Turning 65 should be a milestone of freedom, not a source of financial stress. Yet, for millions of Americans, navigating the first step of Medicare — the Initial Enrollment Period (IEP) — becomes a confusing high-stakes gamble.
The IEP is a critical seven-month window centered on your 65th birthday, and missing it can trigger something far worse than a temporary inconvenience: lifetime late enrollment penalties added to your Part B and Part D premiums, along with costly gaps in coverage.
Whether you are ready to retire or plan to keep working, understanding this single, immutable deadline is the first and most important step to securing your health care future.
The Medicare Initial Enrollment Period (IEP)
The Initial Enrollment Period (IEP) is the first time you are eligible to sign up for Medicare Part A hospital insurance and Part B medical insurance.
The IEP is a 7-month window centered around the month you turn 65:
3 months before the month you turn 65
The month you turn 65
3 months the month you turn 65
Birthday Rule: If your birthday falls on the first day of the month, your Medicare eligibility is moved forward one month. Your IEP and coverage start one month earlier.
When you sign up
Coverage start date
During the 3 months before your 65th birthday month
The month you turn 65 (earliest possible start)
During the month you turn 65
The following month
During the 3 months after your 65th birthday month
1 to 3 months later (depending on the month you enroll)
The penalties for missing the IEP
Medicare penalties are surcharges added to your monthly premiums for as long as you have that part of Medicare, except for Part A. These penalties are designed to encourage timely enrollment.
If you miss your IEP and do not qualify for a Special Enrollment Period (SEP) (usually due to having creditable employer coverage), you face two serious consequences:
Penalty
Penalty calculation
Duration
Impact
Medicare Part B Penalty-This is the most common and expensive penalty.
You pay an extra 10% of the standard Part B premium for every full 12-month period you were eligible for Part B but didn’t enroll and did not have qualifying creditable coverage (usually from an active, large employer).
The penalty is permanent. It lasts for as long as you have Part B.
The penalty is based on the current standard premium, which usually increases every year. This means your dollar penalty amount will also rise annually.
Medicare Part D penalty– This penalty applies if you go 63 days or more without creditable prescription drug coverage after your IEP ends.
Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($34.50 in 2026) by the number of full, uncovered months you were eligible but didn’t enroll.
The penalty is permanent and is added to your Part D plan’s premium for as long as you have Part D coverage, even if you switch plans.
This penalty is added even if you choose a Part D plan that has a $0 monthly premium.
Medicare Part A penalty– Most people receive Part A premium-free (because they or a spouse worked and paid Medicare taxes for 40 quarters). The penalty only applies if you have to buy Part A and you enroll late.
Your Part A premium may go up by 10%.
You pay the penalty for twice the number of years you were eligible but didn’t sign up. For instance, if you delayed enrollment for 2 years, you pay the penalty for 4 years.
How employer insurance factors in
Deciding when to enroll is highly dependent on your current or your spouse’s employer-provided group health plan and the size of the employer. Before your IEP begins, you should always speak with your employer’s Benefits Administrator or HR department and ask these two questions:
“How many employees are currently on the payroll?” Why? This determines if Medicare your is primary or secondary insurance.
“Is our employer-provided prescription drug coverage considered creditable coverage by Medicare?” Why? If not, you may need to enroll in Part D during your IEP to avoid a Part D penalty later.
Primary and secondary coverage
When you have Medicare and other health coverage, such as a group plan, retiree coverage, or Medicaid, each plan is called a payer. The payment process follows a specific sequence, known as “coordination of benefits.”
Primary payer: This plan pays the medical bill first, up to the limits of its coverage.
Secondary payer: The remaining balance is then sent to this plan, which pays for services covered by its policy.
Your responsibility: If the secondary payer doesn’t cover the full remaining balance, you may be responsible for the rest of the costs.
Important reminder for those covered by a group or retiree plan: If your group health plan or retiree coverage is the secondary payer, you might be required to enroll in Medicare Part B before they will agree to pay their portion of the costs.
