© Reuters. FILE PHOTO: A woman watches the sunset over the Pacific Ocean along Highway 1 near Half Moon Bay, California, U.S., January 24, 2023. REUTERS/Matt Mills McKnight/File Photo
(This Feb. 8 column has been corrected to change the type of company to ‘an employer with fewer than 20 workers’ instead of ‘an employer with 20 or fewer workers,’ in paragraph 6)
By Mark Miller
(Reuters) – Marian Leonard filed for Social Security when she turned 65 years old. She did not sign up for Medicare at the same time, because she could not afford to pay the monthly premiums. But that was a costly mistake that serves as a warning to anyone navigating the transition to retirement.
Leonard signed up for Medicare four years later – only to learn that the delay would cost her dearly. Leonard would be paying about 40% more in premiums for Part B (outpatient services) because she failed to enroll at age 65. What’s more, she would be paying this penalty for the rest of her life.
“I’m being penalized for having been too poor to afford Medicare,” said Leonard, who lives in eastern Pennsylvania.
Here is what Leonard did not know: Medicare requires that nearly all workers sign up for the program during a seven-month Initial Enrollment Period (IEP) that includes the three months before, the month of, and the three months following their 65th birthday. If you are already receiving Social Security at that point, you will be signed up for Medicare Part A (hospitalization) and Part B (outpatient services) automatically.
But everyone else needs to pay careful attention to the enrollment rules. Missing your IEP can trigger late-enrollment penalties levied in the form of higher premiums that continue for life.
There really is only one important exception to the enrollment mandate. You can postpone enrollment if you are still working beyond age 65 and have insurance through your employer, or if you receive insurance through your spouse’s employer. (One exception to that exception: if you work for an employer with fewer than 20 workers, you can continue with that coverage, but Medicare becomes your primary source of insurance at age 65, and you should sign up during your IEP).
The penalties were included in the 1965 legislation that created Medicare. The idea was to prevent so-called adverse selection, which occurs when only the people who think they need benefits enroll in an insurance program. That can drive up the program’s costs, so it is important to enroll…