I wrote and posted a previous blog on what Late Enrollment Penalties are and how to avoid them. [https://www.cdi-cares.com/blog/what-are-medicare-penalties-and-how-do-i-avoid-them] But let’s go a bit further to help Medicare beneficiaries who already have Late Enrollment Penalties (LEP). I have found that some clients come to me after the fact and don’t even realize they have a Late Enrollment Penalty (LEP). Also, once you are notified that you have a penalty, how do you pay it? Is there anything you can do about it after the fact? Let’s get into it!
Part D Late Enrollment Penalty
If you do not sign up for a Medicare Part D plan within 63 days of becoming Medicare eligible and are NOT on an active employer plan, then the penalty amount is 1% of the national average premium for every month you do not have a creditable drug plan. The national average drug plan premium in 2023 was $34 per month (and some change). As an example, if you have 14 months of penalty, then you can roughly estimate 34 X 0.01 X 14 for a total of $4.76 that will be added monthly onto your plan premium. It will be added to your drug plan premium OR it will be added to your Advantage Plan premium. So how do you pay your penalty? This is called a pass through. The insurance company will collect that money monthly from you, and then turn around and pay it to the Social Security Administration on your behalf.
Part B Late Enrollment Penalty
This can be more of a hit. When you first become eligible for Medicare turning 65, you have a 7 month window to enroll in Part B. You have three months prior to and up to three months after your Birthday month. However, if you are still covered on an active employer plan, you can delay Part B with no penalty. I repeat – you do NOT have to enroll in Part B if you continue on your creditable active employer plan. However, when you retire or leave the employer plan, you have 8 months to add your Part B without penalty. But let’s say for some reason, you had no creditable medical coverage for 3 years after you became Medicare eligible. The penalty here is 10% of the Part B standard premium for every 12 months you were not covered. So in this example, the penalty can be roughly calculated as $174.80 X .10 X 3 years. The result is an added $52.44 per month on top of your Part B premium. This will be paid directly to the Social Security Administration. They will either bill you or automatically withhold it from your SS income check if you are drawing it.
Can a Penalty Be ‘Undone’?
In some cases, yes! When you are notified of your penalty after enrolling in Part D or Part B, you can immediately appeal it by giving them prior coverage information and dates or by stating that you were not notified by an employer that their plan was not creditable (if that is your situation). The appeal process will be explained on your notice of penalty. Another way to remove penalties is if you qualify for Extra Help or Medicaid. The income thresholds for these programs change frequently, so even if you weren’t eligible before, you may be eligible now. It is rather quick and easy to apply online, so it may be worth the trouble. If approved, not only will you get help with prescription drug costs and premiums, but you will no longer pay a late enrollment penalty if you had one.
How Would I Know If I Have a LEP?
This may sound like a silly question, but I have had new clients come to me who did not use a local agent when they first enrolled in Medicare and thus weren’t given adequate education or assistance. When you enroll in Medicare Part B and D, you should be notified in writing from SSA and the insurance company about a Late Enrollment Penalty and given a chance to appeal. However, not everyone pays attention to all their mail or understands what they are reading. In some of these new client meetings, as we are discussing current coverage, the amount they pay in premiums sometimes doesn’t add up. So, I suggest maybe they have a LEP. After some digging, we find out they do. We can then strategize to look at some plan changes or other ways to offset penalties.
CDI is here to help you manage your healthcare costs and find the best options for your unique situation. We can meet in person or virtually. Reach out if you would like more information. Email carrie@cdi-cares.com or check out www.cdi-cares.com for a contact page and other helpful blogs.
QUOTE OF THE DAY:
Sometimes we stare so long at a door that is closing that we see too late the one that is open.
Alexander Graham Bell
