Many retirees think that once they reach age 65 the nightmare of navigating the maze of insurance choices will be over. I hate to break it to you, but the maze of choices is still there, although fewer choices, the consequences for making a mistake can be more painful. What follows are three avoidable mistakes that many people make in regards to Medicare planning and enrolling.
1. Missing Your Initial Medicare Enrollment Period
Missing your Initial Enrollment Period (IEP) could cost you big and for the rest of your life. Medicare expects you to know when you should enroll and which parts you should enroll in, regardless of whether you are still working. Therefore, you will only sign up for Medicare parts A and B through the Social Security office.
The Facts:
Your IEP begins three months before the month of your 65 th birthday includes the month of your birthday, and then extends for three months after your birthday.
Don’t expect Medicare to notify you when it’s time to enroll. The Social Security office enrolls some people automatically and some it does not.
Suppose you are taking your Social Security benefits already. In that case, they will automatically enroll you in Parts A & B. If you are not receiving Social Security benefits, you must enroll yourself.
The IEP takes precedence over any other election period. This can cause problems if you retire in the three months after your 65 th birthday while you are still in your IEP. The is a Special Enrollment Period (SEP) for those retiring after age 65. If you retire in the year you turn 66; Medicare will start the day after your group coverage ends. However, if you retire within your IEP, the IEP overrides any SEP you may have otherwise had. For example, if you retire two months after your 65 th birthday, thinking that your Medicare will start in the month after you submit your application, you will soon find out that your Medicare will be delayed by three months due to the IEP guidelines.
If you miss your IEP, you can’t just enroll any time during the year. You will have to wait for the next General Enrollment Period (GEP) to sign up. The GEP runs from January 1 to March 31.
Penalties:
If you miss the IEP and have no other creditable health coverage, you could be subject to a Part B late enrollment penalty. The penalty is cumulative and assessed at 10% for every 12-month period you fail to enroll in Part B. This isn’t a one-time penalty either. You will pay this penalty every month as long as you are enrolled in Part B, which would be the rest of your life.
To avoid penalties and to see Medicare’s enrollment dates click here .
2. Canceling Part B When You Enroll In a Medicare Advantage Plan
There is often confusion around Medicare Advantage Plans and Medigap Plans. This is because Medicare Advantage plans pay instead of Original Medicare, whereas Medigap plans pay after Medicare.
The Facts:
Medicare Advantage Plans (Part C) confuse many initial enrollees. Since Medicare Advantage Plans pay for medical expenses instead of going through Medicare, many people wrongly assume they don’t need to pay the premiums for Medicare Part B. Many Medicare Advantage plans are offered with a zero premium, which is a major reason people think it would be better to switch to a Medicare Advantage Plan and drop Part B coverage.
It is important to read the “Summary of Benefits” of any insurance plan you choose. As for a Medicare Advantage Plan, the Summary of Benefits will clearly state that you must remain enrolled in Parts A and B while on the plan.
If you cancel your Medicare Part B and are enrolled in a Medicare Advantage Plan, you will receive a letter from the insurance company stating that they have terminated your coverage.
The Penalty:
If your Medicare Advantage Plan coverage is terminated due to canceling Part B coverage, you must wait until the next General Enrollment Period. This could be costly since you will now be without coverage for things like outpatient coverage, doctor visits, lab tests, Chemotherapy. And depending on the timing, you may be penalized with a permanent Part B late penalty.
Click here to learn more about Medicare Advantage Plans
3. Believing You Can Switch From A Medicare Advantage Plan To A More Comprehensive Medigap Plan During The Annual Election Period (AEP)
As the name states, Medigap Plans often fill the gaps that Original Medicare doesn’t cover, such as Coinsurance, Copayments, and even Deductibles. Medigap policies are typically more expensive than Medicare Advantage Plans because they often cover more costs, and for this reason, many people think they can choose a Medicare Advantage Plan while they are healthy to avoid paying the higher premiums required by a Medigap plan, and then switch to the more comprehensive Medigap plans later. This could be a BIG mistake.
The Facts:
Your Medigap Open Enrollment Period, where you get a 6-month opportunity, beginning on your Part B effective date, to sign up for Medigap with no health questions, is your only opportunity (there is a special circumstance for the disabled).
The Annual Enrollment Period has nothing to do with Medigap plans.
If you miss your One-Time Medigap Open Enrollment Period, you can still apply for a Medigap plan at a later time, but you will be subject to a health screening which could make you ineligible.
The Penalty:
Let’s say you decide to go with a Medicare Advantage Plan instead of Medigap during your 6-month Medigap Open Enrollment. You are healthy and on a fixed income, and decide the low premiums offered by the Medicare Advantage Plan would be the most cost-effective. Then, after a few years, you develop an illness that requires you to visit your doctor for treatment every single month. The treatment is covered under Part B, and your share of the cost under your Medicare Advantage Plan is 20%. If the treatment costs $2,000, you would be responsible for $400 every month ($4,800 per year). At this point, you may want to switch to a Medigap plan, but after answering the health questions, you are denied.
Thousands of people, every year, enroll in lower-premium Medicare Advantage Plans, thinking that they can wait until an illness strikes and then change to the more expensive Medigap Plan. It is not impossible, but it is not guaranteed either.
Click here to learn more about Medigap Policies
The key to successful Medicare Planning is understanding your needs and matching them up with what is available through Medicare or private insurance to avoid making a mistake that you can’t undo.
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