Whether you’re eligible for Medicare, signing up for employer-sponsored healthcare, or finding an individual plan on the marketplace, health insurance can be one of those topics that finds its way to the bottom of our to-do list and makes us all sigh.
Understanding your health coverage options can be a daunting task to navigate, but avoidance can have real consequences to your health and well-being! It’s important to be mindful of what coverage you need, annual enrollment and change periods, and potential penalties of missing deadlines in order to ensure you’re signed up on time for a plan that fits your needs.
- Employer-Sponsored and Marketplace Health Insurance
If you’re currently employed full-time, it’s likely you have employer-sponsored insurance, as it’s the most common way Americans obtain health insurance.
If this is the case, you’ll usually be asked by your company’s Human Resources department to sign up for benefits within 90 days of your start date or sign a form towards the end of each year to confirm that you want to continue your coverage or make a change.
If you’re not insured through an employer and aren’t yet eligible for Medicare, you’ll want to keep an eye on the Health Insurance Marketplace Open Enrollment Period. The Open Enrollment Period is the only time you can sign up for health insurance unless you have a qualifying life event. For 2021 coverage, the Open Enrollment Period runs from November 1, 2020 to December 15, 2020.
Certain life events, such as having a baby or moving to a home in a new zip code, qualify you for the Special Enrollment Period.
- Signing Up for Medicare
If you’ve already started collecting Social Security benefits at least four months before you turn 65, you will automatically be enrolled in Part A (which covers hospitalizations) and Part B (health insurance) of Medicare. You’ll receive your Medicare card in the mail three months before your 65th birthday and coverage will start on the first day of your birthday month (if your birthday is on the first, coverage will start the first day of the prior month).
If you are not yet collecting Social Security benefits, you’ll have a seven month Initial Enrollment Period to sign up for Part A and/or Part B. This period starts three months before you turn 65, includes the month you turn 65, and lasts for three months after you turn 65, though if you do not sign up during the three months preceding your birthday, your Part B coverage will be delayed.
You can also sign up for Part D (prescription drug plan) in addition to your Original Medicare coverage or choose to enroll in Part C (Medicare Advantage) instead.
Medicare Advantage is an alternative to Original Medicare; it’s a plan that’s provided by a private company that contracts with Medicare, and it bundles Parts A, B, and usually D too.
- Continuing Medicare Enrollment Dates
Medicare open enrollment, sometimes referred to as Medicare’s annual election period, starts on October 15th and ends on December 7th . During this time, there are a variety of actions you can take.
You can switch from Original Medicare to Medicare Advantage (you have to already be enrolled in both Part A and B and live in an area covered by Medicare Advantage plans), switch from Medicare Advantage to Original Medicare (you can add on a Part D prescription drug plan and possibly Medigap coverage too), change Medicare Advantage plans, change Part D prescription drug plans, or enroll in one for the first time (a late enrollment penalty could be assessed if you haven’t had creditable coverage).
- Medicare Advantage Open Enrollment
Medicare Advantage has its own open enrollment period from January 1st to March 31st every year. Similar to the Medicare open enrollment period, you have choices, you can switch back to Original Medicare or to another Advantage plan. However, the main difference is that you can only make one plan change during this period, whereas Medicare open enrollment in the fall allows you to make multiple changes if you happen to change your mind.
- How Timing and Income Affect Your Medicare Premiums
Most people don’t pay for Medicare Part A because they paid into it during their working careers, but Medicare Part B and Part D each come with premiums. Medicare Part B premiums are based on your Modified Adjusted Gross Income (MAGI) and can increase beyond the standard 2020 monthly premium of $144.60 if you have a higher income. The income threshold in 2020 for a single person was $87,000 and for a married couple filing jointly, $174,000.
Premiums are based on a two-year look-back, so your 2020 premium would be determined by Social Security looking at your 2018 tax return that you filed in 2019. Even if you’re already retired and not earning wages or a salary, your income level can be affected by retirement distributions, investment earnings such as dividends, and other investment income. If you recently experienced a life-changing event that significantly decreased your income or affected your finances, you can ask Social Security to adjust your premium. Medicare Part D premiums are also income based but vary by the plan you personally select.
It’s prudent to enroll in Medicare Part B as soon as you’re eligible (unless you’re already covered by an employer health plan) because if you choose to put it off and don’t have any coverage, you’ll be charged a permanent 10% penalty on your premiums per year delayed. If you lack creditable coverage (usually this would also come from an employer), you will also pay at least a 1% penalty on your monthly premiums for every month that you delay signing up for Part D coverage.
Health insurance and, especially, Medicare can feel like complicated topics due to how much information there is to digest, important time periods to consider, and coverage options to evaluate. It’s always a good idea to consult with financial professionals or tax advisors when it comes to preparing to pay Medicare premiums or retirement planning in general. You can also work with Medicare consultants to ensure you choose the best option for your healthcare needs, whether that’s making sure a specific prescription drug is covered or choosing a Medicare Advantage plan.