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Making the Leap From Obamacare to Medicare

What you should know to avoid penalties

Ms. Medicare Q&A: From Obamacare to Medicare

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What you should know about switching from Obamacare to Medicare

En español | You bought health insurance through Obamacare's online Marketplace, but now you're eligible for Medicare. You may be wondering how and when you can transition from one system to the other — or even whether you should.

You should know that this transition is not automatic. People approaching Medicare age will receive no official notification about how to make the change or when to do it. It's a new scenario ripe for mistakes, some of which can be costly for consumers.

Medicare recently announced that it has begun sending notices to people who are both enrolled in a Marketplace plan and in Medicare, warning them that they may be risking financial penalties. However, this falls short of what people in many other circumstances need to know in advance if they're currently in a Marketplace plan and will soon be eligible for Medicare, but have not yet signed up.

So here are answers to important questions about the Obamacare-to-Medicare transition that AARP has received from consumers who are 65 and older.

Q1: I am happy with the Marketplace plan I currently have. Do I have to enroll in Medicare?

A: The law allows you to keep your plan if you want, instead of signing up for Medicare, but there are good reasons why you shouldn't.

If you bought a Marketplace plan, the chances are very high that you do not have employer-based health care coverage. (The exception is if you work for a small employer that purchased insurance for you through the Small Business Health Options Program, known as SHOP, as explained in question 2 below.) Therefore, to avoid unwelcome financial penalties and gaps in coverage, you need to sign up for Medicare during your initial enrollment period (IEP).

Your IEP runs for seven months, of which the fourth is usually the one in which you turn 65. (For example, if your 65th birthday is in June, your IEP starts March 1 and ends Sept. 30.) However, if your birthday happens to fall on the first day of the month, your whole IEP moves forward one month. (For example, if you turn 65 on June 1, your IEP begins Feb. 1 and ends Aug. 31.)

If you fail to sign up by the last day of your IEP, you face two consequences: You'll be able to sign up only during a general enrollment period (GEP), which runs from Jan. 1 to March 31 — with coverage not beginning until July 1 of the same year. And you'd likely be liable for late penalties that would be added to your monthly Medicare premiums for all future years (PDF).

That's the most pressing reason why it makes sense to enroll in Medicare as soon as you're eligible instead of staying with your current plan. But there is another: You will no longer qualify for any government subsidies or tax credits that reduce the cost of your premiums — and paying the full amount is likely to cost a lot more than Medicare. If you continue to remain in the plan, you need to go back to the Marketplace website and terminate any subsidies you get, or you run the risk of having to repay them at the end of the tax year (PDF).

Insurance companies in the Marketplace are banned from knowingly selling new policies to people enrolled in any part of Medicare. However, if you're enrolled in a Marketplace plan before becoming eligible for Medicare, your plan cannot reduce or terminate your coverage unless you request it.

Q2: I have Marketplace health insurance that my employer bought through SHOP. I plan to continue working after I turn 65. Must I enroll in Medicare?

A: It depends on how many employees your employer has and what the employer's insurance company requires. The Small Business Health Options Program (SHOP), which makes it possible for small businesses to buy health insurance for their employees through the Marketplace, defines a small employer as having 50 or fewer employees.

But under Medicare rules, a small employer is one that has fewer than 20 employees. Larger employers are subject to laws that are designed to protect older workers — for example, by requiring these employers to offer to employees who are 65 and older exactly the same health benefits as they offer to younger workers. Those laws also make it illegal for these employers to persuade older employees to enroll in Medicare instead of the employer plan.

Therefore, if your employer has 20 or more employees, you have the right to continue receiving the employer insurance and to delay Medicare enrollment until the time when you retire or otherwise lose the employer coverage. Throughout the time that you have this insurance, and for up to eight months after it ends, you'll be entitled to a special enrollment period (SEP) to sign up for Medicare without incurring any late penalties. This is also true if your health insurance comes from your spouse's employer through SHOP.

But an employer with fewer than 20 employees is not bound by those laws. In this situation, the employer insurance may be primary or secondary to Medicare. If it's primary, you don't need to enroll in Medicare at 65 and can delay enrollment until the job ends. If it's secondary, you do need to enroll in both Medicare Part A and Part B at 65 because the employer plan will only pay for medical services that it covers but Medicare doesn't — so if you don't sign up, you'd essentially be left with little or no health care coverage.

