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Navigating Medicare Enrollment: Guiding Clients through the Medicare Maze

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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.”

Advantage plans tend to feature lower monthly premiums, and can be a cost-effective option for clients of modest means and good health. Fortunately, open enrollment comes around every year, and people who are overpaying for unneeded benefits can still switch to Medicare Advantage. For clients shopping for Medigap, understand that, while premiums may vary from one company to the next, the benefits of each lettered plan are standardized.

Special circumstances for late retirement

Not all seniors face penalties for late enrollment.

“As open enrollment approaches, people are made to believe they have to join, but that’s not the case for a person who continues to work and is covered by a group health plan,” says Frey. “The key factor is how many total employees work for their company.”

More and more people are working past age 65, and as long as their employers have more than 20 employees, their group health plans serve as their primary insurance. Once they retire and lose that coverage, they have eight months to enroll in Part B, regardless of their IEP or COBRA coverage. For self-employed people and workers at companies with 20 or fewer workers, however, Medicare automatically becomes the primary insurance at 65, and the typical IEP and Part B penalty apply.

The enrollment process

You’ve given your clients an overview of their enrollment dates, requirements and potential penalties – now what?

“For someone who’s very tech savvy, you can compare plans and even enroll on,” says Scheil. “Most laypeople don’t get much out of it, though, because it’s very confusing and hard to compare plans.”

Fortunately, Medicare’s plan finder is a great tool for advisors themselves to compare policies and help clients make sense of their options. Finding a Part D plan is a relatively straightforward process of inputting prescriptions and finding the plan with the lowest overall costs. Advantage plans are a little more complicated, given the need to find a network that includes a client’s primary physician and specialists.

No matter which plans a client considers, or what coverage they already have, it’s important to take action every year. “If you’re on Medicare, you’ve got something to do every Fall,” says Scheil. “Either enroll for the first time in an Advantage plan, enroll in a different Advantage plan or, if you’re on Medigap, enroll or re-enroll in Part D.”

Advantage and Part D will automatically renew, but clients’ needs change – as do plans themselves – and a yearly reassessment is critical to keeping costs down.