Explaining the Medicare Late Enrollment Penalty

Wednesday, May 11th, 2022

While Medicare is intended to provide important health care coverage for seniors and the disabled, it comes with a host of rules that can make it tricky to navigate. One of those rules involves enrolling in Medicare and, more specifically, when you should do it. Read on as we tackle explaining the Medicare late enrollment penalty (SV: 880) and what it can mean for you if you don’t enroll on time.

If you don’t follow the deadlines connected to enrollment, you can face some tough financial penalties. Many people are surprised by these penalties when they have a good reason (like they’re still working) to wait to enroll.

When Should You Sign Up for Medicare?

One of the benefits of Medicare is that it’s available to all seniors once they turn 65. Now, you don’t have to take advantage of it. But you may face penalties if you sign up later.

You can begin signing up for Medicare three months before your 65th birthday. You have 7 months to sign up, including the 3 months prior to turning 65.

Not signing up during the open enrollment window of eligibility can mean you have to wait a longer period to enroll and pay lifelong penalties. More on penalties shortly.

Understanding Medicare

Medicare is a bit of alphabet soup that you must learn to understand how to navigate through it.

Medicare Parts A and B take care of medical needs, both hospitalization and doctor’s visit. Medicare Part D covers prescription coverage.

Many people opt to enroll in Medicare supplemental insurance. This helps to fill in gaps that arise in Medicare coverage.

Understanding these parts matters because of enrollment rules.

Still Working When You Turn 65?

One reason that sometimes trips people up with Medicare enrollment is that they are still working and covered under their employer’s coverage.

This can change the late enrollment rules slightly if someone is still working at age 65 and wants to remain on their employer’s coverage beyond turning 65.

Since there are no additional costs for enrolling in Medicare Part A, you should enroll in that when you’re first eligible, whether you plan to use it or stay on an employer’s insurance. Some employers will want you to switch over the government insurance once eligible anyway.

The rules for Part B and Part D are a little more complex. In most cases, not signing up for Part B and Part D will mean you pay a penalty for late enrollment. One exception involves if you or your spouse are still working and eligible for employer insurance or another creditable source.

The rules for enrolling remain strict. Once your employer’s insurance ends or you stop working, you have only 8 months to enroll without penalty in what’s called a Special Election Period (SEP).

Part D works similarly if you have employer insurance and want to enroll late. If you don’t get enrolled during the special window when you leave work, your late enrollment penalty is based on how long you wait before you do opt to get enrolled.

There are really a plethora of rules to navigate for Medicare in general and Medicare late enrollment. If you plan to also enroll in a supplemental plan, an insurance broker who specializes in Medicare can help you navigate the rules.

One rule to follow is don’t wait too long. Check with them before you get close to turning 65, so you’re following the rules as needed.