Understanding Medicare annual enrollment

Understanding the Annual Enrollment Period: Where to start

Medicare provides health care coverage for millions of Americans, making it easier for them to access doctors, hospitals and other health services. And while Medicare can seem like “set and forget” coverage, it most certainly isn’t. Just like when you were working, it’s important to review your health care coverages on an annual basis to ensure you’re appropriately managing costs and maximizing the available benefits. Which leads to your first step: understanding the various enrollment periods associated with Original Medicare and other Medicare coverage options available.

Medicare initial enrollment period vs. Medicare open enrollment period

One of the most important distinctions to make is Medicare’s initial enrollment period, or IEP versus Medicare’s open enrollment, or annual enrollment period, or AEP. The initial enrollment period, or “age-in,” only happens once — it’s a specific timeframe for those who are turning 65 and new to Medicare to enroll in a coverage plan for the first time. The annual enrollment period, meanwhile, is only for those who have existing Medicare coverage.

Initial enrollment period

Your initial enrollment period is a seven-month window surrounding your 65th birthday. This period includes the three months leading up to the month of your 65th, your birthday month, and the three months following your birthday month. Keep in mind that this is a one-time occurrence and after your initial enrollment period ends, you can usually only sign up for Medicare during one of the other following enrollment periods.

• The general enrollment period (also known as “late enrollment”) is for those who didn’t sign up when they were first eligible. You can sign up from Jan. 1 to March 31 each year, with coverage starting the next month. You may have to pay a higher premium for Original Medicare for late enrollment. Medicare will calculate the penalty if it applies.
• Medicare’s special enrollment period, or SEP, is for people who don’t enroll in Original Medicare when they’re first eligible at 65 because they are covered under a group health plan with their or their spouse’s current employer, have other “creditable” coverage, or qualify from another triggering event. If you qualify for a SEP and enroll in Medicare within the eight-month period that begins after your group health coverage ends, you will not pay a late enrollment penalty. For example, you may still be working and covered by an employer health care plan, so you may have enrolled in Part A at age 65, since there is no cost, but have not yet enrolled in Part B.

You should also contact Social Security about applying for Medicare if:

• You are a disabled widow or widower between age 50 and age 65, but have not applied for disability benefits because you are already getting another kind of Social Security benefit.
• You are a government employee and became disabled before age 65.
• You, your spouse or your dependent child has permanent kidney failure.
• You had Medicare medical insurance in the past but dropped the coverage.
• You turned down Medicare medical insurance (Part B) when you became eligible for hospital insurance (Part A).
• You or your spouse worked for the railroad industry.

Medicare open enrollment

Just like group health insurance coverage through an employer, Medicare offers a period each year for you to make changes to the coverage you’ve signed up for. This period is known as the open enrollment period, or annual enrollment period. It occurs annually from mid-October to early December, allowing you to make the following changes:

• Switch from Medicare to a Medicare Advantage plan — though if you currently don’t have prescription drug coverage, you may be charged a penalty to switch to a Medicare Advantage plan with built-in drug coverage
• Drop your Medicare Advantage coverage and go back to Original Medicare — though if you want to also purchase Medicare Supplement (Medigap) coverage, you might have to go through a medical exam
• Change Medicare Advantage plans, including the option to go with or without a plan that offers drug coverage
• Join, change or drop a Medicare prescription drug plan (Medicare Part D)

Medicare Advantage open enrollment

Deciphering between Medicare’s IEP and AEP is straightforward, but when it comes to open enrollment for Medicare Advantage, also known as Medicare Part C, it can get confusing. Mostly because they have a few things in common. For example, during both periods you can:

• Drop your Medicare Advantage coverage and go back to Original Medicare.
• Change Medicare Advantage plans, including the option to go with or without a plan that offers drug coverage.

But that’s where the similarities end. It’s important to note that you cannot take the following actions during the Medicare Advantage open enrollment:

• Switch from Medicare to a Medicare Advantage plan
• Join or switch Medicare drug plans while on Original Medicare

Both enrollment periods provide different opportunities for you to adjust your coverage, but Medicare open enrollment gives you a wider range of choices for change.

Choosing the right Medicare plan during open enrollment

Medicare open enrollment is a great chance to review your coverage each year to determine if you have the coverage that best meets your needs. Because both your health needs and your need for care can change from year to year, you may have a shift in priorities when choosing Medicare benefits. Not to mention it’s generally the only time each year that you can make changes to your existing coverage. If you miss the open enrollment period, you may be stuck with a plan that doesn’t give you the coverage you need, plus out-of-pocket expenses that impact your budget.

