Two Medicare Enrollment Surprises to Consider

Two Medicare Enrollment Surprises to Consider

If you are in the process of researching your Medicare plan options, you have probably discovered there is a lot to learn. Some refer to the process as the Medicare Maze.

It’s not just a matter of deciding on the best plan options, but all the rules to follow and penalties to avoid.

You might have found us because you realize you need guidance from an expert.  You’re not alone!

This article will address two Medicare issues that many fail to consider.  In fact, when we consult with people, these “issues” make quite a difference in planning…and sometimes can result in delaying Medicare enrollment.

IRMAA – Income Related Monthly Adjustment Amount

In September of 2017, Hurricane Irma made landfall in Florida and caused a lot of destruction.  Most people evacuated well in advance.  Others hunkered down in boarded-up houses with lots of supplies and a generator.  At the time, I couldn’t help thinking about the parallel with IRMAA.

What is IRMAA?  Well, IRMMA is the additional amount of premium you will pay if you are a high income earner.  This applies to both Medicare Part B and Part D.  See the 2018 charts below.  There is a two year look-back.

You can read more about IRMAA at the Medicare website here.

For Part D:
If your filing status and yearly income in 2016 was
File individual tax return File joint tax return File married & separate tax return You pay each month (in 2018)
$85,000 or less $170,000 or less $85,000 or less your plan premium
above $85,000 up to $107,000 above $170,000 up to $214,000 not applicable $13.00 + your plan premium
above $107,000 up to $133,500 above $214,000 up to $267,000 not applicable $33.60 + your plan premium
above $133,500 up to $160,000 above $267,000 up to $320,000 not applicable $54.20 + your plan premium
above $160,000 above $320,000 above $85,000 $74.80 + your plan premium
For Part B:
If your yearly income in 2016 (for what you pay in 2018) was You pay each month (in 2018)
File individual tax return File joint tax return File married & separate tax return
$85,000 or less $170,000 or less $85,000 or less $134
above $85,000 up to $107,000 above $170,000 up to $214,000 Not applicable $187.50
above $107,000 up to $133,500 above $214,000 up to $267,000 Not applicable $267.90
above $133,500 up to $160,000 above $267,000 up to $320,000 Not applicable $348.30
above $160,000 above $320,000 above $85,000 $428.60

Preparing for IRMAA

IRMAA (like Hurricane Irma) can be an unwelcome surprise and cause you to make changes to avoid (financial) damage.
You might not have a choice and need to pay the higher premiums due to your income.  If you are self-employed, it’s possible you can do some advanced planning to fall in a lower income bracket.  Talking to a tax advisor could be a smart move.
If you are employed and have the option to stay on the group plan, then this could be the better option.  You will be automatically enrolled in Medicare Part A, but you can defer enrollment in Medicare Part B.  You do not need to take action (unless you are receiving Social Security benefits).  Simply do not enroll in Part B until needed.  There is no cost to Part A as long as you or your spouse have paid taxes for at least 40 quarters.
CAVEAT: Some employers require Medicare eligible employees to disenroll from the group plan.  If your company has fewer than 20 employees, then most insurance companies require enrollment in Part B.  For groups with 20 employees or more, you can just opt to stay on the group plan.  If your income is such that you would pay a high IRMAA, then it’s important to run a cost/benefit comparison.
We run cost/benefit comparisons and take into account that you will pay employer-based coverage with pre-tax dollars.  It is important to factor in the cost of your medications.  Often times, group plans can offer better drug coverage.  In almost every other respect, Medicare plans (especially Medicare Supplement plans) are better than the typical group plan.

CAUTION:  If you delay in enrollment in Part B AND you are work for an employer with fewer than 20 employees, then your options will be limited.

Something that most people don’t realize is that if you work for a small company (less than 20 employees) and you defer enrollment in Part B, then when you finally retire, your options will be limited.  Most carriers only allow you to enroll in certain plans on a guaranteed-issue basis.  When you are first eligible for Medicare, you can apply for coverage and have guaranteed acceptance.  No medical questions asked. 

However, in the scenario described above, you will only be able to enroll in Plan F on a guaranteed acceptance basis.  You can enroll in Plan N and Plan G, but you will need to answer health questions and could be declined.  This is the case in most states in 2018.  This is likely to change due to pending legislation.  Make sure you ask your agent.

 Surprise # 2

Finding Out You May Have to Keep The Carrier You Select for Life*

*(There are a few states that allow you to change Medigap carriers on a guaranteed-issue basis)

When you first enroll in a Medicare Supplement plan, it’s very important you select a very good company.  Many, if not most, people think they can switch carriers (and plans) at anytime on a guaranteed-issue basis.  You might think that the Affordable Care Act requires health insurance companies to accept everyone.  That’s not the case.

You can switch Medigap carriers and plans at anytime after your initial enrolment period. However, you will need to complete a health questionnaire and undergo the underwriting process.  If you have a chronic health condition or take several medications, then you could be declined.

Start Comparison Shopping Early

Since you could be “stuck” with your Medigap carrier for life, it’s important to start the shopping process early. You will want to ask questions about which carriers are the best.

Below are some important factors to consider.

  • Financial strength / Ratings by independent rating agencies
  • Length of time in Medicare business
  • History of rate increases
  • Reputation of company
  • Customer service

The list above is not exhaustive, but it gives you some criteria to consider when selecting an insurance company.

Two Medicare Enrollment Surprises to Consider – Conclusion

The “surprises” we discussed are just two of the most common ones.  There are other aspects to Medicare that people simply don’t know and learn the hard way.  We’ve had people contact us after doing lots of research on their own.  At some point, they decided they needed an expert to help.

There is no charge to work with an agent.  Agents are paid a commission by the insurance carrier.  For that reason, it is smart to shop around.  Carriers offer incentives (trips to Hawaii, bonuses, etc) for placing a lot of business with them.  If an agent is steering you towards a particular carrier, ask why.

Make sure you get a quote that shows all the carriers available in your area.  You should ask your agent to tell which three are the carriers they recommend the most and why.

Working with an agent with lots of experience (minimum of 10 years) is essential.  There is just so much to know about Medicare.  Finally, you don’t want to be surprised after the fact.  Take your time, ask questions, and carefully weigh your options.