New Medicare Regulation Mandates Health Plan Switch

Medicare beneficiaries may face significant plan changes in 2025, but many are unaware of the potential impact, according to a recent eHealth report.

Why it matters: Failing to review plan options during the Annual Enrollment Period (AEP) could prove costly for beneficiaries, as this year’s AEP is expected to be among the most disruptive in recent memory.

The details:

• Only 48% of Medicare beneficiaries carefully read the mail they receive from their insurance company.
• Only 36% of Medicare Advantage and Part D plan enrollees find their annual notice of change letter readily understandable.
• 51% of Medicare beneficiaries incorrectly believe that benefits under most Medicare plans are “basically the same.”
• 81% of beneficiaries have been enrolled in their current Medicare plan for two years or more, while 51% have never made a change to their Medicare coverage.

Changes to coverage can have a profound impact on beneficiaries’ quality of life and financial wellbeing. Medicare Advantage and Part D plan enrollees could see reductions in supplemental benefits, increases in Part D premiums, product withdrawals, and market exits by some insurers, and other core benefit changes.

What they’re saying:

• “Changes to coverage can have a profound impact on beneficiaries’ quality of life and financial wellbeing,” said eHealth CEO Fran Soistman.
• “It is important for beneficiaries to understand they have options when faced with significant changes to their benefits,” continued Soistman.

“Licensed agents and brokers like eHealth can provide valuable assistance at no additional cost to help beneficiaries review their options and enroll in a plan that meets their needs for 2025.”

The other side: Some experts suggest that concerns about cuts to Medicare Advantage are premature and that drawing conclusions based on statements from insurance company CEOs may be an overreaction.

What’s next: Beneficiaries should carefully review their Annual Notice of Change letters in September and consider seeking assistance from licensed agents to compare plans and ensure their coverage meets their medical and financial needs for 2025.

Full story

A new Medicare regulation could soon force many seniors to switch their health insurance plans or face substantial penalties. Seniors who continue working past the age of 65 often remain on their employer’s health plan instead of transitioning to the government-run Medicare. However, an update to Medicare coverage under the Inflation Reduction Act could create additional hurdles for seniors who delay joining Medicare, especially regarding drug coverage.

Currently, seniors can avoid late penalties for Medicare Part D as long as their employer’s plan matches the traditional Medicare prescription drug plan. But, starting January 1, employer plans may no longer be accepted as a way to avoid late penalties because they may no longer meet the qualifying threshold of the new and improved Part D coverage. From January 1, out-of-pocket maximums will be set at $2,000.

Some of the previously accepted employer plans will no longer qualify. This change implies that seniors may need to switch from their employer’s health plan to Medicare to avoid penalties. Those delaying joining Medicare could face higher out-of-pocket costs for drug coverage.

Seniors must ensure their current plans meet the new requirements to avoid penalties. “The primary concern is that most employer group plans have combined health and prescription max out-of-pocket benefits, which are generally higher than $2,000,” Chris Fong, a Medicare specialist and CEO of Smile Insurance Group, told Newsweek. Consequently, employer plans with out-of-pocket costs exceeding $2,000 will no longer be considered credible coverage, subjecting Medicare-eligible employees to the late enrollment penalty.

The late enrollment penalty is triggered if, after the initial enrollment period, you had 63 or more days without Medicare drug coverage or an employer-provided creditable drug coverage plan.

Medicare penalties for delaying enrollment

This penalty applies each month you are enrolled in Medicare without proper drug coverage.

According to Fong, “The penalty is calculated on a monthly basis and is a lifetime penalty. It only comes into effect when you enroll in a Medicare plan that covers prescriptions.” The exact penalty is calculated by multiplying 1 percent of the national base beneficiary premium, which was $34.70 for 2024, by the number of months you went without coverage. Under the new Inflation Reduction Act, insurers are required to notify their Medicare-eligible customers if their prescription drug coverage is considered creditable.

Seniors should take proactive steps now to avoid any confusion or surprises regarding the late penalty. Many seniors continue to work well past the traditional retirement age. According to Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, working seniors must pay close attention to these recent rule changes.

“If you continue to work and your employer provides you with health insurance, that plan must offer the same level of financial support in some categories as Medicare,” Beene explained. Beene emphasized that seniors already face high costs and should be vigilant to avoid penalties brought about by these changes. “With healthcare costs already at near historic highs, you don’t want to miss out on significant savings you should get with a healthcare plan,” he added.

By staying proactive and informed, seniors can safeguard their healthcare benefits and avoid unnecessary expenses. It’s crucial for seniors to stay informed about these changes to avoid unexpected costs and penalties. Consulting with a Medicare expert can provide clarity and help navigate these new regulations.