Employer-provided insurance
When working for a ‘large employer’ (20 or more employees): If you, or your spouse, are still working and covered by a group health plan from an employer with 20 or more employees, the employer’s plan is considered the ‘Primary Payer’. It can be used in place of Medicare Part B and you can generally delay enrollment in Part B without penalty.
Since Part A is usually premium-free, many people enroll in it at 65, even while working. It serves as secondary insurance in the case you are hospitalized.
A Special Enrollment Period (SEP) is available when employer coverage ends: When your current employment ends or your employer coverage ends (whichever comes first), you qualify for a penalty-free SEP to enroll in Part B. This SEP lasts for 8 months after the employment or coverage ends.
Caution: If you have a Health Savings Account (HSA), you cannot contribute to it once you enroll in any part of Medicare (even premium-free Part A). You must stop contributions at least six months before you plan to enroll in Part A.
Working for a ‘small employer’ (fewer than 20 employees): If you or your spouse is still working and covered by a group health plan from an employer with fewer than 20 employees, Medicare generally becomes the ‘Primary Payer’ at age 65.
In this circumstance, you must enroll in Medicare Part B during your IEP. Why? If you delay Part B, your employer’s plan may only pay a small fraction of your medical bills (or nothing at all), resulting in massive out-of-pocket costs, and you will face the late enrollment penalty.
Retiree coverage and Medicare Part B: The critical difference between retiree coverage vs active coverage is whether your insurance is considered “creditable coverage based on current employment.” Retiree coverage, insurance offered by a former employer, union or government entity, does not qualify you for a Special Enrollment Period (SEP) to delay enrollment in Medicare Part B. The only time you can delay Part B without penalty is if you (or your spouse) are actively working and covered by an employer group health plan (EGHP).
Most employer-sponsored retiree plans are designed to work with Medicare, not replace it. Once you turn 65, most retiree plans expect Medicare to pay first.
Before making any enrollment decisions, contact your former employer’s benefits administrator/HR department and ask these crucial questions:
“Am I required to enroll in Medicare Part A and Part B to keep my retiree health coverage?” (The answer is almost always yes.)
“Is my retiree prescription drug coverage considered creditable coverage?” If the answer is no, you must enroll in a Part D plan during your IEP.
“If I enroll in a separate Medicare Part D plan, will I lose my entire retiree health plan?” (Some plans will terminate all your retiree benefits if you enroll in a separate Part D plan.)
Different rules for retiree coverage and Medicare Part D: The rules are slightly different for prescription drugs (Part D). You can delay enrollment in a Medicare Part D plan without penalty only if your retiree drug coverage is considered creditable coverage. Creditable means the plan is expected to pay, on average, at least as much as standard Medicare Part D coverage.
For prescription drug coverage, your former employer or union must send you a notice each year, before October 15, informing you whether your drug coverage is creditable. You must keep this notice as proof.
COBRA Coverage: COBRA is generally not considered “coverage based on current employment” because you (or your spouse) has been ‘separated from service.” This means an employee’s ties with an employer have ended, due to retirement, resignation, termination or death.
You will qualify for a SEP when you lose your employer-provided insurance and have up to eight months after you stop working (or lose your health insurance, if that happens first) to sign up for Part B without a penalty, whether or not you choose COBRA. The end of COBRA coverage will not trigger a second SEP.
The process for enrolling in Medicare Part A and Part B
If you’re 65 or older, you can enroll in Parts A and B, or Part A only. You can delay Part B if you’re already covered through an employer group health plan. If you want to sign up for a Medicare Advantage or Part D drug plan, you have to enroll in Medicare first. You can make specific elections after enrollment.
You may be surprised to learn that enrollment for original Medicare (Part A and Part B) is handled by the Social Security Administration (SSA), not Medicare itself.
Automatic Enrollment: You will be automatically enrolled in Part A and Part B if you are already receiving Social Security retirement benefits or Railroad Retirement Board (RRB) benefits at least four months before you turn 65.
