Switching from a market plan to Medicare? Here’s what you need to know
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Anyone getting health insurance in the public market should remember one key part of reaching age 65: switching to Medicare.
Whether you’re automatically enrolled — which happens if you’re already receiving Social Security payments — or you have to actively enroll, there are rules to be aware of.
For starters, to avoid late enrollment penalties that can last a lifetime, anyone who turns 65 should enroll in Medicare unless they have eligible coverage elsewhere. And health plans through the Affordable Care Act exchanges, whether federal or state, don’t count.
Here’s what you need to know.
Whether you pay more for your Medicare coverage depends on the specifics of your situation.
If you receive subsidies (technically tax credits) that reduce your monthly premiums or other cost shares (i.e. deductibles, co-payments) for your ACA Market Plan, the help stops when you switch to Medicare.
“There are people who get their ACA plan very cheaply because they qualify for a subsidy that makes the plan really affordable for them,” said Danielle Roberts, co-founder of insurance company 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 (ambulatory care), the standard monthly premium (for 2022) is $170.10, although high earners pay more (see table above).
Part D (prescription drug coverage) also includes monthly premiums averaging about $33 this year. However, as with Part B, high earners pay more for Part D (see table below).
Some people stick with basic Medicare and combine it with a standalone Part D plan and, perhaps, an extended Medicare plan (aka “Medigap”), which covers some deductibles and coinsurance associated with the original health insurance and can cost between about $100 and $400. month.
Others choose an Advantage (Part C) plan, which includes Part A and Part B benefits and usually Part D, plus some extras like limited dental and vision benefits. These 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 health insurance programs that help pay premiums or out-of-pocket expenses.
When you enroll in Medicare, there is no automatic cancellation of your ACA plan, said Elizabeth Gavino, founder of Lewin & Gavino and independent broker and general agent for Medicare plans.
This means that you must opt out of 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 trade plan to end the day before the Medicare plan starts.”
Your initial Medicare enrollment period begins three months before the month of your 65th birthday and ends three months after (seven months total), but the effective date of coverage depends on when you enroll in the during this window. The earlier you enroll in your enrollment period, the sooner you get coverage.
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“Start your search early so you have time to enroll in Medicare and get set up for Medigap and Part D or Medicare Advantage coverage before the time you need it and don’t struggle to understand all the different moving parts at the last minute,” Roberts said.
Also, just because you have to switch to Medicare doesn’t mean your family coverage through the exchange has to end.
“A member can opt out of the trading plan only … without having to cancel the entire account,” Gavino said.
The price of a late registration
There are late enrollment penalties associated with certain aspects of Medicare.
For Part B, if you don’t register when you’re supposed to, you could face a penalty that equals a 10% higher Part B base monthly premium for each 12-month period you should have been registered but were not. And these penalties are usually for life.
For Part D, you may also face a penalty if you decide you want coverage after not registering when you first qualified. This 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 did not. Like the Part B penalty, this amount also generally lasts as long as you have coverage.