Mr. Hutchinson has drug coverage through his former employer’s retiree plan. He is concerned about the Part D premium penalty if he does not enroll in a Medicare prescription drug plan, but does not want to purchase extra coverage that he will not need. What should you tell him?
The Correct Answer and Explanation is :
Mr. Hutchinson should enroll in a Medicare Part D prescription drug plan to avoid the late enrollment penalty. Even though he has drug coverage through his former employer’s retiree plan, this coverage may not be considered “creditable” by Medicare standards. If his retiree plan’s drug coverage is not expected to pay, on average, at least as much as Medicare’s standard Part D coverage, he will incur a late enrollment penalty if he delays enrolling in a Medicare Part D plan.
Medicare defines “creditable” drug coverage as prescription drug coverage that is expected to pay, on average, at least as much as Medicare’s standard Part D coverage. If Mr. Hutchinson’s retiree plan is not creditable, he will face a late enrollment penalty if he enrolls in a Medicare Part D plan after his initial eligibility period. This penalty is a permanent increase in his Part D premium, calculated as 1% of the national base beneficiary premium for each full month he was eligible but did not enroll in a Part D plan.
To determine whether his retiree plan’s drug coverage is creditable, Mr. Hutchinson should contact his former employer’s benefits administrator. They are required to provide a notice each year by October 15th informing retirees whether their prescription drug coverage is creditable. If he does not receive this notice, he should request it from the benefits administrator.
If Mr. Hutchinson’s retiree plan’s drug coverage is not creditable, he should enroll in a Medicare Part D plan during his initial enrollment period to avoid the late enrollment penalty. If he is already past his initial enrollment period, he can enroll during the annual open enrollment period from October 15 to December 7. During this time, he can compare different Part D plans to find one that best fits his needs and budget.
In summary, to avoid the late enrollment penalty, Mr. Hutchinson should verify whether his retiree plan’s drug coverage is creditable. If it is not, he should enroll in a Medicare Part D plan during his initial enrollment period or the annual open enrollment period. This will ensure he has adequate prescription drug coverage and avoid unnecessary penalties.