Starting January 1, 2022 and ending March 31, 2022, Medicare is conducting its annual General Enrollment Period (GEP). During this three-month period, individuals aged 65 and over can enroll in Medicare Part A (Hospital Insurance) and Medicare Part B (Medicine Insurance). Individuals who enroll in Medicare Part A and Medicare Part B during the GEP will have their coverage taking effect on July 1, 2022.
For federal employees and federal retirees aged 65 and older, what does the GEP mean? This column discusses which federal employees and federal annuitants may need to take advantage of the current Medicare GEP. Included in the discussion are GEP enrollment procedures, monthly premium cost, and possible late enrollment penalties.
It is important to first discuss and to explain what Medicare Part A and Medicare Part B are and who is eligible to enroll. Medicare Parts A and B is called the “Original Medicare” and started in July 1965. Medicare Part A is hospital Insurance and covers inpatient hospital care, skilled nursing facility inpatient care, hospice care, and home health care.
An individual becomes eligible for Medicare Part A and then automatically becomes eligible for the other parts to Medicare – Part B, Part C and Part D. An individual’s eligibility for Medicare Part A is a result of the individual’s paying the Medicare Part A Hospital Insurance Tax (HIT) for a minimum 10 years. HIT is a payroll tax deduction from an individual’s wages or salary. HIT is equally to 1.45 percent of an employee’s gross wages; all employees pay this payroll tax which is also paid (matched) by the employer. No matter the age of the age of the employee or the amount of the employee’s wages or salary, an employee always pays the HIT. In other words, there is no wage cap each year on the HIT as there is on the Social Security (FICA) tax.
The Affordable Care Act (ACA) added an extra Medicare tax for high earners. This surtax is the Additional Medicare Tax. As of January 2013, anyone with earned income of more than $200,000 ($250,000 for married couples filing jointly) has to pay an additional 0.9% in Medicare hospital insurance taxes beyond the standard 1.45%. That entire 0.9% is the responsibility of the employee. It is not split between the employer and the employee.
All employees including federal employees are subject to the HIT. The rule is that if an individual has paid the HIT for at least 10 years during his or her lifetime employment history, then upon becoming age 65, the individual is eligible to enroll in Medicare Part A with no monthly premium. Note that even if the individual enrolls in Medicare Part A at age 65 but continues to be employed, the individual must continue to pay the HIT.
As mentioned, when an individual becomes eligible for Medicare Part A, then the individual is automatically eligible to enroll in the other parts of Medicare, including Part B (Medical Insurance). Medicare Part B coverage includes doctor services, medical equipment, laboratory services such as blood tests and x-rays, and outpatient care.
Unlike Medicare Parr A, there is a monthly premium for Medicare Part B. A Medicare Part B enrollee’s monthly premium depends on an individual’s income – in particular, the individual’s yearly modified adjusted gross income (MAGI). The higher an individual’s MAGI, the more an individual’s Medicare Part B monthly premium. The chart below shows the 2022 Medicare Part B premiums for individuals in Part B during 2022.
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It is important for retirees aged 65 and older and enrolled in Original Medicare to understand that Medicare Parts A and B do not pay 100 percent of a retiree’s hospital and doctor bills. On average, Medicare Part A and Medicare Part B pay on average 60 to 80 percent of an enrollee’s doctor bills. The enrollee needs to have some type of Medicare supplemental insurance (offered by private health insurance companies) to fill in the gaps between what doctors charge a patient’s services and what Medicare Part A and Part B will pay a hospital and doctor. An individual who enrolls in the Original Medicare will usually at the same time purchase Medicare supplemental insurance.
Federal employees are fortunate to be eligible to keep their Federal Employees Health Benefits (FEHB) program health insurance into and throughout their retirement. They need not purchase individual health insurance when they retire from federal service. And if they enroll in the Original Medicare when they become age 65, their FEHB insurance can serve as a Medicare supplemental insurance.
It should be emphasized that a federal employee or a federal annuitant is not required to enroll in any part of Medicare. Most federal annuitants do enroll in Medicare Part A when they become at age 65 because there is no monthly premium. But there are federal annuitants who do not like the idea of enrolling in Medicare Part B because there is a monthly premium. They feel that their FEHB health insurance is more than adequate to pay their doctor bills and other non-hospital medical expenses. But studies have proven that federal annuitants who are enrolled in Medicare Part B and who see doctors who accept Medicare patients will have minimal – if anything at all, in out-of-pocket expenses including deductibles, co-payment and co-insurance.
Those federal annuitants who do enroll in the Original Medicare must adhere to strict enrollment deadlines with respect to Medicare Part B. If they miss an enrollment deadline, then they will pay a late enrollment penalty. It is therefore important to discuss Medicare’s various enrollment periods including the “Initial Enrollment Period” (IEP), the “Special Enrollment Period” (SEP), and the “General Enrollment Period” (GEP).
The discussion about Medicare Part B enrollment deadlines is divided into two sections – one section is for federal employees who retire from federal service before age 65, and the other section is for federal employees who retire from federal service after age 65. Note again there is no late enrollment penalty for Medicare Part A because individuals who enroll in Medicare Part A pay no monthly premium, the result of paying the Medicare payroll tax (HIT) for at least 10 years.
