Late Enrollment Penalties (LEP)
An LEP can be added to your monthly premium if you don’t enroll when first eligible. If you don’t sign up for Parts A, B and D during the appropriate enrollment period, you assume the risk of incurring a separate late enrollment penalty for each of these Medicare parts.
What many beneficiaries don’t realize is that LEP’s can last for as long as you keep your Medicare coverage, which for most is your lifetime! It’s important to make sure you understand your enrollment periods and how to comply.
Understanding the Different Late Enrollment Penalties
Read more to know the penalty amount and length of time for various penalties.
REASON FOR PENALTY
If you didn’t qualify for automatic enrollment, and didn’t sign up during your Initial Enrollment Period, you’ll be required to pay a late penalty premium for Part A when you choose to enroll.
Note: If you or your spouse paid 10 years (40 quarters) of income taxes while working, Part A is free for you. If you have never been employed, or you haven’t worked long enough to have paid 10 years (40 quarters) of income taxes, you can still enroll in Part A, but you’ll have to pay a monthly premium for your coverage.
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.
EXCEPTIONS
If you qualify for a Special Enrollment Period.
REASON FOR PENALTY
If you didn’t enroll in Part B when you were initially eligible, and you don’t qualify for an SEP.
PENALTY
A monthly premium increase of 10% of the current Part B premium, for every 12-month period that you could have had Part B, but did not enroll.
LENGTH OF PENALTY
The duration of your Part B coverage.
EXCEPTIONS
If you qualify for a Special Enrollment Period.
REASON FOR PENALTY
If you didn’t enroll in a Part D prescription drug plan when you initially became eligible.
PENALTY
A monthly premium increase of 1% of the average monthly prescription drug premium, multiplied by the number of months you could have had Part D but did not enroll.
CMS will impose this 1% per month penalty for every month you went without creditable Part D coverage. Your penalty will be calculated off of the “National Base Beneficiary Premium” (NBBP), which is $34.70 in 2024. 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
The duration of your Part D coverage.
EXCEPTIONS
If you qualify for a Special Enrollment Period.
Part D Creditable Coverage
You can possibly avoid the late penalty under an SEP if you’ve had Creditable Coverage for any period of time after 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.
