Medicare & Retirement: What Federal Employees Need to Know – Part III

This column is the third of five columns discussing what federal employees and annuitants need to know about Medicare.

The first column presented a general overview of the Federal Employees Health Benefits (FEHB) program and Medicare and how the two programs are coordinated. In particular, how federal annuitants can minimize their out-of-pocket doctor and hospital expenses by being enrolled in the “original” Medicare (Medicare Part A and Medicare Part B) and in an FEHB health insurance plan (considered to be a Medicare supplemental health insurance plan).

The second column discussed Medicare Part C (Medicare Advantage plans) and Medicare Part D (Prescription Drug program). The column explained how federal employees and annuitants who enroll in a Medicare Advantage plan (a Medicare Advantage plan that is offered outside of the FEHB program) can minimize their medical, dental and vision expenses, as well as what they need to do to enroll in Medicare Part C. The column also explained why federal annuitants are not required to enroll in Medicare Part D when they are age 65 and retired from federal service.

This column presents the different enrollment periods for Medicare and possible penalties for late enrollment. There are many different rules and deadlines for enrolling in the various parts of Medicare, and enrollment dates can be different for Medicare Parts A, B, C and D..

Those individuals who elect to start receiving their Social Security retirement benefits before they are age 65 will be automatically enrolled in Medicare Parts A and B when they become age 65. They will receive their Medicare enrollment cards three months before the month of their 65th birthday. Within the three- month period, they have the option of refusing enrollment in Part B. Most likely they would refuse enrollment in Part B because there is a monthly premium charge for Part B, the amount of which depends on an individual’s adjusted gross income (AGI). Higher AGI results in a larger Medicare Part B monthly premium. But as will be discussed, refusing Part B enrollment when one is first eligible to enroll is usually a bad idea.

Initial Enrollment Period

If an individual is close to age 65 and not receiving Social Security benefits, in order to enroll in Medicare, the individual must apply for it. The individual can apply online or call the Social Security Administration at 1-800-772-1213.

An individual’s initial enrollment period (IEP) is the seven-month period that includes the three months before the month the individual becomes age 65 and three months after the month the individual becomes age 65. In order to get coverage under Part A and/or Part B the month the individual becomes age 65, the individual must sign up during the first three months before turning age 65. If the individual waits until the Last four months of the initial enrollment period, coverage will be delayed.

The following table summarizes:

Compare Investment Options

The following two examples illustrate:

Example 1. Jason turned age 65 in February 2021. Jason enrolled in Medicare Parts A and B in December 2020. Jason’s Medicare Part A and Part B coverage became effective Feb. 1, 2021.

Example 2. Jessica turned age 65 in March 2021. Jessica enrolled in Medicare Parts A and B in April 2021. Jessica’s Medicare Part A and Part B became effective May 1, 2021.

General Enrollment Period

Individuals who did not sign up for Medicare Part A and/or Part B when they first became eligible during the initial enrollment period may be able to sign up during the general enrollment period (GEP) that is held from January 1 through March 31 of each year. If they enroll during the GEP, Medicare coverage will start the following July 1.

Special Enrollment Period

In certain cases, an individual can delay the Medicare Part B enrollment without having to pay higher monthly premium as a result of a late enrollment penalty (see below). If the individual did not enroll in Part B when the individual was first eligible because the individual or the individual’s spouse was working and had qualifying group-sponsored health insurance plan (such as the Federal Employee Health Benefits- FEHB – program or TriCare) through an employer or union, the individual can enroll during a special enrollment period (SEP) and not be subject to a late enrollment penalty.

The SEP is:

(1) any time the individual is still covered by the employer or union group health plan through his or her spouse’s current or active employment, or

(2) during the eight month period that begins the month after the employer or union group health plan coverage ends, or when the employment ends or the employee retires, even if the retired employee is eligible to keep the employer-sponsored health insurance plan throughout retirement – for example, in the FEHB program.

