If you’ve benefited from a health insurance subsidy under the Affordable Care Act, you may be feeling hesitant about Medicare. Many people ask us questions about ACA and Medicare.
Can an individual health plan on the ACA and Medicare work together? Can people turning 65 keep their ACA plan instead of enrolling in Medicare? If you’ve been asking these questions about ACA (Obamacare) and Medicare, this post is for you.
Confusion over Medicare and the Affordable Care Act (ACA) has been common among beneficiaries since the passage of the legislation. If you have an ACA plan through the Marketplace, you can keep that plan until your Medicare coverage starts. You’ll be able to end your ACA plan without any penalties when your Medicare begins.
Your Medicare Eligibility and ACA
You should sign up for Medicare when you first become eligible. Once your premium-free Part A Medicare benefits begin, you are no longer eligible for a premium tax credit (subsidy) or any other savings that you may be getting from your ACA plan.
If you keep your ACA plan, you would have to begin paying full price for it (which can be a huge rate increase if you’ve been getting a subsidy that makes your ACA plan inexpensive).
Even worse, if you fail to enroll in Medicare at age 65 because you choose to keep your Obamacare plan instead, you will later owe a Part B late enrollment penalty that will stay with you for as long as you remain enrolled in Medicare. It’s a 10% penalty per year for every year that you could have been enrolled in Medicare (at 65). So if you waited two years, your would pay a 20% higher monthly premium for Part B for the rest of your life.
This can be disappointment news if you’ve been getting your ACA plan very inexpensively due to a subsidy. However, it’s better to know it now so you can make the switch to Medicare like you are supposed to rather than pay penalties down the road.
Here are some of the most popular questions we have had Obamacare and Medicare. These will help you learn more about changing from the marketplace over to Medicare.
If I am on Medicare, do I need to do anything to avoid an ACA penalty?
Once you enroll in Medicare, you should simply cancel your ACA plan. You do not need both coverages. Cancellation is not automatic, though, s oyou need to actively cancel your ACA coverage by calling the Healthcare Exchange and requesting cancellations.
As long as you are enrolled in at least Medicare Part A, you are considered to be covered by Medicare which is excellent health insurance. You will owe no tax penalty in relation to Obamacare.
Should I sign up for an ACA plan along with my Medicare?
Definitely not. It is illegal for anyone to sell you an ACA qualified health plan if you are currently enrolled in Medicare. You cannot have ACA and Medicare at the same time.
So if you are enrolled in either an ACA plan or a short term medical plan, you’ll likely want to cancel that coverage once you join Medicare. Many people use short-term health insurance plans to bridge the gap between when their employer coverage ends and when they turn 65 and become eligible for Medicare.
Can I choose an Affordable Care Act plan instead of Medicare?
Not unless you are someone who pays for Part A. Your ACA coverage was never meant to replace Medicare. If you do not sign up for Medicare during your Initial Enrollment Period, you will be subject to substantial penalties when you later enroll in Medicare.
Also, as we mentioned, once you are eligible for Medicare, you are no longer eligible for the subsidy (premium tax credits) that are making your ACA plan so cheap.
If you miss your window to switch to Medicare, the federal government will catch up to you soon enough. When it finds that you should have moved to Medicare at age 65, it will assess you a fine to make you pay back any subsidy dollars that you have received toward your ACA coverage since you turn 65.
Exception Regarding ACA and Medicare Coverage
There is a ONE exception. If you have not yet worked enough years to qualify for free Medicare Part A, you could choose an ACA qualified health plan. For example, we often see new immigrants enroll in ACA because they do not have enough credits to qualify for premium-free Part A.
However, there are several complicating factors if you do this. First, whenever you later decide to return to Medicare, you would then likely owe late enrollment penalties for Medicare A &B. Second, if you are already taking social security and you dis-enroll from Part A, you could forfeit your Social Security benefits.
Finally, the ACA plans are quite expensive compared to Medicare when you can no longer take advantage of the subsidy that has been reducing the price. In many cases, paying for Medicare Part A can still provide you with more benefits at less cost than an ACA-plan would cost.
It is somewhat difficult to estimate your costs for an ACA plan over age 65. Most of the insurance companies’ quote engines cut off at age 64. There is considerable hassle in going this route. It’s best to work with a professional to determine whether pursuing this option would really make sense financially.
When Should I Cancel My ACA Plan?
You will want to avoid any gaps in health coverage. Contact the ACA plan and request that it be cancelled the day before your Medicare benefits begin.
Don’t be tempted to gamble with your health by cancelling your ACA plan early. If you have more than a 63-day window between when your ACA plan ends and your Medicare begins, then when you enroll in a Medigap plan, they can impose a waiting period for pre-existing conditions.
Everyone who enrolls in Part B is given a 6-month Medigap open enrollment window to enroll in any Medigap plan they want. It’s better to use this window when you first activate Part B and have your ACA plan coverage terminate the day before your Medicare and Medigap plan begins.
Coverage from Medicare and a Medicare Supplement Plan F would give you very comprehensive benefits where you will pay nothing out of pocket for any Medicare Part A or B covered services except for your month premiums.
Can we help you with an insurance plan like that today? Don’t hesitate to contact us.