Medicare open enrollment is coming up in October. Retirees are being inundated with advertisements, mail and reminders, yet few eligible consumers truly understand the program's ins and outs.
Medicare enrollment presents a perfect opportunity to clear up confusion and help clients plan their spending and drawdown strategies. Picking the right plan can also set them up for the lowest possible health care costs, while poor planning and late enrollment can leave them with unnecessarily steep bills.
Even if you don't plan on selling Advantage plans – or plan to refer clients to Medicare specialists to enroll — it's important to understand the program's particulars of the program to set clients at ease, spot gaps in their planning and help them make informed health care decisions.
Critical dates
Despite the open enrollment buzz around open enrollment, that's not the date by which most retirees initially sign up for Medicare.
"This is when lots of people feel they need to do something because of all the marketing," says Randy Frey, vice president of senior services at FNA Insurance.
The initial enrollment period (IEP), which falls during the month a retiree turns 65 and the three months before and after, is a seven-month period during which clients must enroll in Medicare parts A and B for the first time. For each 12 month-period they fail to sign up, they'll have a 10 percent premium penalty. Fortunately, the general enrollment period from Jan. 1 to March 31 allows clients who missed their IEP to sign up before a full year has passed
Enrollees can sign up for or change their Medicare Advantage and Medicare Part D plans or switch from Medigap to Advantage during open enrollment (Oct. 15 to Dec. 7). If they only want to sign up for Medigap, however, they'll usually do that during the six-month Medigap open enrollment period that starts on the first of the month after the month they enrolled in Part B.
A variety of special enrollment periods (SEPs) cover extenuating circumstances, and may allow seniors to sign up for Medicare Advantage and Part D after losing coverage, change their address or register a move to an assisted living facility. An SEP may also qualify in the event of clerical errors or misunderstandings about creditable coverage.
Medicare Advantage vs. Medigap
Part B will rarely cover all of a client's medical expenses alone; most enrollees fill the gaps with Medicare Advantage or Medicare Supplement insurance (Medigap). With Medicare Advantage, a private-pay alternative to traditional Medicare, recipients receive parts A and B and supplemental coverage through an HMO or PPO. As the name implies, Medigap is a private-pay supplement that takes over where government-paid Part B leaves off. Advantage recipients receive drug coverage through their private payer, while Medigap enrollees need to purchase it separately with a Part D plan.
"People of means are generally going to buy Medigap because it allows them to go to any doctor or hospital in the country that takes Medicare," says Hans Scheil, CFP with Cardinal Planning. "A lot of retirees buy into Medicare Advantage plans while they're still healthy, but as soon as they get seriously sick, they can't go to out-of-network hospitals."
