Ask Ms. Medicare: When Does the Part B Late Penalty Clock Start Ticking?

Q. How does the Part B late penalty work? I missed signing up during my initial enrollment period, which expired at the end of August 2008, but I enrolled in February 2009. I was told I must pay a 10 percent penalty on all my future Part B premiums. Is this correct?

A. No, in your case, it’s not correct. The law says that a 10 percent penalty is imposed “for each full 12-month period” that people delay enrolling in Part B when eligible to do so (unless they have group health insurance from their own or their spouse’s current employment). If the delay is less than 12 full months, the penalty should not apply.

Social Security officials explain that the penalty clock starts ticking at the beginning of the month after your seven-month initial enrollment period (IEP) expires and shuts off on the final day of the annual open enrollment period (OEP) in which you sign up for Part B.

So in your case, although you failed to enroll during your IEP, you did sign up the following February, during the OEP that runs from Jan. 1 to March 31. For you, the enrollment delay was officially seven months (Sept. 1 through March 31), so you won’t incur a late penalty.

Here’s a different example showing how the late penalty can hit. Say your IEP expires at the end of March and you sign up for Part B the following January during the OEP. That’s an actual enrollment delay of only 10 months. But under Social Security rules, the clock continues to tick until the last day of the OEP in which you enroll. So the delay is considered to be a full 12 months (April 1 through March 31) and you must pay a 10 percent late penalty on all future Part B premiums.

Once you’ve missed your first deadline for joining Part B (according to the scenarios described below), you can enroll only during an open enrollment period. Missing each March 31 deadline means another full 12-month delay and a further 10 percent late penalty. For example, delaying enrollment by five years results in a 50 percent penalty.

So it’s important to know when your personal deadline for enrolling in Part B expires, and when the late penalty clock starts ticking, according to different circumstances.

For example, when you turn 65, you can delay signing up for Part B beyond your IEP if:

* You are covered by a group health insurance plan from your employer or union and you are still working; or

* You are covered by your spouse’s group insurance and your spouse is still working.

If you lose this insurance or retire (or, if it’s your spouse who has the employer plan, when he or she retires), you’ll get an eight-month special enrollment period (SEP) to sign up for Part B without penalty at that time. In this case the late penalty clock starts ticking at the beginning of the month after your SEP expires.

* You do not get an SEP, even if you have group health insurance and plan to continue working past 65, if:

* Your employer has fewer than 20 employees;

* Your employer or union health plan automatically becomes secondary to Medicare when you (or your spouse) turn 65; or

* You are covered by COBRA temporary group health insurance.

In the following circumstances, the Part B penalty clock starts ticking at the beginning of the month after your initial enrollment period expires:

* If you have individual health insurance and continue to work after age 65, the penalty clock starts ticking at the beginning of the month after your IEP expires. (With individual, instead of group, insurance, you don’t get an SEP if you delay joining Part B.)

* If you become entitled to Medicare at a younger age through disability, the Part B penalty clock starts ticking at the beginning of the month after your IEP expires. However, if you delay signing up at that time and incur a penalty, the clock will be reset as soon as you turn 65. At that point you’ll get a new seven-month IEP based on your age. Provided that you sign up again for Part B before your new IEP expires, you will no longer have to pay the penalty.

Note: If your state pays your Part B premiums under a Medicare Savings Program, the state will also pay any Part B penalties you’ve incurred.

Patricia Barry is a senior editor at the AARP Bulletin.