Late Enrollment Penalty and Three Medicare Enrollment Periods

Enrolling in Medicare can be difficult, and penalties may apply if enrollment is not completed by the deadline. Around 776,200 Medicare beneficiaries in 2020, or 1.4% of all beneficiaries, paid late enrollment fees for Medicare Part B. As a result, the Medicare Part B monthly premiums for these late enrollees in Part B are, on average, 27% higher.

This article explains how enrolling in Medicare can lower outpatient care costs for federal retirees (such as doctor visits, lab tests, and medical equipment prescribed) and inpatient care (such as stays in a hospital or skilled nursing facility).

The Initial Enrollment Period (IEP), Special Enrollment Period (SEP), and General Enrollment Period are the three enrollment periods available to eligible individuals (GEP).

We will now discuss the three enrollment windows.

Initial Enrollment Period (IEP)

People who turn 65 become eligible for Medicare Part A (hospital insurance) and Part B in the first month (medical insurance). The IEP is started in the month that a person turns 65 and lasts for seven months.

Each IEP for a Medicare beneficiary is distinct. When the beneficiary turns 65 will determine the IEP. For instance, the IEP would start on July 1 and end on January 31 if the beneficiary turned 65 on October 15.

Medicare, like Social Security, considers a person is “of age” the day before their birthday. 

A person’s IEP will start on the first of the month they turn 65. They will be regarded as turning 65 on the last day of the month if their birthday falls on the first. For instance, if a person’s 65th birthday is on October 1, their IEP would start on June 1 and end on July 31.

Whether a person enrolls in Medicare during the three months before turning 65 or the month they turn 65. Part A coverage commences on the first day of the month the beneficiary turns 65. Part B coverage begins between the month after they turn 65 and six months after they turn 65, depending on when they apply, up until December 31, 2022.

After January 1, 2023, Medicare Part B coverage will begin on the first of the month following enrollment if the individual turns 65 or enrolls in the program during the final three months of their IEP.

The IEP and the start date of Medicare Part A and Part B coverage are shown in the chart below:

If a person is eligible for Medicare Part B but doesn’t enroll, their Part B coverage can be delayed. Additionally, as long as they are Part B enrollees, they might have to pay a higher monthly premium. This is because the person’s monthly premium will rise by 10% for each 12-month period during which they were qualified for Part B but did not enroll. However, suppose an individual qualifies for a Special Enrollment Period (SEP), as described in the next section. In that case, there won’t be a late enrollment fee.

Special Enrollment Period (SEP)

Suppose a person doesn’t enroll in Medicare Part B during their IEP. In that case, they can do so again between January 1 and March 31 during the General Enrollment Period (GEP), which is held annually. 

When they turn 65, federal employees enrolled in an FEHB health plan and still employed by the government are exempt from signing up for Medicare. Because there is no Medicare Part A premium, some workers sign up for it when they turn 65. However, due to the required monthly Medicare Part B premiums, these same employees opt not to enroll in Medicare Part B.

However, once these workers leave the federal government, they must enroll in Medicare Part B during the employee’s particular enrollment period (SEP) to avoid a late enrollment fine.

The SEP for a retiring federal employee who has FEHB health insurance and has worked past the age of 65 is eight months beginning on the employee’s retirement effective date. Most federal employees retire on the first day of the month.

General Enrollment Period (GEP)

People who did not apply during their IEP or SEP are eligible to enroll during the General Enrollment Period (GEP). The GEP is held between January 1 and March 31. Anyone who enrolls in Medicare Part B during a GEP will have coverage beginning July 1 of the following year.

Beginning January 1, 2023, people who apply for Medicare Part B through the GEP will begin receiving coverage the first of the month after they apply. 

Penalties for Late Enrollment

Individuals will probably incur a late enrollment fee if they fail to sign up for Medicare during their proper enrollment period (IEP, SEP, or GEP). Medicare penalties are calculated separately for each component. For instance, a person will only be charged a late fee for Part A if they pay the Part A premium. You must pay a Medicare Part A premium if you don’t have ten years of covered employment (didn’t pay the Medicare hospital insurance tax). Most people never pay a late enrollment fee for Part A because they typically do not pay a premium.

The 10 percent of a person’s premium multiplied by the number of complete years delayed is used to determine the Part B late enrollment penalty. This penalty consistently increases the monthly Part B premium of the person. 

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