While you are not required to join Medicare Part B, signing up at the wrong time may end up costing you money. If you don’t join when you are first eligible, you may have to pay a late enrollment penalty, which is added to your monthly premium for as long as you have Part B coverage. For each full 12-month period that you go without Part B coverage, your premium may go up 10 percent. Understanding how the penalty works is important, and the key to avoiding paying more for benefits.
How Does the Part B Penalty Work?
When you first become eligible for Medicare, you are automatically enrolled in Medicare Part A (hospital coverage) and Part B (Medical insurance). If you choose to opt out of coverage for Part B, you can. However, the clock starts ticking on penalties for late enrollment the month after your 7-month Initial Enrollment period (IEP) ends. In other words, if your birthday is in June, then your IEP extends from March through September. Your deadline to enroll in Part B expires at the end of September.
However, even if your IEP expires, you will not be charged a penalty until a full 12 months has passed after your IEP ends. For example, let’s say your IEP expired at the end of March and you did not sign up for Part B. If you decide to join during General Enrollment the following January, you will not be charged a penalty as only 10 months passed after your IEP ended, not the full 12 required for the penalty. But, once your IEP ends, you can only join Part B during General Enrollment, January 1-March 31 each year. Your coverage will start on July 1st.
Joining Part B after Initial Enrollment Ends
If you miss your first chance to join Part B (during your Initial Enrollment Period) but would still like to join, you must enroll during General Enrollment (January 1 through March 31). Remember, the Part B penalty doesn’t affect you until a full 12 months has passed after your IEP ends. That means you can miss your IEP, and still sign up without penalty during the General Enrollment.
While you will not be charged a penalty until a full 12 months has passed, missing each March 31 deadline means another full 12 months, and another 10 percent late penalty. For example, if you go without Part B coverage for 3 years (without having other acceptable coverage) and decide to sign up, you may incur a 30 percent penalty—10 percent for each full 12 months you could have had coverage, but didn’t sign up.
When It Is Okay to Delay Signing Up for Part B Without Paying a Penalty
Not everyone decides to enroll in Part B coverage when they are first eligible. There are cases when it is okay to wait until after you turn 65. If you are still working, and covered through an employer’s group health insurance or your spouse is still working and you are covered under their employer’s group health insurance, you can wait.
The good news is, when you retire (or your spouse retires) you will have a full 8 months to sign up for Part B without paying a penalty. However, if you do not sign up during this Special Enrollment Period (SEP), then the penalty clock begins from the originaldate you lost coverage, not the date your SEP ended.
Understanding the Medicare Part B penalty can be complicated. Unless you have other coverage through an employer or a spouse, the easiest way to avoid penalties is to sign up for coverage when you are first eligible, during your Initial Enrollment period. If you miss your first opportunity to join, you may have to wait until the General Enrollment period to enroll.