A late enrollment penalty is an extra charge that is added to your Medicare premiums if you fail to enroll for Medicare during your Initial Enrollment Period. This can increase the amount you will pay for Medicare insurance. If you do not sign up for Medicare when you are first eligible, you will eventually pay more when you later decide to enroll. For most people, the first period of eligibility is the Initial Enrollment Period. This period starts three months before turning 65 and ends three months after turning 65. Even if you do not need extra healthcare services currently, it is better to enroll for Medicare when you become eligible.
Medicare Part A Late Enrollment Penalty
Most people do not need to pay premiums for Medicare Part A. If you have paid up to 40 quarters of Medicare taxes when you were employed, you qualify for premium-free Part A. If not, you can still enroll for Medicare Part A but at the cost of paying monthly premiums. If you are not enrolled automatically for Medicare Part A, you will need to sign up during your Initial Enrollment Period.
If you delay enrollment, you will pay a late enrollment penalty when you sign up. The late enrollment penalty for Part A is 10% of the cost of the premium. This late enrollment penalty will be active each month for twice the number of years you were eligible for Part A but delayed enrollment. For example, if you delayed Part A enrollment for four years, you will pay a late enrollment penalty each month for eight years.
Medicare Part B Late Enrollment Penalty
The Initial Enrollment Period for Part B starts three months before you turn 65 and ends three months after your 65th birthday. If you receive benefits from Social Security, the monthly premium for Part B will be deducted from your benefits. If you do not sign up for Part B during your Initial Enrollment Period, you will pay a late enrollment penalty with each monthly premium.
The late enrollment penalty for Part B is permanent and an extra charge will be added to your monthly premium. This is a 10% increase for each year during which you were eligible for Part B but failed to enroll. However, if you qualify for a Special Enrollment Period for Part B, you will not pay the late enrollment penalty, provided you enroll during the Special Enrollment Period. People who have health insurance such as a group health plan may qualify for a Special Enrollment Period if they delay their Part B enrollment.
Medicare Part D
You can enroll for Part D without paying a late enrollment penalty if you enroll within three months after your Original Medicare coverage becomes active. If not, you will pay a permanent late enrollment penalty.
To know more about enrolling in Medicare and avoiding late enrollment penalties, reach out to Wise Up Financial today!