Still working past age 65 and relying on your employer's health plan rather than Medicare ? This is for you.
Upgrades coming to Medicare prescription drug coverage under the Inflation Reduction Act may actually cause problems for some people who delay enrolling in Medicare because they are covered by employer health insurance.
The issue relates to penalties assessed against Medicare beneficiaries who enroll later than their initial eligibility dates.
If you are employed in a job that provides health insurance past age 65, you can delay signing up for Medicare without penalty, as long as certain conditions exist. In the case of prescription drug coverage, the plan has to pay on average as much as the standard Medicare prescription drug coverage.
With improvements coming to Part D going into effect January 1, some employer plans that qualified as “creditable” because their benefits were at least as good as those offered by Part D before the changes may no longer be eligible. For instance, starting January 1, the out-of-pocket maximum under Part D will be $2,000 a year.
If a private plan doesn’t cap the amount policyholders have to pay at $2,000 or less a year, the policy may not suffice as a substitute allowing beneficiaries to delay enrolling in Part D without a penalty.
The late enrollment penalty is imposed every month you are enrolled in Medicare if, at any time after your Initial enrollment period, there's a period of 63 or more days in a row when you don't have Medicare drug coverage or other creditable prescription drug coverage.
Medicare calculates the penalty by multiplying 1% of the "national base beneficiary premium" ($34.70 in 2024) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly penalty is rounded to the nearest $.10 and permanently added to your monthly Part D premium.
The law requires insurers to notify Medicare-eligible policyholders whether their prescription drug coverage is creditable coverage. But if your employer or insurer hasn’t notified you, you should inquire in time to plan your coverage decisions when Part D changes.
Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
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