As People Work Longer, They Risk Penalties for Missing Deadlines
Rules for enrolling in Medicare are complex. But when people postpone retirement past age 65, as many people are doing these days, it's easy to get caught up in red tape.
Older adults can't get into Medicare any time they want. The easiest time to sign up is when you turn 65, and, if you're already collecting Social Security, enrollment is automatic. But if you keep working beyond that age and opt instead to stay with your employer's group health plan, your options for getting Medicare can be sharply limited. It's important to pay attention to strict enrollment deadlines, or you may face a fine and risk going without coverage for months.
That's what happened to Barbara Gardner, 66, who chose to continue on her former employer's plan instead of signing up for Medicare when she retired last year. "My employer's plan offers much better coverage," says the Austintown, Ohio, resident, who suffers from rheumatoid arthritis and asthma.
Now, Ms. Gardner realizes her decision caused her to run afoul of a Medicare rule that required her to enroll within eight months of leaving her job. As a result, Ms. Gardner's next chance to sign up for Medicare is in January, and her coverage won't begin until July. With her current health plan due to expire in March, Ms. Gardner is facing several months without insurance. And as a penalty for missing the deadline, her monthly Medicare premium will permanently be increased by 10%. "I don't know what I am going to do," she says, adding that she can't afford to purchase an individual policy for the months she'll be without insurance.
Medicare advocates say a growing number of older adults are getting ensnared in the program's complex rules, as more seniors return to work or put off leaving their jobs. The nonprofit Medicare Rights Center says that before the recession it typically received a handful of calls each month from people trying to sort out the enrollment rules. Now, the organization says it gets several such calls a day.
In January, Rep. Kurt Schrader (D., Ore.) plans to introduce a bill designed to make it easier for those 65 and older who leave jobs to switch from their employer's group health insurance to Medicare, his office says. Among other things, the bill would eliminate the delays that some experience before their Medicare benefits go into effect.
"Many seniors are going without coverage because of problems transitioning into Medicare and are unable to pick up temporary coverage because of their age," Rep. Schrader says.
A spokesman for the Centers for Medicare & Medicaid Services, which administers Medicare, says the agency is just following the laws governing the insurance program. "We just don't have the discretion" to accommodate those who miss enrollment deadlines, he says.
Some workers postpone enrolling in Medicare because their health coverage on the job can be less expensive. Even though Medicare Part A, which covers hospitalization, is free for most people 65 and older, Medicare Part B, which covers doctor visits and other forms of outpatient care, charges a monthly premium of between $96.40 and $353.60, depending on a beneficiary's income.
Many people also choose to purchase private "supplement" policies, which pay for expenses Medicare doesn't cover, and so-called Part D prescription-drug plans. Others choose to receive benefits through private Medicare Advantage plans, which generally charge premiums, copayments and deductibles.
But it's important to do some homework before deciding to stick with an employer's plan alone. Those who are employed can switch at any time from a group health plan to Medicare. But once an employee stops working—voluntarily or not—he or she has only eight months to sign up for Medicare Part B. Those who miss this window—called a special enrollment period—must wait for Medicare's general enrollment period, from Jan. 1 to March 31, to sign up. Worse, their Part B benefits won't go into effect until the following July, and late-enrollment penalties may apply.
Common Traps
One common trap: Many people on Cobra, a federal law that permits workers temporarily to stay enrolled in an employer's health plan, or those receiving retiree medical benefits are unaware that the eight-month deadline applies to them, says Pamela Meliso, senior attorney at the nonprofit Center for Medicare Advocacy Inc. in Mansfield, Conn. Other people get into trouble by failing to check whether their company's plan requires them to sign up for Medicare Part B upon turning 65. Such rules are typical of companies with fewer than 20 employees and also often apply to former employees on Cobra. After age 65, these plans at best provide only supplementary coverage, paying only for expenses that Part B won't cover, says Hannah Oakland, a health advocate at Medicare Rights Center.
