How to Avoid the Medicare Part B Penalty

Medicare Part B is optional and covers outpatient expenses such as lab tests, outpatient surgeries, doctor visits and limited outpatient prescription drugs (typically not drugs you would administer yourself). 

Coverage begins after you meet an annual deductible of $147 (2015) as well as paying a monthly premium of $104.90. After meeting the deductible, you must also pay a coinsurance of 20 percent of the Medicare-approved charges for most doctor services.

You may be wondering whether you should sign up for Part B at the same time as Part A. Naturally, you are concerned about paying premiums for Part B if you don't need the coverage. But the timing for enrolling in Part B is a bit trickier and the stakes much higher, since late enrollment can cause you a permanent premium increase.

One thing you should consider: If you don't have employer group coverage, then this is a no-brainer. You should apply during their seven-month initial enrollment period.

If you are covered under a group health plan based on your current employment -- whether it's your employer or your spouse's -- you may qualify for a Special Enrollment Period, often abbreviated as SEP. If so, you may delay enrolling in Part B until your group health coverage is terminated, and avoid the late enrollment penalty.

The eight-month special period starts the month after the end of either your employment or the group health insurance coverage based on that employment -- whichever happens first. I'll remind you periodically regarding your Part B coverage.

Keep in mind that COBRA coverage does not qualify as employer coverage, and so it won't allow you to escape the penalty for delayed enrollment. Be sure to educate yourself so you don't make this common mistake.

There are other considerations as well. Some smaller employers require Part B coverage to be integrated with their existing insurance plans, for instance, while larger employers may not. Talk to your human resources department to find out whether Part B coverage is necessary for yourself.


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