Understanding Medicare Enrollment Periods
In this second installment of the Medicare series we will dig deeper into enrollment periods and possible penalties to help beneficiaries decipher the consequences if they do not act in timely manner. Remember that Medicare is a government program managed by Center for Medicare & Medicaid Services (CMS) which, offers limited health insurance coverage for people age sixty-five and older, and individuals under age sixty-five with certain disabilities. Note, that the insurance industry refers to Medicare recipients as beneficiaries and you will see this used repeatedly in this series.
Initial Coverage Enrollment Period (ICEP). For people turning age sixty-five or qualifying through special circumstances, the ICEP begins on the first day of the month, three months prior to their sixty-fifth birthday or eligibility date and continues through this period, and ends on the last day, of the 3rd month after the birthday or eligibility month. For example, if a person will turn sixty-five on October 10th this year, the ICEP would have begun on July 1st this year and would continue through January 31st, 2020. This is a seven-month window to enroll in Medicare Parts A and B, and to enroll in a Medicare Advantage health plan or a Part D prescription drug plan both offered through private insurance carries.
Initial Enrollment Period (IEP). This refers to the Part D IEP, this is when a beneficiary is enrolled in Part A only. The IEP begins the on the first day of the month, three months before the month of eligibility, continues through the eligibility month and will end on the last day, of the 3rd month after eligibility. When a newly eligible individual enrolls in both Part A and B at the same time, then IEP & ICEP coincide. There is an important note about this regarding penalties below.
General Enrollment Period (GEP). The GEP is a grace period for those who did not enroll into Part A and or Part B during the seven-month window of their IEP, and do not have credible coverage. In this case a beneficiary may enroll in the GEP for Part B between January 1 and March 31st the eligibility effective date would be July 1st of that year. This would allow for an enrollment into a Medicare Advantage plan (with or without Prescription Drug coverage) between April 1st and June 30th for an effective date no sooner or later than July 1st.
Annual Election Period (AEP). This is the period between October 15th and December 7th every year when beneficiaries may switch Medicare Advantage and Part D prescription drug plans. If a switch is made the plan effective date will be January 1st the following year. Beneficiaries may process as many enrollment applications as they wish between these dates. The last dated application will take effect January 1st the following year. This allows for beneficiaries to change their mind if they find a plan which is a better fit but, strictly limited to the time frame of AEP. AEP ends on December 7th every year therefore, if you were to submit a new application on that day, that will become your plan effective on January 1st.
Open Enrollment Period (OEP). This recently was added back into the mix of enrollment options earlier this year. OEP is the period between January 1st and March 31st every year. During this period a beneficiary has the option to make one more possible change to their Medicare health insurance albeit, with some limitations:
During OEP a beneficiary may change from a Medicare Advantage plan to a different Medicare Advantage plan.
Disenroll from a Medicare Advantage plan and return original Medicare. In this case only, they may also enroll in a stand-alone Part D prescription drug plan.
Beneficiaries may only change plans once during OEP. Beneficiaries who are enrolled in Original Medicare may not add or change Part D Prescription drug plans. The OEP may only be used if a beneficiary is enrolled in a Medicare Advantage plan.
Open Enrollment Period for Institutionalized Individuals (OEPI). This is a continuous enrollment period for individuals who move into, reside in or move out of a skilled nursing facility, nursing facility, rehabilitation hospital or psychiatric hospital. These beneficiaries may also enroll or disenroll in a Medicare Advantage Special Needs Plan if one is available in the service area. If the beneficiary moves out of the institution, they will have a two-month Special Enrollment Period (SEP) to switch plans.
Special Enrollment Periods (SEP). There are many reasons for a SEP to occur. These enrollment periods are started by some type of qualifying event. The time frames for these vary however, most will begin on the 1st day of the month in which a qualifying event takes place and will normally last for two months or 63 days. The beneficiary generally has only one opportunity to change plans.
There are many events which create a SEP and here some common cases:
- Change in residence
- Involuntary loss of credible drug coverage
- Gaining or losing Part D low-income subsidy
- Gaining or losing Medicaid eligibility
- Voluntarily dropping employer coverage to switch to Medicare
- Individuals with severe or disabling conditions who wish to enroll in a Special Needs Plan (SNP).
Part B & D Late Enrollment Penalty (LEP). CMS requires eligible beneficiaries to maintain credible coverage which is defined as that which pays equal to or more than Original Medicare. This is true for both Parts B and D. Some credible coverage programs are the Veterans Administration for Part D, TriCare for retired veterans for Part B, some employer plans but you must confirm do not assume. COBRA is not considered credible coverage.
The Part B penalty for beneficiaries who do not enroll when they are first eligible is 10% for each full 12-month period in which a beneficiary does not enroll in Part B. This penalty is a monthly amount which is added to your Part B premium is permanent while Part B is in place. Most people keep part B for the rest of their lives therefore this could add up to a lot money for a penalty which can easily be avoided.
CMS states that enrolling in a Part D prescription drug plan is optional however, there are consequences if you do not enroll when first eligible. You are first eligible on the Part A effective date, also known as your IEP. You do not need Part B in place to be eligible for Part D. Most beneficiaries will not have a premium for Part A and therefore will have an effective date the 1st day of the month of their sixty-fifth birthday or special circumstance eligibility. Should you go longer than 63 days without other credible prescription coverage without enrolling into a part D plan you may begin to incur a penalty. The penalty is 1% of the national average Part D plan premium for every month that you do not have credible coverage. The penalty is a monthly amount which will remain in place while Part D coverage continues and here again, most beneficiaries would have this for the remainder of their lives. Beneficiaries who qualify for Low-Income Subsidy are not subject to the penalty but, do not assume this is available to you without applying for this subsidy
CMS requires insurance carriers adhere strictly to enrollment guidelines. I cannot stress this enough so understand your situation and do not procrastinate. That could cause you to incur a LEP mentioned above. Enrollment periods and eligibility is one of the more complex aspects of Medicare. There are many resources for you to research further: Social Security Administration at www.ssa.gov; CMS at www.Medicare.gov; American Health Insurance Plans at www.AHIP.org. In subsequent articles of our Medicare series will go deeper into Part D, C and Medicare Supplement also known as Gap plans. Until we talk again, be well.