If you keep working after you turn 65, do you need to sign up for Medicare?
No one wants to be charged with a late fee, especially when they’re moving into retirement age and every penny counts, so it makes sense that a lot of people dread the Medicare late fee that you might be hit with if you don’t sign up for Medicare once you turn 65. But the late fee isn’t as straightforward as media often makes it out to be, in fact, if you’re still working at 65 and you have health insurance, then you don’t need to worry about the late fee at all. It’s a little complicated, so we’re going to break it down in this article.
How much is the Late Fee?
The late fee applies to Medicare Part A, Part B, and Part D. For Parts A and B, the “fee” is actually permanent 10% increase to your monthly premium per year that you didn’t sign up for Medicare. For Part D it is a 1% premium increase per month that you don’t sign up. So even though it is called a “late fee” it is not a one-time fee.
You might be thinking, wait isn’t Part A usually free?
Individuals who have worked 10+ years paying Medicare taxes qualify for free Part A. So, even if you get a late fee for part A, 10% of free is still free.
There are instances where the late fee is less than 10%, but those are few and far between. For the most part, Medicare applicants only have to worry about late fees surrounding Part B, as it is not free. But let’s talk a little bit more about the late fee before we get into the caveats there.
What causes a “Late Fee?”
You’ll get a late fee if you enroll outside of your initial enrollment period (which is 3 months before you turn 65 and 3 months after) or outside of “special enrollment periods.”
To make it less complicated, you basically will incur a late fee if you:
- Don’t sign up for Medicare within 3 months of turning 65.
- Don’t have an equivalent level of group insurance outside of Medicare from you or your spouse’s job.
If you have insurance through you or your spouse’s work and you lose it (due to quitting, being fired, retiring, etc.) you have 2 months to sign up for Medicare Part B, and then there’s part C. Which can seem pretty complicated.
Medicare Part C (and a refresher on A, B, and D)
If you’re not familiar with Medicare Parts A, B, C, and D, and what the differences are, we wrote an article about that, and you can find it by clicking here.
To summarize it quickly, Part A is for short-term hospital care and is usually free. It’s also additive, meaning you can have it on top of other coverage. Part B is just like any other healthcare plan, it will be similar to your plans with Sharp or Kaiser. Part D is the drug plan, and basically just gives you coverage for prescription drug plans. Insurance people will call the combination of Medicare part A and Part B, Original Medicare.
Part C is the alternative to “Original Medicare,” and adds additional coverage but limits you to networks. Medicare Part C combines Parts A, B, and D, and then adds additional coverage, such as dental or vision insurance, or maybe even expanded health coverage. These plans really vary, so you’ll need to keep a close eye on how much they cost, what their benefit schedule is like, and where their doctors are located. The SDPEBA Sharp Retiree plans are examples of Medicare Part C.
So, can you get late fees on part C? Kind of. If you have a late fee on Part D, you’ll pay that increase with any Part C plan that carries Part D. Additionally, Medicare Part C will follow standard “open enrollment” policies, so you’ll need to sign up during a special enrollment period (e.g., when you retire) or during open enrollment in the fall.
If you sign up for a plan outside of SDPEBA or the City/County, the Open Enrollment periods may be different. Be sure you’re checking your price options too; a lot of part C plans can have hidden fees.
To Summarize
-You get a 10% late fee added to your premium for each year you don’t sign up for Medicare Parts A and B.
-The 10% late fee on Part A is usually negligible because Part A is free so long as you put 10 years of taxes into Medicare.
-Part D adds a 1% to your monthly premium per month that you’re late signing up.
-You can avoid these late fees by signing up for Medicare within 3 months of turning 65 and within 2 months of losing insurance through you or your spouse’s employer if you work past 65.
-Part C doesn’t have late fees, but since Part C sometimes uses Part D, you might still have to pay the late fee on that.