All U.S. citizens gain Medicare enrollment eligibility three months before their 65th birthday. If you already have a Marketplace policy, your premium tax credits will disappear as soon as your Medicare coverage begins.
Non-subsidized Marketplace plans impose significantly higher premiums, so understanding both programs can ensure a smooth transition between the two and help you avoid coverage gaps and late enrollment penalties.
Medicare and the Health Insurance Marketplace offer similar benefits and adhere to most of the same federal regulations, often nullifying the benefit of maintaining Marketplace coverage after age 65. Even if you choose to keep both forms of insurance, your Marketplace plan would only help pay for eligible expenses not already absorbed by Medicare.
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The Basics of Medicare
Before transitioning to Medicare, you must review your medical needs and choose between one or more of the following coverages:
- Medicare Part A: Original Medicare Part A (Hospital Insurance) covers services received at hospitals, skilled nursing facilities, and other inpatient environments. Most individuals qualify for premium-free Part A after paying at least 10 years of Social Security taxes.
- Medicare Part B: Original Medicare Part B (Medical Insurance) covers 80% of medically necessary doctor’s care, durable medical equipment, lab tests, and most other outpatient services. All beneficiaries must pay a $174.70 monthly premium to retain Part B coverage.
- Medicare Part C: Many private companies sell Medicare Part C (Medicare Advantage) Plans that provide equal benefits to Original Medicare and often include additional perks like dental care and gym memberships. However, premiums and cost-sharing responsibilities can vary by insurer.
- Medicare Part D: Original Medicare members can also purchase supplementary Part D prescription drug coverage. Because private companies structure these plans, they can impose varying premiums, deductibles, coinsurances, and eligible pharmaceuticals.
Key Transition Timelines
Newly eligible seniors can only transition from Marketplace coverage into Medicare during the following enrollment windows:
- Initial Enrollment Period (IEP): Your Initial Enrollment Period (IEP) begins three months before your 65th birthday (or 25th month of SSDI benefits) and ends three months after. Medicare automatically enrolls individuals eligible for premium-free Part A as soon as they come of age.
- Annual Enrollment Period (AEP): Medicare beneficiaries can switch between Original Medicare and Medicare Advantage, adjust Medicare Advantage coverage, and add or drop prescription benefits every year between October 15th and December 7th during the Annual Enrollment Period (AEP).
- Special Enrollment Period (SEP): Some people can enroll in Medicare outside of the conventional windows after changes in residence, loss of existing health coverage, and other qualifying life events.
Potential Pitfalls of Delaying Medicare Enrollment
People who miss their IEP may not have another chance to secure Medicare until the following AEP, resulting in dangerous and costly coverage gaps for those who have already canceled their Marketplace policies. Furthermore, late Medicare enrollment can trigger penalties that often permanently impact future premium payments.
For example, while Medicare allows for late Part B enrollment during a General Enrollment Period between January 1st and March 31st every year, you would incur a permanent 10% premium increase for every 12 months you delay coverage.Likewise, failing to enroll in Part D after first becoming eligible will result in incremental 1% premium hikes for every month you postpone enrollment.
How to Make the Transition
Follow the steps below to ensure a smooth transition from Marketplace to Medicare coverage:
- Verify your eligibility. While most individuals automatically receive premium-free Part A on their 65th birthday, those who paid less than 10 years of Social Security taxes must enroll online or call 1-800 MEDICARE.
- Determine your coverage needs. Original Medicare may adequately suit individuals who want standardized access to inpatient and outpatient medical services. However, others may wish to enroll in Part D prescription drug coverage or Medicare Advantage Plans with additional benefits like vision, hearing, and dental care.
- Enroll in Medicare during your IEP. You can purchase Medicare any time between the three months before and after your 65th birthday. Missing this window will likely result in lifelong late enrollment penalties.
- Cancel your Marketplace policy. You lose eligibility for premium tax subsidies through the Health Insurance Marketplace at age 65. After transitioning to Medicare, promptly contact your Marketplace insurer to cancel benefits and avoid paying double premiums.
Financial Assistance: Making Medicare Affordable
Some people accustomed to Marketplace premium tax credits may worry about paying full price for Medicare. However, monthly Medicare expenses often prove equally or more affordable than non-subsidized Marketplace plans and other private insurance alternatives.
Likewise, Medicare offers various financial assistance programs for low-income and special needs beneficiaries to help reduce their cost-sharing responsibilities and prescription drug costs.
Medicare Savings Programs
Medicare beneficiaries with low income and limited resources invested in stocks, bonds, or retirement accounts can enroll in the following state-sponsored Medicare Savings Programs:
Savings program: | Helps pay for: | Monthly income limit: | Resource limit: |
|---|---|---|---|
Qualified Medicare Beneficiary (QMB) | Part A and Part B premiums, deductibles, coinsurance, and copayments | $1,235 for individuals $1,663 for married couples | $9,090 for individuals $13,630 for married couples |
Specified Low-Income Medicare Beneficiary (SLMB) | Part B premiums only (must have both Part A and Part B) | $1,478 for individuals $1,992 for married couples | $9,090 for individuals $13,630 for married couples |
Qualifying Individual (QI) | Part B premiums only (must have Part A and Part B) | $1,660 for individuals $2,239 for married couples | $9,090 for individuals $13,630 for married couples |
Qualifying Disabled and Working Individual (QDWI) | Part A premiums only (must have a disability, active employment, and have lost eligibility for SSDI and premium-free Part A after returning to work) | $4,945 for individuals $6,659 for married couples | $4,000 for individuals $6,000 for married couples |
Medicare Extra Help
Medicare “Extra Help” helps people with limited income and resources pay for Part D premiums, coinsurance, deductibles, and other affiliated prescription drug costs. Furthermore, Extra Help allows beneficiaries to bypass late enrollment penalties and will automatically register individuals who meet any of the following criteria:
- People with full Medicaid coverage
- People enrolled in a QMB, SLMB, or QI program
- People receiving Supplemental Security Income (SSI) benefits through Social Security
You can also apply for Extra Help directly through the Social Security Administration. Individual applicants must have an annual income below $21,870 and less than $16,660 in liquidable assets. In contrast, married couples must make less than $29,580 yearly and possess less than $33,240 in combined resources.
The Importance of Staying Informed
All people lose eligibility for premium tax credits through the Health Insurance Marketplace after turning 65, significantly increasing their projected expenses. Luckily, Medicare offers similar benefits, adheres to most of the same federal regulations, and provides various savings opportunities comparable to those of subsidized Marketplace policies.
To ensure a seamless transition between both programs, determine your coverage needs and budget, promptly cancel your Marketplace policy, and purchase Medicare during your IEP to avoid costly late enrollment penalties and double premium payments.