In a nation where health insurance is usually tied to employment, job loss or retirement can cause disruptions in both insurance coverage and income.
Most Americans age 65 and older are eligible for Medicare to provide their health coverage, but the pandemic has changed the way that some enroll in the program and how much some people pay for that coverage.
Most people can use the online application to apply for both Medicare Parts A and B during their initial enrollment period, which begins three months before their 65 birthday, includes their birthday month and extends three months after their 65 birthday. It is a simple and quick process. I’ve done it myself.
Many people choose to enroll in Part A hospital insurance as soon as they are eligible because it is free. But those who continue to be covered by group health insurance at work or through their spouse’s current employer often delay enrolling in — and paying for — Medicare Part B outpatient health insurance coverage until their employer coverage ends. They have up to eight months to enroll in Medicare B penalty-free once their group health insurance ends.
Normally, people who have Medicare Part A but want to enroll in Part B because they retired or have lost their job must visit their local Social Security office to complete their application. Last week, I detailed how some older workers were having a difficult time enrolling in Part B because local Social Security offices have been closed to the public since mid-March due to the pandemic.
Initially, the Social Security Administration, which processes Medicare applications, said it would let individuals mail or fax their applications to their local Social Security offices. Now, Social Security has added an online application for people who want to apply for Medicare Part B due to job loss or retirement. It includes a digital signature.
“Previously, you could apply online if you were new to Medicare and enrolling in both Part A and B,” said Casey Schwarz, senior counsel for education and federal programs at the nonprofit Medicare Rights Center. “But if you already had A and tried to enroll in B during a special enrollment period, you could not use an online portal. This new online portal is for Part B applications.”
The new application, which was posted last week without fanfare, says: “During the COVID-19 pandemic, the Social Security Administration will be taking Medicare Part B enrollment applications online for working aged individuals who qualify for a Special Enrollment Period (SEP). You may use this online enrollment application if you are 65 or older and you have or had group health plan (GHP) coverage within the last 8 months through your or your spouse’s current employment.”
Applicants must also complete Request for Employment Information form. Normally, this needs to be signed by your former employer to attest that you had creditable health insurance during the previous eight months. But during the pandemic, Social Security will accept other types of proof of coverage, such as income tax returns that show health insurance premiums paid, W-2s reflecting pretax medical contributions or pay stubs that list health insurance premium deductions.
A reduction in income during the current pandemic can affect how much some people pay for their Medicare coverage. Although most Medicare beneficiaries pay $144.60 per month for Part B in 2020, higher-income individuals pay more.
Medicare surcharges, officially known as income-related monthly adjustment amounts, kick in when an individual’s modified adjusted gross income exceeds $87,000 or when a married couple’s joint income exceeds $174,000. MAGI includes adjusted gross income plus any tax-exempt interest from municipal bonds, which are a popular investment vehicle for many retirees. Medicare uses the last available tax returns to determine surcharges, so IRMAA determinations for 2020 are based on 2018 tax returns.
There are five IRMAA income brackets above the base premium amount with surcharges ranging from $202.40 per month per person to as much as $491.60 per month per person.
If an individual’s income declines as the result of a life-changing event, such as retirement, job loss or a reduction in work hours or wages, that is grounds for appealing an IRMAA determination if the income loss would result in a reduction or elimination of the surcharge.
However, if this year’s income declines for other reasons, such as a reduction in dividend payments or a decision not to take a required minimum distribution from an individual retirement account as allowed by the CARES Act, that does not qualify as a life-changing event and is not an acceptable reason to appeals a current IRMAA surcharge. The CARES Act, passed in response to the COVID-19 pandemic, waives the requirement for any required minimum distributions in 2020.
But lower income this year could automatically reduce Medicare surcharges two years from now, as Medicare surcharges in 2022 will be based on 2020 income tax returns.