Original Medicare versus Medicare Advantage

Original Medicare, which includes Medicare Part A and Medicare Part B, is managed by the federal government and covers most medically necessary services at hospitals, doctor’s offices, and other health care facilities. If you have Part A or Part B, you can generally go to any doctor or hospital that takes Medicare, anywhere in the U.S., and you likely won’t need a referral to see a specialist. It doesn’t cover some routine services like eye exams or dental care, and if you need prescription drug coverage you must enroll in a separate Medicare Part D plan.

Medicare Advantage, on the other hand, is a Medicare-approved health plan offered through a private insurance company. Also known as Medicare Part C, it can be a good way to bundle benefits from Part A, Part B and usually Part D into one plan. It may also offer extra benefits that Original Medicare doesn’t cover, like eye exams and dental and hearing services. However, for non-emergency care you often can only use doctors or other providers who are in the plan’s network and service area, and you may need to get a referral to see a specialist.

What about cost?

With Original Medicare, you’ll pay a monthly premium for Part B, as well as 20% of the Medicare-approved amount for health services after you meet your deductible. If you choose to join a Medicare drug plan, you’ll have to pay separate premium for Part D. Medicare Part A is usually free for most people if you or your spouse paid Medicare taxes while working. If you aren’t eligible for free Part A, you can buy it if you meet the requirements. However, if you choose to buy Part A, you usually must also have Part B. And if you don’t buy Part A for Part B when you’re first eligible, you may pay a penalty for both.

If you opt for Medicare Advantage, your out-of-pocket costs may vary, depending on the service. You’ll have to pay the Plan B premium, plus any premium charged by your Medicare Advantage plan — though most Advantage plans don’t have a premium or may help pay for your Part B premium. Most Medicare Advantage plans include Part D, so you won’t have to pay a separate premium for drug coverage.

If you have Original Medicare, there’s no yearly limit on your out-of-pocket spending, which could be costly if you expect to have a lot of health care expenses. You can opt to buy Medicare Supplement Insurance, also known as Medigap, to help pay for those costs. Medicare Advantage plans do have a yearly limit on out-of-pocket costs for the services Medicare Part A and Part B cover, which will limit how much you pay each year.

What about Medigap?

Medigap can help with out-of-pocket costs you might face with Original Medicare, including:

• Copayments
• Coinsurance
• Deductibles

There are 10 different types of Medigap plans offered in most states, but all include the same basic benefits no matter where you live or what insurance company you buy the policy from. In some states, you may be able to buy an alternative Medigap policy called Medicare SELECT. You can only purchase Medigap coverage if you’re already enrolled in both Medicare Part A and Part B.

You get a six-month Medigap open enrollment period, which starts the first month you have Medicare Plan B if you’re 65 or older. During this time, insurance companies can’t deny you coverage due to any pre-existing health conditions. After this period ends, your health issues may keep you from being able to buy a policy, or it may be more expensive. The Medigap open enrollment period is a one-time thing; if you decide to add Medigap later during Medicare open enrollment, insurance companies can consider your pre-existing health problems.

Making the most of Medicare annual enrollment

The best way to make sure you get the coverage you need at a price that fits your budget during the annual enrollment period is to be prepared. Consider asking yourself the following questions to determine the best plan for your needs.

When it comes to your medical providers:

• How do you like to receive medical care?
• Do you want to be able to pick your providers, or are you comfortable with using a primary care provider?
• Are there any doctors you're currently seeing that you'll need to keep going to?

When considering your prescription drug needs:

• Are you currently on medications?
• Does the plan you’re considering cover your medications? If you need to pay for them out of pocket, would you be able to?
• What are the differences in medication costs between plan types?

If you’re worried about out-of-pocket costs:

• Would you rather pay lower monthly premiums if it means your out-of-pocket costs might be higher?
• Would you be OK paying more per month if it meant your overall medical costs were lower?
• How does the plan you're researching fit within your budget?

If you decide you don’t want to make any changes to your current coverage, relax! You don’t have to do anything.

Of course, the biggest step in being prepared is knowing when the open enrollment period is approaching. It can be helpful to mark it on your calendar so you don’t feel rushed to make changes — or miss the opportunity altogether.

If you’re worried about picking the best plan for your needs or want help determining if you need supplemental coverage, it can be a good idea to talk with an insurance agent. You can call a USAA Health Solutions Specialists at 800-515-8687 to help you explore your options.