Note that if an individual, such as a federal annuitant aged 65 and older and who is enrolled in the FEHB program, does not enroll in Medicare Part B during the individual’s IEP, then the individual will have to wait until the general enrollment period (January 1 – March 31 of each year). The individual may then have to pay a higher Medicare Part B premium because of late enrollment.

The following example illustrates:

Example 3. Kevin, age 66, is a federal employee enrolled in a FEHB health insurance plan and is enrolled in Medicare Part A, but not Medicare Part B. Kevin intends to retire on December 31, 2021 and will retain his FEHB health insurance coverage into and throughout his retirement years.

Sometime after he retires on Dec. 31, 2021 and before Sept. 1, 2022, Kevin will have to enroll in Medicare Part B. He can do so by contacting Social Security at 1-800-772-1213 or by going to a local Security office. Before he does visit or contact a Social Security office, he must download Form CMS L564 (Request for Employment Information). Kevin will complete the first section of the form and then forwarded the rest of the form to his HR office to complete. Once completed, Kevin will take the form with him to the Social Security office to sign up for Medicare Part B. If the entire process is completed by Sept. 1, 2022, Kevin will not be penalized for enrolling in Part B after his initial enrollment period.

Medicare Part B Late Enrollment Penalty

Individuals who do not enroll for Part B when they are first eligible may be subject to a late enrollment penalty for as long as they are not enrolled in Medicare Part B. Their monthly premium for Part B may increase by 10 percent of the tier one premium for each full 12-month period that an individual could have been enrolled in Part B but was not enrolled. The following example illustrates:

Example 4. In 2018, the tier one Medicare Part B monthly premium was $135.50. Larry, a retired federal employee, retired from federal service in 2017, became age 65 in November 2018. Larry did not enroll in Part B until January 2021 during the General Enrollment Period. His Medicare Part B premium in 2021 is:

$148.50 first tier premium
+ $13.55 10 percent of $135.50 from the first 12-month
+ $13.55 10 percent of $135.50 for the second 12-monh
$175.65 Larry’s Part B monthly premium for 2021

Enrolling in Medicare Advantage Plans (Medicare Part C)

Medicare Advantage plans (Medicare Part C) (that is, outside Medicare Advantage plans that are not part of the FEHB program) and federal annuitants was discussed in the previous MFR column in this series of what federal annuitants need to know about Medicare. The following information presents what federal annuitants need to know with respect to enrolling in Medicare Advantage plans.

To join a Medicare Advantage plan, an individual must meet the following conditions:

• Be enrolled in Medicare Parts A and B
• Live in the plan’s service area
• Cannot have end-stage renal disease (ESRD) unless they were enrolled in a Medicare Advantage plan when the individual developed ESRD and
• Be a U.S. citizen or lawfully present in the United States.

Federal employees and annuitants who would like to enroll in a Medicare Advantage plan (a Medicare Advantage plan offered outside of the FEHB program) would have to do the following:

• Be enrolled in Medicare Parts A and B
• Enroll in a Medicare Advantage plan during the annual open enrollment period, between October 15 and December 7, with coverage becoming effective the following January 1st and
• Suspend their FEHB plan coverage during the ‘open season” (held between the second Monday of November through the second Monday of December).

An individual may be able to switch or drop their Medicare Advantage plan during a special enrollment period if the individual:

• Moves out of the plan’s service area or moves to a new address within the individual’s service area but new plan options are available in the new location

• Moves back to the U.S. after living outside the country

• Just moved into and currently living in, or just moved out of an institution such as a skilled nursing facility or long-term care facility and

• Involuntarily loses other drug coverage that is good as Medicare drug coverage (creditable coverage) or other coverage changes and is no longer available.

Note the following:

(1) in the above listed situations, the chance to join, switch, or change coverage lasts for two full months after the month of the event that triggers the change; and

(2) federal employees or annuitants who need to drop out of a Medicare Advantage plan for one of the listed reasons and reenroll in the FEHB plan, may do so outside of an FEHB open season.