Bottom line: Ask your employer whether your health plan will stay primary or become secondary when you turn 65, and make sure that you get that information in writing, either in a letter from the plan's administrators or in its informational materials, such as your evidence of coverage document.

Q3: I will have to pay premiums for Medicare Part A because I do not yet have enough work credits. Can I stay on my Marketplace plan (which I don't have through my employer) until I've earned enough credits — in about four years time?

A: Yes, you can. The payroll taxes you pay at work for Medicare guarantee that you will pay no premiums for Part A benefits (coverage for hospital stays, home health services and hospice care) after you've earned 40 credits, which takes about 10 years of work. You can also qualify on the work record of your spouse, including a divorced or dead spouse, if you meet certain conditions. If you don't yet qualify, you have the option of not signing up for Part A and going without coverage, or paying a monthly premium — the full monthly premium ($411 in 2016) if you have fewer than 30 credits, or a reduced premium ($226 in 2016) if you've earned between 30 and 40 credits.

In this situation, you can choose to stay on your Marketplace plan or enroll in one for the first time, instead of signing up for any part of Medicare. You'd also be entitled to keep any government subsidies you've been receiving to reduce your Marketplace premiums. Staying on a Marketplace plan would save you from paying quite high premiums for Part A benefits alone, although you'd need to compare the overall costs of each system to see which one would be the least expensive for you.

However, there is a catch. Even though you don't qualify for premium-free Part A, you're still entitled to enroll in Part B, which doesn't require any work credits — provided that you're a U.S. citizen or a permanent legal resident (green card holder) who has lived in the United States for at least five years. And if you delay signing up for Part B (coverage for doctors' services, outpatient care and medical equipment) beyond the end of your initial enrollment period, you'll face the same consequences as those explained in question 1: delayed coverage and permanent late penalties.

Q4: I am enrolled in Medicare Part A, but I missed my deadline for signing up for Part B and I'm now looking at many months without coverage. Can I enroll in a Marketplace plan to help pay my medical costs until Part B kicks in next July?

A: The answer, unfortunately, is no. People miss their Part B enrollment deadline for many reasons — most often because, in the absence of any official notification about Medicare enrollment for everyone approaching age 65, they were given wrong information when consulting friends, employers, insurance companies or even, in some instances, government officials. Whatever the reason, the consequence is the same: Under Medicare rules, they are allowed to enroll only during a general enrollment period, which runs from Jan. 1 to March 31 each year, with coverage not beginning until July 1 of the same year.

Under Marketplace rules, anybody who has Medicare Part A alone, without paying a premium for it, is considered to have creditable health coverage, thus protecting them from having to pay Marketplace penalties for noncoverage. But Marketplace rules also insist that insurance companies cannot sell a Marketplace plan to anyone who is enrolled in any part of Medicare, because that would violate the law that protects consumers from being sold insurance that duplicates Medicare benefits.

This really hits people who have Part A but not Part B because, of course, it is Part B that provides coverage for the doctors' and outpatient services that comprise most people's everyday health care needs. And for people over 65, it is also virtually impossible to buy coverage in the open insurance market, outside of Obamacare.

Legislation to change this situation is currently before Congress. The Beneficiary Enrollment Notification and Eligibility Simplification Act (BENES) would require official enrollment information to be sent to everyone on the verge of Medicare eligibility, so that fewer people would fall into the trap of missing their deadlines. It would also abolish the delay in coverage for people signing up late, while retaining late penalties. The BENES bill was introduced as a result of lobbying efforts by the Medicare Rights Center, and supported by AARP and some 70 other organizations.

Until this bill becomes law, or some similar action is taken, there is little you can do except wait it out until July and hope that you don't get sick before then. Still, two possibilities are worth mentioning:

  • If you received wrong information from a government official, which resulted in your missing your Part B enrollment deadline, you can apply to Social Security for something called "equitable relief." If granted, you would be able to sign up for Part B immediately and be excused any late penalties. But be aware that you would need to provide specific details on how you received incorrect information. To ask for equitable relief, send a letter to your local Social Security office, following the procedure and wording suggested by the Medicare Rights Center in its model letter (PDF).
  • If your income and savings are limited enough to qualify for assistance under a Medicare Savings Program (MSP), you would be able to sign up for Part B at any time of the year, outside of formal enrollment periods. MSPs are run by the states, and income limits vary from state to state. If you qualify, your state would pay your Part B premium and maybe other Medicare costs, and any late penalties would be waived. To check on eligibility, contact your state health insurance assistance program (SHIP), as suggested in question 11.

