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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Ineligible for Premium-Free Medicare Part A. Can I Keep My Subsidized Covered California Plan?

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Question: I currently have individual health insurance with Covered California and receive a financial subsidy. I will be turning 65 in July 2016. I also have only 31 work credits with Social Security towards premium-free Medicare Part A. Accordingly, as I will not have the requisite 40 credits when I turn 65 this July for premium-free Medicare Part A, can I keep my existent Covered California plan and its financial subsidy?

Answer: No. The law makes no distinction between premium-free and premium-required Part A enrollment, so all persons age 65 and older are supposed to enroll in Medicare. Those with less than the requisite 40 credits for fully insured status must pay the premium for Part A. In 2016, the Part A premium is $411. Part B premiums are a minimum of $122 per month. If you don't sign up for Part B when you're first eligible, you'll have to pay a late enrollment penalty for as long as you have Part B. Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn't sign up for it.

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Part A and Part B Premium Penalties Individuals eligible for Part A as voluntary enrollees (they pay a premium) who decide to enroll in a QHP rather than enrolling in Part A will face financial penalties should they later decide to enroll in Medicare. The Part A premium goes up 10% for people who do not enroll in Part A when they are first eligible. They are then required to pay the higher premium for twice the number of years they could have had Part A, but didn’t sign up.

For Part B, the premium penalty is 10% for each 12 month period the person could have had Part B but did not enroll. Unlike the Part A premium penalty, this Part B premium penalty is not lifted after a number of years but lasts the duration of a person’s enrollment in Part B.

Example: Ms. Smith is eligible for Part A and Part B of Medicare. Because she will be a voluntary enrollee in Part A and thus have to pay a premium, she takes a QHP with a tax credit. She stays in the QHP for three years, and then decides to enroll in Medicare. Had she enrolled in Medicare Part A when she was initially eligible, her Part A premium would be $426 per month and her Part B premium would be $104.90 per month (2014 numbers). However, because she delayed enrollment, her Part B premium is $136.37 per month (Part B premium + 30% penalty) and her Part A premium is $468.60 (Part A premium + 10% penalty). She will be required to pay the higher Part B premium for the rest of her life, and the higher Part A premium for six years.

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Taking the APTCs today is probably an unwise decision because the penalties on the back end are substantial. Imagine this: somehow the PPACA actually gets unwound by a new administration after the elections in November … but it takes three years to do that. The person who first posed the question could work two more years and earn premium-free Medicare Part A. But the choice was to not enroll and take APTCs for four years. That’s a 40% penalty on Part A for 8 years and a 40% penalty on Part B for life.

I’ve seen information from Covered California that answers this questions differently. According to the information I read (dated Sept 2015) if Part A has a premium required and the person does not enroll in Medicare they may be eligible for the subsidy if they meet other income requirements. The penalty would still apply if they later tried to enroll in Medicare.

Phil’s answers are generally correct, but could have been more specific.

In order to finance the PPACA, Congress mandated that nearly all persons who reach age 65 must enroll in Medicare. Only immigrants lawfully present in the US less than 5 years are exempt. So you need to enroll. Your enrollment “window” actually opened on April 1 and will close on October 31 (seven months of opportunity). Coverage will begin on July 1 as long as you enroll on or before June 30 — but enrolling NOW is better than waiting until the last day.

However, even though you personally have only 31 Social Security “credits,” you may still be entitled to “premium-free” Part A under one of three conditions: you have been married for more than 9 months to a spouse who already has 40 credits (is “fully insured”), or if you were previously married. If divorced, but married for at least ten years to a spouse who was “fully insured,” or if widowed, were married to your “fully insured” spouse more than 9 months, then you are eligible for Part A without cost.

If neither situation applies to you, then you will only pay $226 per month for Part A (with 30-39 credits; less than 30 credits = $411 per month). The other good news is that you may continue to work and earn credits until you reach 40, at which time your Part A coverage will be premium-free (unless still in a penalty window),

If your 2014 adjusted gross income was less than $85,000 ($170,000 if married), your Part B premium will be $121.80 per month. If you are not receiving a Social Security benefit check, then you will have to pay your premiums quarterly in advance (226+121.80=347.80x3=$1043.40). Higher incomes will result in higher Part B premiums.

You will also need to enroll in a Part D Prescription Drug Plan (“PDP”), premiums for which range from about $18 to $132 per month, nationally.

If you fail to enroll in Medicare as required, there are premium penalty surcharges which will apply. Part A is 10% for each 12-months of non-enrollment for twice the number of months you were not enrolled — not enrolled for two years = 20% penalty for 4 years. Part B is a cumulative 10% for each 12-months of non-enrollment FOR LIFE — not enrolled for two years = 20% penalty for life. Part D is a cumulative 1% per month for each month of no coverage (or non-creditable coverage) FOR LIFE — not enrolled for two years = 24% penalty for life..

If you enroll in Parts A and B, then you are eligible to enroll in either a Medicare Supplement insurance plan (monthly premiums based on age and type of plan selected), or a Medicare Advantage managed care insurance plan ($0 premium in most regions of California where available). With Medicare Supplement, you still need a PDP. With Medicare Advantage, drug coverage is generally included.

Medicare Supplement works in tandem with “Original Medicare” (Parts A & B) to cover some or most of the expenses Medicare does not cover. Medicare Advantage substitutes coverage under an HMO system which may provide a greater level of benefits than Original Medicare, and with reduced out of pocket costs compared to Original Medicare without a Medicare Supplement plan.

You should speak to a knowledgeable Life & Health insurance agent.to determine which will best suit your needs. If you have Medicare Parts A & B but neither Medicare Supplement insurance nor enrollment in Medicare Advantage, you could be exposing yourself to more than $40,000 in potential out of pocket medical expenses in one really “bad” year.

Hope this helps.

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