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In this week’s column, Phil Moeller, the author of Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs and co-author of the updated edition of How to Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security, answers a question about the transition from an ACA health plan to Medicare.
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The Affordable Care Act (ACA) covers lots of working folks, either because their employers don’t provide health insurance or because they find their state Marketplace plans are cheaper and better than what their employers do offer.
As these employees turn 65, the eligibility rules for these ACA plans change. This transition can be confusing, and I get questions from people who wonder about how to comply with the rules. Here’s one that provides a good idea of the issues.
Question
Dear Phil,
I’ve done a lot of research on this issue but I’m still unclear. Healthcare.gov has a section on “Changing from the Marketplace to Medicare,” and here are some key verbatim excerpts:
“If you have a Marketplace plan, you can keep it until your Medicare coverage starts.”
“If you like, you can keep your Marketplace plan too. But once your Medicare Part A coverage starts, you’ll no longer be eligible for any premium tax credits or other cost savings you may be getting for your Marketplace plan.”
So it seems like the website is saying that you can no longer receive tax credits once Medicare starts, which is not the same thing as when you become Medicare-eligible.
If I haven’t started taking Social Security yet, Medicare doesn’t automatically start when I become Medicare-eligible at 65. Isn’t it possible to delay when Medicare starts for a few months and stay on my Marketplace plan (with the tax credits) until I start on Medicare?
Thanks,
David
Answer
David,
I asked the folks who oversee the Marketplace rules about what happens when people on the plans turn 65. The key shift going on here is that the tax credits offered on ACA policies are no longer available to Medicare-eligible people. And the definition of “eligible” can include people who have not yet started Medicare.
Here’s Medicare’s statement to me. It’s a bit geeky, which is often the case:
“Internal Revenue Service (IRS) regulation at 26 CFR 1.36B-2(c)(2)(i) and (ii) states that once a consumer becomes eligible for other qualifying coverage such as Medicare, the consumer is no longer considered eligible to receive advanced payment of premium tax credit (APTC) to help pay for a Marketplace plan regardless of whether they actively enroll into that other coverage.
“This would include those consumers who: 1) age into Medicare (turn 65) and have the required number of work quarters (40), 2) are automatically enrolled in Medicare because they are already receiving Social Security or Railroad benefits before age 65, 3) are receiving Medicare due to a medical disability, or 4) are receiving Medicare due to a diagnosis of end-stage renal disease (ESRD).
“If a Marketplace enrollee who is receiving APTC delays their Medicare enrollment, they may be liable for repaying to IRS through the tax filing process any APTC received for those months in which they were eligible for Medicare and enrolled in a Marketplace plan when they file their federal income taxes.”
David would thus face possible IRS penalties if he stays on his Marketplace plan between the time he turns 65 and when he enrolls in Medicare. In addition, he also could be hit with Medicare’s late-enrollment penalties. They add 10% a year to Part B premiums for each full year of late enrollment, and 1% to Part D premiums for each month a person is late in enrolling in a Medicare Part D drug plan.
The big exception
The big exception, which Medicare indirectly alluded to in the first item of its response, is when a person has not worked long enough to qualify for Social Security benefits.
This requirement is 40 quarters of work at jobs that require the payment of Social Security payroll taxes. This requirement also enables a person to qualify for premium-free Part A hospital insurance from Medicare.
People who don’t qualify for premium-free Part A can wind up paying up to $505 a month in 2024. Because of that expense, they can keep their ACA plans and do not need to enroll in Medicare.