Limits of Cobra
Carla Arnett, of Dripping Springs, Texas, found out too late the limits of opting for Cobra instead of signing up for Medicare when she turned 65 last year. When she recently left her job in a retail store, she discovered she had to wait until January to sign up for Part B and wouldn't begin receiving benefits until July 2010, according to her son, Edward Arnett. He says his mother was diagnosed with lung cancer this summer and didn't want to be without insurance. So she paid to continue her former employer's coverage through the Cobra program, not realizing that she was buying a plan that only provided supplementary coverage.
Mr. Arnett says his mother recently learned that the Cobra plan will only cover a small fraction of the more than $20,000 in medical bills she has incurred since her cancer diagnosis.
"They informed me that they consider their coverage to be secondary," or supplementary, to Medicare Part B, says Mr. Arnett. She is "fighting for her life and watching as the bills stack up higher and higher," he says. Mr. Arnett says his mother has little choice but to continue the Cobra coverage, at a cost of $376 a month, until she can qualify for Medicare next year.
If you plan to delay signing up for Medicare, experts recommend keeping good files about your decision and copious notes from phone conversations with officials you contact for advice, including employees at Medicare and Social Security Administration, which handles Medicare enrollments.
Misinformed
Bill Bregar, a former software engineer, accepted a voluntary retirement package from his employer in June 2007. Now 68, Mr. Bregar and his wife were able to remain on the company's health insurance plan, via Cobra, for two years. "The cost was very reasonable and the plan covered everything," says the Lake Oswego, Ore., resident. He says he was assured by a representative at Social Security that he would be able to switch to Medicare when this coverage expired on May 31, 2009.
But when Mr. Bregar tried to enroll in Medicare Part B in May, he was told he was out of luck. Because he had missed the eight-month deadline in which to sign up for Medicare Part B, which expired in early 2008, he was relegated to Medicare's general enrollment period from Jan. 1 to March 31. And, when their Medicare benefits finally would be set to kick in next July, the Bregars would also be subject to a 10% late-enrollment penalty. "We were stunned," Mr. Bregar says.
With help from Rep. Schrader's office. Mr. Bregar submitted a request to Social Security asking for "equitable relief," a legal protection that allows for immediate enrollment in Medicare Part B without penalty.
He attached a letter documenting his earlier conversation with the Social Security representative who had misinformed him about Medicare's rules. A few weeks later, the Bregars received notice from Social Security that the agency was granting the couple's request for enrollment.
A Social Security spokeswoman says people requesting "equitable relief" should submit a letter explaining their case. Generally, Social Security looks for evidence that the person was misled by an agent of the federal government, she says.
Medicare Enrollment Deadlines
You can't get into (or out of) Medicare anytime you want. Here are specific times when you can join the program—or change or drop coverage. For questions or to enroll, contact the Social Security Administration.
| Enrollment Period | When It Occurs | Who Needs It | Comments |
| Initial enrollment period | This period spans seven months—starting three months before your 65th birthday month and ending three months after your birthday month. | Those enrolling in Medicare Part A (hospital insurance), Part B (medical insurance) and Part D (prescription-drug plan). Also applies to those who choose to receive their benefits through Medicare Advantage plans, also known as Part C. | Those receiving Social Security are automatically enrolled in Parts A and B unless coverage is declined. If you don't have coverage from an employer plan, you'll pay an ongoing late enrollment penalty of 10% of the Part B premium for every 12 months you delay signing up. |
| Special enrollment periods | Within eight months after you stop working. | Those about to lose employer coverage and have delayed enrolling in Part B. | Separate special enrollment periods also exist for Medicare Advantage and Part D plans. |
| General enrollment period | Jan. 1 to March 31 | Those who do not enroll in Parts A and B during their initial enrollment period or special enrollment period. | Coverage doesn't become effective until July 1. |
| Annual election period | Nov. 15 to Dec. 31 | If you don't enroll in a Medicare plan with drug coverage during your initial enrollment period, you can do so now. If you did, you can change or drop these plans now. | You have to enroll in Medicare Parts A and B first. |
| Medicare Advantage open enrollment period | Jan. 1 to March 31 | Those who want to join, drop or change a Medicare Advantage plan. | Beneficiaries with prescription drug coverage can't drop it at this time; those without drug coverage can't add it. |
