For those 65 and older, fall not only brings with it apple picking, leaves changing colors and securing travel plans to escape the cold Midwest winters, it is also the time of year for Medicare participants to decide if changes should be made to their health insurance plans. As outlined below, there are key enrollments dates and changes to Medicare in 2018 that you should be aware of:
Open enrollment for current Medicare recipients is between October 15 and December 7, and during this time period certain changes can be made:
- Medicare recipients can switch to Medicare Advantage plans and Medicare Advantage recipients can switch to traditional Medicare.
- Medicare Advantage plan participants can switch from one plan to another.
- Medicare Part D participants (prescription drug coverage) can switch from one plan to another.
- One can sign up for Medicare Part D if they did not sign up for a plan during their initial Medicare enrollment. A late enrollment penalty may apply.
Note: Auto re-enrollment occurs for Medicare Advantage as well as for Part D participants, however Part D auto enrollment only occurs if the current Part D plan is still available
Here are a few other key enrollment dates:
- January 1 – February 14: Participants can leave Medicare Advantage and switch to original Medicare and Medicare Part D.
- January 1 – March 31: Special enrollment period to sign up for original Medicare if initial enrollment period is missed. Coverage will not start until July 1 and late enrollment penalties may apply.
In addition to these key enrollment dates, there are some noteworthy changes to Medicare in 2018 as summarized below:
- Newly issued Medicare ID cards will no longer contain Social Security numbers and will instead be identified by random ID numbers. Changes started in April 2018 and will be complete in April 2019.
- The percentage of costs participants pay for covered drugs under Part D will be lower compared to 2018 for participants that fall into the “donut hole”. Once out of pocket costs reach $3,750, the percentage of costs a participant pays starts to go down. Once $5,000 is reached, the participant is no longer financially responsible for covered drugs.
- Medicare Part B premiums will be higher for many participants in 2019 because of the “hold harmless” rule that prevented the full Medicare premium increase in 2018. The hold harmless rule states that in any year Medicare premiums increase more than the Social Security benefit increase, if Medicare premiums are paid directly from the participants social security benefits, then the net benefit received cannot be lower than the prior year benefit as a result. It is expected that the cost of living adjustment for Social Security will be greater than the Medicare premium increase in 2019 and therefore most participants will pay the full increase in Medicare premiums.
- There are new Medicare premium brackets for high income participants that may result in higher Medicare premiums. In 2019, Medicare premiums start to increase for married participants that have $170,000 in income ($85,000 for single filers) and reach the maximum increase at $320,000 of income ($160,000 for single filers). In 2018, the maximum bracket was not reached until income exceeded $428,000 ($224,000 for single filers)
Although many Medicare participants will simply let their benefits auto-renew and no action will be taken, the open enrollment period that occurs between October 15 and December 7 is the time for participants to review their benefits and determine if any changes should be made. Your BDF team is here to help you think through these considerations and give guidance as needed.
John D. Smith, CFP® is a Wealth Manager at BDF. A member of the Business Owner Team, he is adept at helping business owners integrate their unique business opportunities and risks into their personal wealth management plan, due to his 20+ years of experience. He finds that business owners, in particular, are often so focused on making sure that their business operations are running smoothly, they may overlook their personal financial well-being. John received his Bachelor of Science degree in Financial Counseling and Planning from Purdue University. He is a member of the Chicago Estate Planning Council and the National Association of Estate Planners and Councils and holds the ACCREDITED ESTATE PLANNER® designation. He is a member of the Financial Planning Association and a member of the University Club of Chicago and is Chairman of the club’s Wine Society.