As people turning 65 age rapidly approach, many who purchased individual health coverage through the Affordable Care Act marketplace will need to enroll in Medicare within their initial seven-month initial enrollment period, which starts three months before their 65th birthday and lasts up until three months post.
As soon as they qualify for Medicare, those receiving premium tax credits (or subsidies) will need to cancel their ACA marketplace plan or risk incurring penalties later on.
Medicare
Most individuals enrolled in individual health insurance via the marketplace will transition seamlessly into Medicare when they reach 65; however, retirees may find that both plans exist concurrently and a qualified Medicare insurance agent can help to ease that transition as efficiently as possible.
Before turning 65, it is crucial that you cancel your Affordable Care Act Marketplace plan as it will miss its one-time seven month initial enrollment period for Medicare – potentially costing a penalty fee if this does not occur.
Subsidies you receive through Medicare Part A are likely to end as soon as you turn 65, making it financially unfeasible to keep a marketplace plan after reaching that age even if its premium payments have become minimal or nonexistent. To cancel, log into your account and click “report a life change”. Once that process has completed, select your new coverage date before clicking “save and close account”.
Health Insurance Marketplace
Prior to the Affordable Care Act, when you turned 65 and had health insurance through an individual marketplace or exchange, Medicare automatically became your default choice. Now it is up to you if you wish to switch plans during a one-time seven month Initial Enrollment Period and enroll.
As soon as you turn 65, any premium tax credits associated with marketplace plans will end. If these subsidies still leave you paying less than $100 monthly due to these subsidies, it can be tempting to delay enrolling in Medicare.
However, you must notify the marketplace to avoid overpayments. Failing to reconcile advance premium credits with your federal income tax return could require repayment of some or all advance premium credits; this can amount to thousands of dollars. New York State of Health’s comparison tool can help estimate potential costs and benefits; more information may also be found by reaching out directly to the marketplace.
Subsidies
Some individuals and families may qualify for premium subsidies based on their income and family size, which help lower or eliminate the cost of marketplace insurance policies.
But as these individuals reach 65 and become eligible for Medicare, they must decide whether to cancel or continue with their marketplace plans – with few guidelines to help make that choice.
Keep marketplace coverage is often not recommended, since it is more costly than Medicare and the subsidy will end once Medicare eligibility at age 65 is reached due to how it is calculated – by comparing income against poverty levels. Income must be reported using Form 8962 included with federal tax returns; for an example on how this works out with Ellen see page 9 of IRS Publication 974 which differs slightly than CMS guidance in KHN story. (But these two references seem accurate).
Enrolling
Enrolling in Medicare can be straightforward and assistance is readily available for free. Simply complete an application and provide some details of your household income; premium assistance or cost sharing reduction may be eligible options depending on individual circumstances; applications should preferably be submitted during either open enrollment periods or special enrollment periods triggered by qualifying events.
If you are still enrolled in an individual market health insurance plan through the Affordable Care Act marketplace and turn 65, it is imperative that you cancel it as soon as possible. Otherwise, you risk missing the one-time initial enrollment period for Medicare and being charged an early enrollment penalty when filing taxes. Furthermore, premium subsidies on ACA marketplace plans will end when enrolling in Medicare so be mindful when selecting coverage type; using the marketplace allows comparison of plans and prices side-by-side.
