One of the more common questions agents get asked from their Medicare clients is "what is the Medicare Part D late enrollment penalty?" It is fairly easy to explain that if a Medicare member spends more than 63 consecutive days without having Part D or creditable drug coverage, they will be required to pay a late enrollment penalty should they choose to enroll in a Part D plan in the future. The typical follow-up question is "will I have a late enrollment penalty?" This is also usually pretty easy to answer, assuming the agent asks the proper questions of the client and the client responds with accurate answers about prior coverage.
The more difficult answer is the one that usually comes third: "How much is my late enrollment penalty going to cost?" To properly answer this question, there are a couple assumptions the agent is required to make:
- The client is past their Initial Enrollment Period and has gone more than 63 consecutive days without having either a Part D plan or creditable prescription drug coverage.
- The client knows how long they've gone without having either a Part D plan or creditable prescription drug coverage.
Once an agent has these assumptions in place, the agent can then help the client calculate what the late enrollment penalty should cost. The late enrollment penalty is calculated by multiplying 1% of the "national base beneficiary premium" times the number of full, uncovered months the client was elgible for, but did not enroll in, a Medicare Part D plan or other creditable drug coverage.
What's the "national base beneficiary premium?" It was $32.42 in 2014, it is $33.13 in 2015, and you can find these values at Medicare.gov. So now that the agent has all of their assumptions in place and knows the "national base beneficiary premium," the agent can walk their client through a simple calculation to determine what the Part D late enrollment penalty should be. Here's an example:
James Senior enrolled in a MA only plan with no Part D drug coverage during his Initial Enrollment Period that went effective July 2014. During AEP Mr. Senior decided to enroll in a MAPD plan that will be effective January 2015. Mr. Senior spent six months (July 1 to Dec 31, 2014) with no Part D coverage. Agent Dan Smith will multiply $33.13 (the "national base beneficiary premium" for 2015) by 6% (1% for every month Mr. Senior went without Part D coverage). Agent Smith knows that Medicare will round the penalty to the nearest $0.10, so he estimates the penalty for Mr. Senior should be $2.00. Here are the calculations:
.06 (or 6%) x $33.13 = 1.9878
1.9878 rounded to the nearest $0.10 is $2.00
Agents should be cautious not to tell clients EXACTLY what the late enrollment penalty will be. The agents are forced to make assumptions about a client's insurance history oftentimes without having actual facts. Medicare clients aren't always aware of what their past coverages consisted of, or they may not be aware that they had creditable drug coverage through a retirement health plan, for example. Agents should also make the client aware that although Medicare calculated the late enrollment penalty, the invoice will come from the company through whom they are enrolled for their Part D or MAPD coverage. Clients often ask why their plans are charging them additional fees, unaware that these charges are being required from Medicare.
If you have any questions about the Medicare Part D late enrollment penalty, feel free to Contact Us.