If you are automatically enrolled, you will receive your Medicare card in the mail approximately three months before your 65th birthday. You can choose to opt out of Part B if you have qualifying employer coverage. You can’t disenroll from Medicare Part A. Since most people don’t pay a premium for Part A, it can serve as secondary insurance if you are hospitalized.
Manual Enrollment: If you are not receiving Social Security benefits at age 65, you must sign up manually during your 7-month IEP.
Online: Applying through the official Social Security website. This is the fastest method, and you can apply for Medicare only if you are delaying Social Security retirement benefits.
If you want to sign up online, you must create or sign in to your personal my Social Security account.
By phone: Call the SSA at 1-800-772-1213. Tell the representative you want to sign up for Medicare Parts A and B, or just Part A.
In person: If you are more comfortable applying in person, then your best option is to visit your local Social Security office.
The process for signing-up for Medicare Advantage (Part C) and Part D drug plans
Medicare Advantage and Part D insurance coverage is managed by private insurance companies. If you want to enroll in either plan, you generally sign-up directly with the insurer after enrolling in Medicare.
Medicare Advantage Plans (Part C): You can enroll directly with a private insurance company after you have enrolled in both Part A and Part B. You can do this during your IEP.
Part D (drug plans): You can enroll through the Medicare Plan Finder tool on Medicare.gov, by contacting the specific insurance plan directly, or by calling 1-800-MEDICARE. You must sign up for this during your IEP to avoid penalties.
Knowing your IEP saves you money
Before your seven-month window closes, it is essential to calculate your start and end dates precisely. Don’t forget about the impact of the Medicare birthday rule. If your birthday falls on the first day of the month, your Medicare eligibility is moved forward one month. Your IEP and coverage start one month earlier.
If you have employer coverage, confirm your company’s employee count and obtain proof of creditable coverage in writing. Don’t rely on assumptions or general advice; rely on the specific rules of the IEP.
Taking these decisive actions now guarantees you avoid the painful late enrollment penalties, ensuring your retirement is defined by financial peace, not preventable premium surcharges.
Starting in 2026, Medicare will fully implement a $2,000 annual cap on out-of-pocket drug spending.
Prescription drug costs have long been one of the biggest financial burdens for Americans, but relief may be on the horizon for many. Starting in 2026, Medicare will fully implement a $2,000 annual cap on out-of-pocket drug spending. This is a landmark change baked within the Inflation Reduction Act, potentially offering reprieve to millions around the country.
However, this new rule comes with certain nuances, including how the cap is calculated, which means you might run into surprise bills if you aren’t careful. QMedic analyzed data from sources including Medicare Rights, the AARP, and Humana to break down how your cap will be calculated, whether or not you qualify, and what to do during open enrollment to ensure you receive your benefit in 2026.
Understanding the $2,000 cap: What it really means
Under the new law, out-of-pocket spending for Medicare Part D prescription drugs will be capped at $2,000 per year. This began in 2025, but plan adjustments will carry into 2026. Once you have spent up to $2,000 on the amount of covered drugs, Medicare and your plan will contribute to cover the rest for the remainder of the year.
The AARP made note of how this new $2,000 cap is meant to replace the previous catastrophic coverage phase, which resulted in enrollees still paying 5% of their drug costs after reaching a certain threshold. Under this new policy, the 5% additional payment is wiped out entirely. The change will apply to all Medicare Part D prescription plans, regardless of whether you get coverage through a standalone plan or through a Medicare Advantage plan.
Necessary calculations: Why you might pay less than $2,000
It’s worth noting that not everyone will reach the full $2,000 by the end of the year. The actual amount you spend out-of-pocket will depend on your plan’s specific copays, coinsurance, and your eligibility for Extra Help, the low-income subsidy program. Additionally, manufacturer discounts and plan payments may count towards your out-of-pocket total.
Real-world drug cost scenarios: What to expect at the pharmacy
To gain a better understanding of how this could play out in your daily life, let’s take a deeper dive into some realistic theoretical examples:
Scenario 1: High-cost specialty medication starting in January
Imagine you were to begin treatment in January with a high-cost specialty drug that costs $1,500 per month and is included in Part D. Under the rules in 2026, you would most likely reach your $2,000 out-of-pocket maximum in February or March, causing your copay to drop to $0 for the remainder of the year.
