ends, allowing you to enroll in Medicare without incurring a late enrollment penalty. An SEP is only available while you are covered by employer health insurance or for eight months after such coverage expires.
Even if you are covered by employer-based insurance, you may still need to sign up for Medicare during your initial enrollment period.
Depending on the size of your employer, your employer may designate Medicare as your primary coverage when you turn 65, with your employer-based coverage becoming secondary to Medicare. Retiree coverage and COBRA coverages are considered secondary coverage, and those coverages will not trigger a special enrollment period.
If you do not take advantage of your initial enrollment period (or, if applicable, your special enrollment period), you may still sign up for Medicare during the general enrollment period.
The general enrollment period spans from January 1 through March 31 of each calendar year.
However, you may incur a late enrollment penalty, which will increase your premiums for Medicare Part B and Part D. For every 12 months you delay enrollment in Part B, your premium may be 10 percent higher. These increases will follow you as long as you are enrolled in Part B, unless you qualify and enroll in certain programs.
For every 12 months you delay enrolling in a Part D prescription drug plan, your monthly premium may be 1% higher. However, if you have prescription drug coverage equivalent to Part D prior to enrollment, you will not pay a penalty. Your plan should send you a letter stating that it provides equivalent coverage to Part D, and you should keep that letter so that you can prove you had comparable coverage when you sign up for Part D.
Medigap, or Medicare Supplement, also has an enrollment period, which starts when you turn 65 and have enrolled in Medicare Part B which lasts for six months. During this enrollment period, insurers cannot deny you coverage due to a preexisting condition and must sell you a plan at the best available rate. After this enrollment period, insurers may increase rates or refuse to provide you coverage.