While you are eligible to enroll in Medicare when you turn 65, you can’t be forced to sign up and pay monthly premiums if you don’t want to. However, if you think you will need the health insurance program at some point in the future, it is important to understand the consequences of enrolling late in Medicare.
Medicare Late Enrollment Penalties
Medicare Part A, Part B, and Part D have late enrollment penalties if you don’t enroll when you first become eligible and don’t have any other creditable coverage. Let’s go over late enrollment penalties for each plan.
Medicare Part A Late Enrollment Penalty
Most beneficiaries are automatically enrolled in premium-free Part A when they turn 65. However, suppose you do not qualify for automatic enrollment or premium-free Part A. In that case, you will be required to enroll manually during your Initial Enrollment Period (IEP), which is a 7-month period that includes the three months before the month you turn 65 and three months after.
If you do not enroll during the IEP, you will see a 10% increase in your Part A monthly premium. You are mandated to pay the higher Part A premium for twice the number of years you qualified for Medicare Part A but failed to sign up.
Medicare Part B Late Enrollment Penalty
The enrollment penalty for Part B is 10% for each 12-month period you failed to enroll. You will have to pay this penalty along with your standard monthly premium for as long as you have Medicare coverage.
Medicare Part D Late Enrollment Penalty
You are first eligible for Part D when you are signed up for either Part A or Part B. You may be penalized if you don’t enroll when you first qualify and then decide to enroll in Part D after you have gone without creditable drug coverage for at least 63 days in a row. To determine what you will have to pay as an enrollment penalty, you’ll need to multiply 1% of the national base Medicare beneficiary premium times the total months you qualified but didn’t sign up for the Part D plan. Medicare will round up the amount to the nearest $0.10 and add it to your Part D premium.
What Happens If You Delay Your Medicare Enrollment Because You Still Have Employer Coverage?
If you have healthcare coverage through an employer with at least 20 employees, you don’t have to enroll in Medicare when you turn 65. The same rules apply if you are covered under your spouse’s policy. Having said that, most people with employer coverage still sign up for Medicare Part A when they turn 65 because it is free.
If you work for an employer with fewer than 20 employees, you must sign up for Medicare Part A and Part B when you turn 65. Not doing so will likely lead to a late enrollment penalty as this would not be considered creditable coverage.