This is the third article in a series to address various scenarios as more people who have a Covered California plan become eligible for Medicare. The previous two articles provided information for people who are entitled to premium-free Medicare Part A. This third article focuses on people who are not entitled to Medicare Part A without a premium thus must pay a premium if they want Part A (see textbox “Who Pays the Part A Premium?”).
Who Pays the Part A Premium?
Some people are not entitled to Medicare Part A without a premium because they or their spouse did not pay any or enough FICA (Federal Insurance Contributions Act) tax. In Social Security terminology, they did not have at least 40 work credits. When they turn 65 and become eligible for Medicare, they have to pay a premium if they want Part A. How much is the Part A premium?
- If you have fewer than 30 work credits (or paid FICA tax for fewer than 7.5 years or did not pay any FICA tax), you have to pay the standard Part A premium, which is $411 per month in 2016.
- If you have at least 30 but fewer than 40 work credits (or paid FICA tax at least 7.5 years but fewer than 10 years), you have to pay the reduced Part A premium, which is $226 per month in 2016.
See our website for more information about Medicare Part A.
Not yet enrolled in Medicare
If you have a Covered California plan, but are not entitled to premium-free Medicare Part A, you may choose to stay with the Covered California plan instead of enrolling in Medicare. If you qualify for financial help with your Covered California plan, you may continue receiving financial help so long as you do not enroll in Medicare Part A. Please see textbox “Medicare or Covered California?” to help you decide whether to enroll in Medicare or stay with your Covered California plan.
Enrolled in Medicare
Some people who are already enrolled in Medicare, and paying the Part A premium, ask if they can get a Covered California plan instead. The answer is yes. They may disenroll from Medicare and buy a Covered California plan (unlike people who are entitled to premium-free Part A, who may not disenroll from Medicare without having to drop their retirement or disability benefits and pay back any retirement or disability benefits they have received.) Before you disenroll from Medicare, because you don’t want to pay the Part A premium, and buy a Covered California plan, see textbox “Medicare or Covered California?”
Medicare or Covered California?
As you decide whether to continue with your Covered California plan instead of enrolling in Medicare, or disenrolling from Medicare to buy a Covered California plan, consider the following:
- Premiums – Is the Medicare premium more or less than the premium for a Covered California plan? Add premiums for Medicare Part A, Part B and other premiums, like for a Medicare Advantage plan or a Medicare Part D and Medigap plan, to compare with the premium for a Covered California plan. If you qualify for financial help, your premium for a Covered California plan will probably be lower.
- Costs and benefits – In addition to comparing premiums, also compare other costs, like deductibles and copayments, and benefits. For example, a Silver 70 plan from Covered California has an annual medical deductible of $2,250 and pharmacy deductible of $250. Depending on what you choose in Medicare, you may or may not have a medical or pharmacy deductible. For example, if you choose a basic Part D plan, you may have an annual pharmacy deductible of $360. As you compare costs and benefits, you may find the exercise like comparing apples and oranges.
- Late enrollment penalty – If you decide to enroll in Medicare later, you may have to pay a late enrollment penalty (see sidebars). For instance, if you no longer qualify for financial help and the premium for a Covered California plan would be higher than for Medicare, you may want to enroll in Medicare. Having coverage from a Covered California plan does not exempt you from the Part A and Part B late enrollment penalties. The late enrollment penalty applies whether you delayed enrolling in Medicare or disenrolled from Medicare and re-enroll later.
- General Enrollment Period – If you decide to enroll in Medicare after your Initial Enrollment Period, you may enroll only during the General Enrollment Period, which is January 1 to March 31 each year. If you enroll during the General Enrollment Period, your Medicare becomes effective the following July 1. To prevent a gap in coverage, you would need to continue whatever coverage you have until Medicare begins July 1.
Enrolled in Medicare Part B only
Some people enroll in Medicare Part B only; they do not have Part A because they cannot afford the Part A premium. However, Medicare Part B alone is not considered minimum essential coverage (MEC). In other words, a person who has Part B only would have to pay a penalty required by the individual mandate, which is part of the Affordable Care Act or health care reform, commonly called Obamacare. The individual mandate requires people to have a health plan that meets minimum essential coverage, such as qualified health plans from Covered California, Medicare Part A, Medi-Cal and TriCare. Thus to avoid the penalty, the person with Part B only may enroll in Part A or buy a Covered California plan.
If an individual cannot afford the Part A premium, s/he probably would not be able to afford the premium of a Covered California plan unless s/he qualifies for financial help. If s/he qualifies for financial help and buys a Covered California plan, s/he would probably disenroll from Part B. By disenrolling from Part B, the individual no longer has to pay the Part B premium, since a Covered California plan covers similar services covered by Part B. Note, however, that if s/he re-enrolls in Part B later, s/he would be subject to the late enrollment penalty as discussed in the sidebar. To avoid the late enrollment penalty, some people may keep Part B and pay the premium as well as the premium for the Covered California plan. A couple of considerations if keeping Part B with a Covered California plan:
- Medicare Part B is the primary payer, and Medicare does not provide coordination of benefits. For example, Medicare Part B would pay first for a doctor’s visit that is medically necessary and reasonable, assuming you have met your Part B annual deductible. Medicare would not forward the remainder of the bill to the Covered California plan. The Covered California plan is not supplemental coverage: it would not pay your Part B annual deductible or the remainder of the bill after Medicare has paid.
- If you are enrolled in Part B, you would need to keep your Medicare Part D plan, or enroll in one, unless the Covered California plan has creditable prescription drug coverage. Prescription drug benefits in Covered California plans are not required to be creditable. Like Parts A and B, Part D also has a late enrollment penalty which applies if you are eligible for Medicare Part D, don’t have creditable prescription drug coverage, and enroll in a Part D plan later.
For more information on other scenarios regarding people with a Covered California plan becoming eligible for Medicare, see Part 1 and Part 2 articles of this series.
Part B Late Enrollment Penalty
Individuals who delay enrollment in Part B for 12 months or more have to pay a late enrollment penalty. Exception: People who have employer health coverage may delay enrollment in Part B without being subject to the late enrollment penalty.
The Part B late enrollment penalty is calculated at 10% of the Part B premium for each 12-month period in the delay, and applied for as long as the individual has Part B.
Example: Mark is >65 years old and delayed enrollment in Part B for 30 months (two 12-month periods, thus 20%). His Part B late enrollment penalty is $24.36 per month (20% of $121.80). With the penalty, Mark pays a total of $146.16 per month for Part B in 2016.
Part A Late Enrollment Penalty
Individuals who have to pay a premium for Part A may have to pay a late enrollment penalty if they did not enroll in Part A but could have. The Part A late enrollment penalty is imposed if someone delayed enrollment 12 months or more. The penalty is calculated at 10% of the Part A premium and applied for twice the number of months in each 12-month period that the individual delayed enrollment.
Example: Mark is >65 years old and delayed enrollment in Part A for 30 months. His Part A late enrollment penalty is $41 per month (10% of $411) and applies for 48 months (2x two 12-month periods). With the penalty, Mark pays a total of $452 per month for Part A in 2016.
This article is part of an educational series sponsored by SCAN Health Plan.