Federal Employees Who Retire from Federal Service Before Age 65
Federal employees are eligible to keep their FEHB program health insurance after they retire from federal service and are federal annuitants. Most employees do keep the FEHB health insurance in retirement. Until they become age 65, they are not eligible to enroll in Original Medicare. Their hospital and doctor bills are paid by their FEHB health insurance plan, just as these bills are paid when they were employees.
Within three months they become age 65, a federal annuitant is permitted in Medicare. This is the start of the annuitant’s IEP. The IEP is a seven-month period consisting of the three months before the month the annuitant becomes age 65, the month of the annuitant’s 65th birthday, and the three months after the month in which the 65th birthday occurs. The following example illustrates:
Example 1. Jason, age 64, retired from federal service on Dec. 31, 2020. Jason is enrolled in an FEHB program health insurance plan. Jason will become age 65 on Apr. 25, 2022. Jason’s IEP started Jan. 1,2022 and concludes July 31, 2022. To enroll in Original Medicare during his IEP, Jason goes online to https://secure.ssa.gov/iClaim/rib.
Once Jason enrolls in Original Medicare, Medicare will be his “primary” health insurance, and his FEHP health plan will be his “secondary” health insurance, or Medicare supplement insurance.
What Happens If an Individual Does Not Enroll in Original Medicare During the IEP?
If an individual failed to enroll during the IEP, then the individual will have to wait until the next GEP in order to enroll in Original Medicare. The GEP occurs every year between January 1 and March 31. Those individuals who enroll in Original Medicare during the GEP will have their Medicare Part A and Medicare Part B taking effect the following July 1st. Note that an individual who failed to enroll in Medicare Part B during his or her IEP and enrolled in Part B during the GEP will most probably be subject to a late enrollment penalty. There is no late enrollment penalty for Medicare Part A.
In Example 1, if Jason failed to enroll in Original Medicare during his IEP ending July 31, 2022, he will have to wait until the next GEP (Jan. 1,2023 – Mar. 31, 2023) with his Medicare Part A and Part B coverages taking effect on July 1, 2023. Jason will likely be subject to a late enrollment penalty for Medicare Part B.
Federal Employees Who Retire from Federal Service After Age 65
Those federal employees who continue to work in federal service past age 65 and covered by a FEHB program health plan are not required to enroll in Original Medicare when they become age 65. They can enroll in Medicare Part A and perhaps they may want to, since there are no monthly premium costs for Medicare Part A. If they do enroll in Medicare Part A, then their FEHB program health plan is considered primary insurance with respect to their hospital bills and Medicare Part A is considered secondary insurance with respect to their hospital bills. The only federal employees who are advised to not enroll in Part A at age 65 are those federal employees who are enrolled in a High Deductible Health Plan (HDHP) associated with a Health Savings Account (HSA). Once they enroll in Medicare Part A, they are ineligible to contribute to their HSA.
For federal employees continuing to work in federal service past age 65, Medicare Part B enrollment is different. There is no requirement that an individual working past age 65 and enrolled in a group-sponsored health plan offered by their employer (in which there are at least 20 full time employees) has to enroll in Medicare Part B. Upon retiring from that employer, the individua can enroll in Medicare Part B and not be subject to a late-enrollment penalty provided the individual enrolls during the retired employee’s “Special Enrollment Period” or SEP.
The SEP is an 8-month period that begins on the “effective” day of a federal employee’s retirement. For most employees, no matter which day of a month an employee retires, the “effective” date of retirement is the first day of the next month. The SEP ends exactly 8 months later. During the SEP, a retired employee must enroll in Medicare Part B in order to avoid a late enrollment penalty. The following example illustrates:
Example 2. Connie, age 68, retired from federal service as a FERS-covered employee on Dec. 31, 2021. Connie previously enrolled in Medicare Part A when she was age 65. Connie is currently enrolled in an FEHB group health plan which she will keep throughout her retirement. Connie must enroll in Medicare Part B during the period Jan. 1,2022 through Aug. 31,2022 in order to avoid a late enrollment penalty.
In case an individual who is eligible to enroll in Medicare Part B during a SEP fails to do so, then the individual will have to wait until the next GEP in order to enroll in Medicare Part B. The result will be a delayed enrollment and the individual will likely be subject to a late enrollment penalty. Consider example 2.
Example 2 (continued). Connie fails to enroll in Medicare Part B before Aug. 31, 2022. She must wait until the next GEP (Jan 1,2023 through Mar. 31, 2023). If she enrolls during the GEP, Medicare coverage becomes effective July 1, 2023. Connie will be subject to a late enrollment penalty.
There are two ways to enroll in Medicare Part B during a SEP, namely: (1) Assuming the individual has previously enrolled in Medicare Part A, the individual should go online and download Form CMS 40B (Application for Enrollment in Medicare – Part B). A federal employee who continued to work in federal service past age 65 should also download Medicare Form CMS L564 (Request for Employment Information); or (2) call Social Security at 1-800-772-1213, TTY users can call 1-800-325-0778.