There are some people that receive a notice from the Centers for Medicare and Medicaid Services and their Medicare Part D prescription drug plan alerting them they have a late enrollment penalty. Some of the beneficiaries that receive this letter don't question the penalty but many others do. There are times this is a letter that shouldn't have been mailed and is easy to address. For others, it's not as easy to avoid as they thought it would be.
What is a Late Enrollment Penalty?
A late enrollment penalty is a penalty that is accessed to those that didn't enroll in a Medicare approved Part D prescription drug plan when they were eligible for it. This letter is almost automatically generated and sent to new enrollees of a Medicare Part D plan. It's something that the Centers for Medicare and Medicaid services will send because they are the party responsible for accessing those penalties.
A late enrollment penalty is a penalty that people are encouraged to avoid. This penalty is added onto the cost of a Medicare Part D prescription drug plan's premium. It's not something that can be avoided because it is added onto the premium's cost and has to be paid at the time the premiums are due, each month.
How is the Late Enrollment Penalty Calculated?
The late enrollment penalty is calculated by CMS. This penalty is one that takes many things into consideration before it is calculated. When a person is accessed a late enrollment penalty, CMS looks at the number of months they appeared not to have coverage.
For every month the beneficiary was without coverage, they have to pay 1% of the national average of the cost of a prescription drug plan. For example, if a Medicare beneficiary was without coverage for 5 months, they have to pay a 5% penalty in addition to their monthly premium.
The national averages of Medicare prescription drug plans are recorded annually by CMS. They look at the many different plans that are offered across the nation and calculate the average of those plans. Once an average is determined, they take the penalty months and apply it to that average. If the national average of a prescription plan is $27 and a person was left without coverage for 10 months, they would have to pay an additional $2.70 each month with their monthly premium. (10% comes from the 10 months they were uncovered. 10% of $27 is $2.70) Because the national average of prescription drug plans can go up or down, the late enrollment penalty amount can increase or decrease for members each year.
I Enrolled On Time. Why Am I Being Penalized?
When a person leaves a private insurance and begins using Medicare, there are many things that have to be recorded. The Centers for Medicare and Medicaid Services try to keep records of the insurance that Medicare eligible beneficiaries have before they begin using Medicare. This system isn't faultless and often those records are outdated. When an eligible beneficiary begins using their Medicare benefit, those records make it seem as if they didn't have any creditable coverage before enrolling.
For those that retired after their initial eligibility period, when they stopped their private coverage, this appearance of non-coverage looks bad. Because it doesn't appear there was coverage for those beneficiaries, Centers for Medicare and Medicaid Services calculate that person's late enrollment penalty. This information is sent to the insurance provider after a person has enrolled into a prescription drug plan.
Those that did enroll into a Medicare prescription drug plan on time are not required to pay this penalty. There is information that will be requested to stop the penalty from being applied to their premiums. It is important that those who get these letters respond to the request for information.
How Can I Stop This Penalty?
There are different ways for people to provide the information to their Part D prescription plan. Those that receive a late enrollment penalty letter have to do what is known as a late enrollment penalty attestation. This attestation is a sworn statement attesting to having coverage. There are town different ways for this attestation to be done.
Some members choose to call their Medicare part D prescription drug plan providers. They call their insurance provider with the name of the insurance they had, the dates they had creditable coverage. There are others that choose to send the attestation letter with the same information enclosed.
Once the information has been received by their insurance provider, it will be forwarded to the Centers for Medicare and Medicaid Services. As soon as it is received, CMS takes the time to review and verify this information. Once it has been proven true, the late enrollment penalty is removed.
What if I Really Didn't Have Coverage?
For those that didn't have creditable coverage, unfortunately the late enrollment penalty will stay. There is very little that can be done to remove the penalty. When there is proof there was no coverage, the late enrollment penalty is correct and the beneficiary is responsible for paying for it. As soon as it is accessed, it has to be paid monthly with the premium to the insurance provider. The insurance provider will divide and pay the late enrollment penalty and forward it to those that should receive it.
Unfortunately there are some people that don't enroll into a Medicare prescription drug plan when they are eligible. Many of these people have gone without coverage for many reasons. Although the late enrollment penalty increases the cost of their prescription insurance, they are still eligible to enroll into the insurance. Those that had creditable coverage are able to have the late enrollment penalty removed.
These penalties aren't designed to punish those that didn't have coverage. They were designed to ensure that beneficiaries were consistently covered for their medicinal needs. Although it's an inconvenience to have a penalty accessed, it is a relief to have them removed. When these notifications are mailed, they shouldn't be ignored or a late enrollment penalty could be accessed to those that shouldn't have one.