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Penalties Loom for ACA Enrollees Who Don’t Switch to Medicare

Sept. 30 is deadline to avoid added costs

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Turning 65 brings changes in health plans for Americans enrolled in the Affordable Care Act marketplaces.

En español | If you are over 65 and have your health insurance coverage through an Affordable Care Act (ACA) marketplace, you are in danger of having to pay higher premiums for the rest of your life once you switch to Medicare. The federal government has given people who are over 65 and still enrolled in a marketplace plan until Sept. 30 to move to Medicare Part B to avoid incurring a lifetime late-enrollment penalty.

The vast majority of Americans over 65 already are signed up for Medicare — either because they are collecting Social Security benefits and were enrolled automatically or because they signed up right before or right after their 65th birthday. The federal government says individuals should enroll up to three months before or until three months after turning 65 to avoid penalties for late enrollment, unless they receive insurance through a large employer.

But there are people over 65 who still get their insurance through the health care law marketplaces. According to a Department of Health and Human Services report, as of February 2016, nearly 100,000 people over 65 were enrolled in ACA marketplace plans.  

Some signed up amidst all the publicity surrounding the passage of the ACA and just never thought about switching to Medicare when they turned 65. Others made a conscious decision to stick with an ACA plan when turning 65 because they were receiving a federal tax credit or subsidy that made their health premium on the ACA marketplace cheaper than the Medicare Part B premium. Medicare Part A covers hospital care and generally has no premium. Part B covers doctor visits and other outpatient services and has a monthly premium. In addition, while ACA plans include prescription drugs, most Medicare beneficiaries pay an added premium for prescriptions — either through Medicare Part D or as part of Medicare Advantage coverage.

There are two problems now for those who stuck with their ACA plans.

  • First, when someone turns 65, he or she is no longer eligible for the ACA tax credit or subsidy, something they only discover when their health plan sends them a renewal letter and they find their premium is increasing substantially because the subsidy is gone.
  • Second, if that individual then decides to sign up for Medicare Part B because that premium is now cheaper than the ACA plan, the premium will be 10 percent higher for the rest of their life because it will include a late-enrollment penalty. The government established that penalty so people eligible for Medicare wouldn’t wait until they were sick to enroll. For an insurance program like Medicare to work, it needs people enrolled who are younger and healthier as well as those who are older and need more medical care.

“A lot of people think, I have health insurance, I like it, it’s affordable to me. I’ll think about Medicare later,” said Stacy Sanders, federal policy director for the Medicare Rights Center. The center has been helping people who find themselves in this predicament and are not sure what to do next.

There is a solution. The Centers for Medicare and Medicaid Services (CMS) decided last year that it would allow people to switch from an ACA plan to Medicare Part B without incurring the late-enrollment penalty. Those who have already moved to Medicare and are paying the late-enrollment penalty can ask to have that penalty reduced or eliminated.

CMS began sending emails and letters to ACA enrollees turning 65 to alert them of this issue and urging them to make the switch. One bulletin sent by healthcare.gov in August 2016 was called: “From Marketplace to Medicare: Avoid a coverage overlap."

To take advantage of this penalty waiver, individuals should contact the Social Security Administration at 800-772-1213 or go to SSA.gov to find the nearest Social Security office.

Sanders said her group has been advocating for some time that the federal government send notices to everyone about to turn 65 reminding them that it is time to enroll in Medicare and explaining the financial penalties if they don’t. “That type of advance warning simply doesn’t exist,” Sanders said.

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