Q5: If I enroll in Medicare, I'll have to pay high Part B premiums due to my being wealthier than most people. Can I choose to stay on my Marketplace plan, which I think would be less expensive for me?

A: You could, but it might actually prove more expensive in the long run. If you delay Part B enrollment, you would be liable for the delayed coverage and permanent late penalties that are described in question 1. The penalties amount to an extra 10 percent, permanently added to your Part B premiums, for each full 12-month period that had elapsed between the end of your IEP and the end of the GEP in which you finally sign up. For example, a delay of 10 years would double your standard Part B premiums for all future years, though it wouldn't affect the surcharges required by your income level. Even so, your current higher income-related premiums would be made even higher by the addition of late penalties.

Q6: I have a Marketplace plan on my own. How do I go about switching from that plan to Medicare?

A: If you sign up for Medicare during the first three months of your IEP, your coverage will begin on the first day of the fourth month. To enroll, call Social Security (which handles Medicare enrollment) at 800-772-1213 and schedule an appointment at your local Social Security office. Alternatively, you can sign up online on Social Security's website (PDF).

However, if you already receive Social Security benefits, the Social Security Administration will automatically sign you up for Medicare Part A and Part B and send your Medicare identity card by mail. The agency will specify the date when coverage becomes effective, without your having to actively enroll.

When you know the date on which your Medicare coverage is due to begin, you can cancel your Marketplace coverage. For example, if Medicare will begin May 1, you will want your Marketplace coverage to end April 30. To make this transition, it's important to cancel your Marketplace policy at least 15 days before you want the coverage to end and to specify that you want it terminated on the final day of the month. (Medicare coverage always begins on the first day of the month.)

A word of caution: If you delay Medicare enrollment until the fifth, sixth or seventh month of your IEP, the beginning of your coverage will be delayed by two or three months. For example, if September is the last (seventh) month of your IEP and you sign up anytime in that month, coverage would be delayed three months and begin on Dec. 1. This is important to remember while calculating when you want your Marketplace coverage to end.

If you bought your Marketplace plan through the federal website at healthcare.gov, you can cancel it in one of two ways:

  • By phone: Call the Marketplace Call Center at 800-318-2596 (TTY: 1-855-889-4325).
  • Online: Log into your Marketplace account. Follow the step-by-step instructions for plan cancellation provided on the Marketplace website under the heading, "If you're ending coverage for everyone on your plan." Even if you have no one else on your plan, you count as "everyone" in this context.

If you bought your plan through a marketplace run by your state, contact the state's health program for information on how to cancel. The process has different rules in different states.

Q7: My entire family is enrolled in a Marketplace plan. But I'll become eligible for Medicare soon. Can my spouse and teenage children stay on the plan after I disenroll? If so, what do I need to do?

A: Yes, you can end your own coverage under your Marketplace plan while your family members stay on it.

If you bought the plan through the federal website, at healthcare.gov, the cancellation process varies according to your circumstances:

  • If you are the "household contact" for your plan — defined as the person who set up the Marketplace account and who probably filled out the application for your family members as well as yourself — you can cancel your own coverage only by calling the Marketplace Call Center at 800-318-2596 (TTY: 1-855-889-4325) and designating another family member as the new household contact. This ensures that your dependents will be able to stay on the plan, according to government officials, who also warn that in this situation you should not try to cancel your own coverage online.
  • If you are the spouse of the household contact and you are the one making the transition to Medicare, your spouse can either contact the Marketplace Call Center or go online to end your participation in the Marketplace plan. Follow the step-by-step instructions provided on the Marketplace website under the heading, "If you're ending coverage for just some people on your plan."

If you bought your plan through a marketplace run by your state, contact the state program for information on the cancellation process.

Q8: My Marketplace plan provides dental coverage. Does Medicare?

