For some exchange enrollees, Medicare is just around the corner. And while people have been transitioning from individual coverage to Medicare for decades, the process is a little different now that Obamacare has been enacted.
If you’re already receiving Social Security or Railroad Retirement benefits, the government will automatically enroll you in Medicare Part A the month you turn 65. Otherwise, you’ll have a seven-month window during which you can enroll in Medicare. It starts three months before the month you turn 65, includes the month you turn 65, and then continues for another three months.
No automatic plan termination
Prior to 2014, coverage in the individual market generally terminated automatically when an enrollee reached age 65. Age was a limiting factor for enrollment – people 65 and over typically could not obtain coverage in the individual market, nor could they keep it once they reached 65, even if they were not eligible for Medicare.
That has changed under the Affordable Care Act, so you’ll need to actively cancel your exchange coverage in order to transition to Medicare.
Subsidies end with Medicare eligibility
You are not required to cancel your exchange plan when you enroll in Medicare, but if you’re getting premium subsidies, they’ll end when you become eligible for premium-free Medicare. And if you keep your individual market exchange plan and don’t sign up for Medicare when you first become eligible, you’ll have to pay higher Medicare Part B premiums for the rest of your life, once you do enroll in Medicare, due to the late enrollment penalty.
[Note that while you’re allowed to keep your exchange plan – at full price – after you become eligible for Medicare, it’s illegal under the Social Security Act for anyone to sell you an exchange plan after you’re already eligible for premium-free Medicare Part A. However, you can purchase a plan in the exchange in lieu of Medicare if you would otherwise be required to pay premiums for Medicare Part A, due to a work history that’s insufficient to qualify for premium-free Part A benefits.]
No benefit to keeping exchange plan in addition to Medicare
In virtually all cases, keeping your exchange plan along with Medicare would be a waste of money. The plans would provide duplicate coverage, and individual market exchange plans are not set up to coordinate with Medicare the way employer-sponsored plans are. So your exchange plan would not function as secondary coverage. Instead, it simply would not be required to provide coverage at all if you also had Medicare coverage (small business plans sold through the SHOP exchanges do coordinate benefits with Medicare, since they’re employer-sponsored plans rather than individual market plans).
What you’ll need instead is a Medicare Advantage plan or a Medigap plan and Part D plan to supplement your Medicare coverage. Here’s a resource to help you figure out what would work best in your situation.
When you’re ready to cancel your exchange plan:
If you’re enrolled in a plan through HealthCare.gov, you can follow these directions for cancelling your exchange plan so you can transition to Medicare. Or you can remove only yourself from the policy if you have other family members who need to stay on the exchange plan.
If you’re in a state with a state-run exchange, you’ll need to follow the steps outlined by your exchange. Regardless of what state you’re in, if in doubt, ask for help. Contact the exchange call center or your broker if you have one. Document the call and keep a record of your cancellation request.
Cancelling your exchange coverage to switch to Medicare should be relatively simple, but we have seen cases where cancellation requests weren’t transmitted to the carrier in a timely manner. For that reason, it may be wise to switch from bank draft to paper billing prior to submitting your cancellation request.
That way, if something goes wrong when the cancellation request is being processed, you won’t end up with premiums being auto-drafted from your bank account after your coverage was supposed to be terminated.
When should you cancel your plan?
The standard advice is to avoid any gaps in coverage. So if your Medicare will start August 1, you would schedule your exchange plan to terminate July 31. But while that’s undoubtedly the safest course of action, some people feel comfortable taking a gamble during their last month or two before Medicare kicks in, and they cancel their coverage early (there’s an exemption from the ACA’s individual mandate penalty if you have a gap in coverage of no more than two months, and the mandate penalty is eliminated altogether after the end of 2018).
Be cautious about this approach if you have pre-existing conditions however. If you’re going to enroll in Medicare A and B, you’re probably going to want a Medigap plan to supplement your coverage. Medigap plans are guaranteed issue during your initial six month enrollment period, but they can impose a pre-existing condition waiting period if you’ve had a break in prior coverage of more than 63 days.
Once you’ve taken steps to enroll in Medicare and schedule the cancellation of your exchange plan, take some time to familiarize yourself with the various coverage options that can improve upon the basic coverage provided by Medicare. And then enjoy your Medicare – you’ve earned it!
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.