These days, a lot of Americans have health insurance once they turn 65, through either their job or their spouse’s. Those who choose to delay Medicare enrollment, though, have to be careful. If they don’t have what Medicare calls creditable coverage, they may face a lifetime of late fees. In this post, we explain what Medicare means by creditable coverage and how to delay enrollment without incurring penalties.
What Is Creditable Coverage?
Creditable coverage means that your plan pays, on average, as much as Medicare pays.
If you are eligible for Medicare, the Medicare Modernization Act (MMA) requires your insurance carrier to notify you whether you have creditable coverage. This requirement only applies to employer and union plans that provide prescription drug coverage.
Notice of Creditable Coverage
Your plan must send you a notice of creditable drug coverage when you join the plan. It must also notify you yearly, prior to October 15 (when Annual Enrollment begins).
Store this notice with your medical records or other legal documents. When you decide to enroll in Medicare, submitting a copy of this notification protects you against late penalties.
Does All Employer Coverage Qualify as Creditable Coverage?
No, all employer coverage does not qualify as creditable coverage. For your employer plan to qualify, the organization must employ 20 or more people. In addition, you (or your spouse) must be an active employee. That means that, even if you keep your insurance upon retirement, it is no longer creditable because you are no longer actively working. The same is true if the insurance was through your spouse’s employer and he or she retires.
Should You Also Enroll in Medicare if You Have Creditable Coverage?
If you have creditable coverage through an employer, you may wish to enroll in Medicare as well. If you do, Medicare becomes your secondary insurer. Of course, you also have to pay your monthly premium for Part B in addition to what you pay for your employer-sponsored plan.
However, most people qualify for premium-free Part A. That’s why we almost always recommend enrolling in Part A as soon as you become eligible for Medicare, even if you delay Part B. It supplements your primary coverage, leaving you with little to no out-of-pocket costs in the event you require hospital care.
The only exception is if you have a Health Savings Account (HSA). As soon as you enroll in any part of Medicare, you may no longer contribute to your HSA. However, if your spouse has an HSA, he or she may continue contributing to the account once you sign up for Medicare.
What Does Not Count as Creditable Coverage?
Numerous types of insurance do not qualify as creditable coverage when it comes to Parts A and B (Original Medicare) although they do count for Part D.
Group Health Plans Through a Small Employer
- Fewer than 20 employees
- If you have both, Medicare is the primary insurer
- Not creditable for Parts A and B
- Check Notice of Creditable Coverage to determine whether creditable for Part D
Avoid late penalties by enrolling in Original Medicare as soon as you become eligible. If you keep your employer-sponsored plan, you will have to pay premiums for both. However, this may be cheaper than paying co-insurance, depending on your individual circumstances.
- Not creditable for Parts A and B
- Creditable coverage for Part D
Many vets forego signing up for Medicare. Sometimes, they simply don’t know that their VA benefits do not exempt them. Others don’t see the need for Medicare on top of their current coverage. However, please remember that VA benefits are subject to the whims of Congress. Coverage also varies according to the details of your service. See our article, Do Veterans Need Medicare if They Get VA Benefits, for the full details.
Federal Employee Health Benefits (FEHB)
One reason many federal employees choose government work to begin with is the amazing benefits – including pension and full medical. However, please note that FEHB is not considered creditable coverage.
We advise beneficiaries to compare their costs carefully. Many have seen their FEHB costs rise enough that Medicare actually costs less. One of our licensed agents can help you compare your options to determine whether your out-of-pocket costs would be higher with Medicare or FEHB. You may also choose to enroll in both. Call us toll-free at 855-350-8101 to get started.
Additional Types of Non-Creditable Coverage
The following are not considered creditable for Medicare Parts A or B.
- COBRA: After starting COBRA, you have 8 months to enroll in Medicare without incurring late penalties.
- Retiree insurance: After retiring, you have 63 days to enroll in Medicare without penalty.
- ChampVA: Enrollment in Medicare is necessary not only to avoid late penalties but to keep your ChampVA benefits.
- TRICARE: Like ChampVA, you must sign up for Medicare as soon as you become eligible or risk losing your TRICARE benefits.
To determine coverage for Part D, either check with your benefits administrator or review your most recent Notice of Creditable Coverage.
How to Sign Up for Medicare After Delaying Enrollment
If you had creditable coverage when you turned 65 and chose to delay Medicare enrollment, you can sign up without late penalties. Follow these steps:
- Ask your employer or benefits administrator for a Notice of Creditable Coverage for each part of Medicare for which you delayed enrollment
- Visit your local Social Security office to sign up in person, so you can give them a copy of your Notice of Creditable Coverage
- Sign up within two months of losing your current coverage
Please note that, even if you have creditable coverage, that does not mean that it’s better than Medicare or will cost you less out-of-pocket. It’s always worth the time to compare your options. One of our licensed agents is only a phone call away.