Some seniors make this costly Medicare enrollment mistake. A bipartisan bill looks to fix it

Personal Finance

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A bipartisan bill in the House aims to fix a costly enrollment mistake that some older adults make when they transition to Medicare from an employer-based health plan.

Under current rules, workers age 65 or older who leave their job but keep their company’s health insurance as allowed under federal law — the Consolidated Omnibus Budget Reconciliation Act, or COBRA — can end up facing late-enrollment penalties for Medicare when they eventually sign up. And those fees, which are tacked onto monthly premiums, are generally life-lasting.

“This bill says anytime you’re on COBRA coverage and discover you should have enrolled in Medicare, you get a special enrollment period, your benefits start right away and you don’t pay a late enrollment penalty,” said Bonnie Burns, a consultant for California Health Advocates and a Medicare expert.

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The bill, called the Medicare Enrollment Protection Act, also would require that if a COBRA insurer discovers the patient should be on Medicare, the claim cannot be denied, according to a congressional staffer for one of the bill’s sponsors.

However, the measure would not prevent a COBRA insurer from going after a patient to recoup benefits paid, which is something that currently can happen, Burns said.

“It doesn’t address that piece of the problem,” she said.

Enrollment rules can be confusing and costly

Medicare’s rules and deadlines for enrolling can be confusing at best and costly at worst, experts say.

For people who tap Social Security before age 65, enrollment in Medicare (Part A hospital coverage and Part B outpatient care coverage) is automatic when they reach that eligibility age.

Otherwise, you are required to sign up when you hit age 65 unless you meet an exception, such as having qualifying health insurance through a large employer (20 or more workers).

COBRA coverage, although it’s the same plan you were on as an employee, doesn’t count. You (or your dependents) can get COBRA coverage for up to 18 or 36 months, depending on the specifics. You also have to foot the entire cost of the premiums instead of your employer chipping in.

Nevertheless, under Medicare rules, leaving your job beyond age 65 would start the clock on an eight-month window for you to enroll in Medicare. If you miss it, you generally can only sign up for coverage in a general enrollment period Jan. 1 to March 31.

You also could face a late enrollment penalty for Part B. It’s 10% of the standard premium ($164.90 for 2023) for every 12-month period you should have been enrolled but were not. Part A does not come with penalties.

Part D (prescription drug coverage) also comes with late-enrollment penalties, whether as a standalone plan or through a Medicare Advantage Plan.

That penalty is 1% of the “national base beneficiary” ($32.74 in 2023) multiplied by the number of months since your enrollment period that you went without Part D or qualifying coverage in place of it. And as with Part B, the charges are added to your Part D premium and are permanent.

The congressional bill, introduced in September, was referred to several House committees for review. Given that this session of Congress ends Dec. 31, it’s uncertain that the measure would be considered before then.

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