I am about to turn 65 and go on Medicare, and my income is $120,000. I know that people with higher incomes are required to pay higher premiums for Medicare Part B and Part D. To avoid paying these higher Medicare premiums, can I sign up for health insurance from a Marketplace plan now instead of enrolling in Medicare when I turn 65?
If you are not yet enrolled in Medicare, you can buy health insurance coverage through the Marketplace before you turn 65, and if you have a Marketplace plan, you can choose to renew it after you turn 65. But once you turn 65 and become entitled to Medicare coverage, you cannot buy a new Marketplace plan. This is because insurers are prohibited from selling health insurance coverage that duplicates what you have under Medicare, if they know you are covered by Medicare.
If you are considering renewing a Marketplace policy after you turn 65 and become eligible for Medicare, there may be downsides to this choice.
First, your total costs could be higher with a Marketplace plan than with Medicare, even if your income is high enough that you are required to pay income-related premiums for Medicare coverage. At your current income level in 2018, you would pay about $4,100 in annual Medicare premiums for Part B ($3,215) and Part D (around $885 on average.) You would also likely buy a Medigap supplemental policy to help cover Medicare deductibles and limit annual cost sharing. The average cost of Medigap is roughly $2,000, though premiums can vary widely depending on the plan you choose, your age, and where you live.
By comparison, premium for a Marketplace policy will also vary depending on where you live, your age, and the plan you choose. In 2017, the national average premium for the lowest cost bronze plan for a 64-year-old was around $8,200 and the average annual deductible under bronze plans was about $5,700. Most Marketplace participants pick silver plans. On average, you would pay around $10,200 for the benchmark silver plan – much higher than the total premiums for Medicare – and the average silver plan deductible was more than $3,000. Also keep in mind that the combination of Medicare plus a Medigap policy would offer you more comprehensive coverage with lower overall out-of-pocket costs than a Marketplace plan.
Second, you should also be aware there would likely be differences in access to doctors, hospitals, and prescription drugs between Marketplace plans and Medicare.
Third, keep in mind that if you sign up for a Marketplace plan, rather than enroll in Medicare Part B when you are first eligible to do so, and then later you decide to sign up for Medicare, you may be required to pay a penalty for delaying enrollment in Medicare Part B. Your monthly Part B premium may go up 10% for each year that you could have had Part B, but didn’t. You may also owe a late enrollment penalty for Part D drug coverage, which is equal to 1% of the national average premium amount for every month you didn’t have coverage as good as the standard Part D benefit Marketplace.
Finally, if you have Marketplace coverage when you become eligible for Medicare, and decide to drop your Marketplace plan, you need to contact your plan to terminate your Marketplace plan yourself. It will not happen automatically when your Medicare coverage begins. Your insurer cannot terminate your Marketplace coverage unless you tell them you want this coverage to end.