A: The traditional Medicare program does not cover routine dental care (checkups, cleanings, extractions, dentures), but some Medicare Advantage plans provide limited coverage. Medicare Advantage plans — such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs) — offer an alternative way of receiving your Medicare benefits, most often through managed care plans run by private insurance companies.

Also, depending on where you live, you may be able to buy a stand-alone dental plan from the Marketplace, even though you no longer have health insurance from that source. This is possible only if your state runs its own marketplace insurance exchange and that state allows dental plans to be sold separately from health care plans; some states do and some don't. But if you bought your current plan through the federal Marketplace because your state doesn't operate its own, stand-alone dental plans aren't permitted.

Q9: Can I get prescription drug coverage from Medicare?

A: Yes. You can sign up for Medicare's drug program, known as Part D, but you must be enrolled in either Part A or Part B (or both) to qualify for this coverage. To receive it, you need to sign up with a private Part D drug plan that has been licensed by Medicare — either a stand-alone drug plan (which provides only drugs and is specifically for people enrolled in the traditional Medicare program), or a Medicare Advantage health plan (such as an HMO or PPO) that offers Part D drug coverage. Stand-alone plans always require premiums, in addition to the Part B premium. Many Medicare Advantage plans include Part D coverage in their benefit packages without charging an extra premium.

Choosing a Part D plan can be complicated because each one has different costs and benefits than the next and you must pick just one out of many available to you. The best way is to compare plans according to the specific prescription drugs you take. You can do this by using the plan finder program on Medicare's website; by calling Medicare at 800-633-4227 (TTY: 1-877-486-2048); or by contacting your state health insurance assistance program (SHIP), as explained in question 11.

Note that Part D is very different from the drug coverage you received through your Marketplace plan. For more information on how it works, see AARP's consumer guide to the Part D program.

It's worth knowing that if your income is under a certain level, you may be eligible for Extra Help, a federal program that provides Part D drug coverage at a low or reduced cost.

Q10: Can I sign up for any Medicare Advantage or Part D plans through the online Marketplace?

A: No. The two systems are entirely separate. But Medicare does run an online plan finder program that provides details of all Medicare Advantage and Part D drug plans. You can compare plans in your area and enroll in one in much the same way that you chose your Marketplace plan online. You also have the option of enrolling through Medicare's help line (800-633-4227) or directly with the plan of your choice.

What if you want to buy supplemental insurance, known as medigap? This is not a government program. It's private insurance you can choose to buy separately to cover some or most of your out-of-pocket costs if you're enrolled in the traditional Medicare program — for example, the 20 percent copays typically charged for doctor visits and other Part B services. You can compare medigap policies — as well as find contact information for insurance companies that sell them in your area — on a section of Medicare's website. Note that if you want to buy a medigap policy, you should do so within six months of enrolling in Part B. During this period you get full federal protections — meaning that insurance companies are prohibited from turning down your application for a medigap policy and from charging higher premiums based on your health status or preexisting medical conditions.

Q11: If I need help in canceling my Marketplace plan or starting Medicare coverage, whom should I call?

A: There are several sources of help and information, depending on the kind you need:

  • Marketplace Call Center at 800-318-2596 (TTY: 1-855-889-4325) for help with any Marketplace issues. Or go online to healthcare.gov.
  • Social Security Administration at 800-772-1213 (TTY: 1-800-325-0778) for help with Medicare eligibility and enrollment issues. Or go online to ssa.gov.
  • Centers for Medicare & Medicaid Services at 800-633-4227 (TYY: 877-486-2048) for issues on Medicare coverage, Medicare Advantage plans and Part D drug plans. Or go online to medicare.gov.
  • State Health Insurance Assistance Programs (SHIPs) provide personal help from trained counselors on all Medicare and Medicaid issues, free of charge. SHIP counselors can help you review your options in Medicare and choose the one that best meets your needs and preferences. They can also determine whether you qualify for assistance programs that would reduce your Medicare costs. To find the main toll-free phone number or the website of your SHIP, go to shiptacenter.org and select your state.

Patricia Barry is a features editor for AARP Publications and the author of Medicare for Dummies, 2nd edition, September 2015. Experts from the Medicare Rights Center and AARP's Public Policy Institute contributed to the information in this article.

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