Late Enrollment Penalties (LEP)

What is a Late Enrollment Penalty?

✓  A penalty that you incur if you don’t enroll when first eligible. 

✓  This penalty is added to your monthly premium.

✓  Late enrollment penalties are not a one-time late fee.

✓  Late enrollment penalties are usually charged for as long as you are enrolled in that type of coverage (that’s a lifetime penalty for Parts B and D).

✓  The costs of your late enrollment penalty increases the longer you wait to sign up.

A Breakdown of LEPs

REASON FOR PENALTY
If you didn’t enroll in Part B when you were first eligible, and you don’t qualify for an SEP.

PENALTY

The penalty is 10% of the current Medicare Part B premium for every 12-month period from when you were first eligible, but didn’t enroll. 

LENGTH OF PENALTY
As long as you are enrolled in Part B (which could be your lifetime).

REASON FOR PENALTY

After your initial enrollment period is over, if you have a gap of 63 days or more where you don’t have other creditable prescription drug coverage.

PENALTY

CMS will impose this 1% per month penalty for every month you went without creditable Part D coverage. Your penalty is calculated by multiplying 1% of the “National Base Beneficiary Premium” (NBBP) by the number of full months you went without coverage after becoming eligible for Part D.  

For example, if you did not have Part D coverage for two years (24 months) after first eligible, your penalty would be 24% of the NBBP for the remainder of your life.  This monthly penalty is rounded to the nearest $0.10 and added to your Part D premium, as well as any IRMAA obligations.

LENGTH OF PENALTY

As long as you are enrolled in Part D (which could be your lifetime).

REASON FOR PENALTY

If you do not qualify for premium-free Part A, you are subject to penalties if you sign up late. 

PENALTY
A monthly premium increase of 10% of the current Part A premium.

LENGTH OF PENALTY
Twice the number of years you were eligible for Part A but did not enroll.

Note: If you are eligible for premium-free Part A, you can never be penalized. 

For those who do not qualify for premium-free Part A, it is important to address your Part A enrollment when turning 65.

Part D Creditable Coverage

You can possibly avoid a late enrollment penalty under an SEP if you’ve had Creditable Coverage for any period of time after age 65.  Creditable Coverage is defined as alternative coverage that meets or exceeds Medicare standards.

Prescription drug coverage through your or your spouse’s job

Prescription drug coverage through a retirement plan

Prescription drug coverage through the Veterans Administration Affairs

To avoid paying late penalty fees for Parts A, B or D, enroll during the appropriate enrollment period. Need assistance? We can help.

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