Under the old system, you would have continued to pay a 5% share, resulting in potentially hundreds or thousands more. This is especially impactful for those who need to take high-cost medicines for chronic conditions such as cancer, multiple sclerosis, or rheumatoid arthritis.
Scenario 2: Multiple medications with moderate costs
Now, think about someone who needs five prescriptions that cost about $300 a month combined. Over a 12-month period, this would amount to $3,600 in total drug costs, but your out-of-pocket costs might be only $1,200-$1,800. While you wouldn’t necessarily hit the $2,000 ceiling, you would still benefit from reduced copays and predictable spending thanks to the new smoothing program.
Scenario 3: Starting treatment midyear (August)
The final scenario comes into play if you start an expensive medication in the middle of the year. Say you begin a $2,000-per-month therapy in August. Before the year’s end, you would likely hit the out-of-pocket limit after just one or two refills, then owe nothing through the remainder of the year. This is meant to protect new patients from high costs, too, ensuring they are treated fairly on cost regardless of when treatment began.
The medicare prescription payment plan (M3P): Monthly “smoothing” explained
Another aspect of this $2,000 cap proposal comes into play: the Medicare Prescription Payment Plan (M3P). This further helps enrollees to reduce costs by adjusting payment frequencies. Drug costs can be spread out over the year instead of paying large lump sums right at the counter. Your pharmacy records each prescription you fill, and instead of paying your total copay immediately, your drug plan bills you monthly for a portion of the costs.
This “smoothing” process can help make your monthly spending more predictable and reduce the burden of a huge lump sum payment.
Who benefits from M3P?
The smoothing plan benefits people who primarily:
Take expensive brand-name or specialty medications
Experience high seasonal or front-loaded drug costs
Prefer predictable monthly budgeting
If your out-of-pocket spending would usually hit $2,000 by March, for instance, the M3P would spread that cost into 12 monthly payments of about $166.
Who should skip M3P
Alternatively, the Medicare Rights Center notes that those with stable monthly costs or those with high costs in the latter part of the year should consider skipping. Also, be aware that if you disenroll or switch plans midyear, you will still owe any outstanding M3P balances on your old plan.
How to enroll in M3P
Enrollment in M3P begins when open enrollment starts, so you’ll typically sign up through your Part D or Medicare Advantage plan’s website or via phone. Participation is voluntary, but if you choose to enroll, then you will see your remaining balance for the year, your amount due that month, and any progress you’ve made towards the $2,000 cap.
Open enrollment action plan: Steps to avoid surprise bills
The key way to maximize your savings in the coming year is to make wise choices during the annual open enrollment period, which has already begun. Typically starting on October 15 and running through December 7, there are some critical dates to be aware of.
Critical dates for Medicare open enrollment
October 15, 2025: Open Enrollment begins
December 7, 2025: Last day to enroll or change plans
January 1, 2026: New coverage takes effect
Be aware that missing the above window will lock you into your current plan and mean you miss out on lower drug costs or better formula coverage.
Step-by-step checklist for beneficiaries
Making sure you’re enhancing your plan for 2026 requires following a few key steps:
Review your current medications and costs: Look at your 2025 drug list and total out-of-pocket expenses, making note of any high-cost medications that might push you toward the cap.
Check your plan’s 2026 formulary: Drug formularies, which are the lists of covered medications, can change each year, so verify that your prescriptions remain covered and check for any new prior authorization requirements.
Compare plans using Medicare Plan Finder: Use the official Medicare Plan Finder to compare costs, premiums, and coverage options for 2026.
Evaluate whether M3P makes sense for you by considering your spending patterns. If you routinely face high costs early in the year, then M3P may offer much-needed flexibility.
Enroll or make changes during open enrollment: Don’t wait until the last minute. Enroll in your chosen plan or make adjustments before December 7 to ensure that your new coverage takes effect in January.
Additional considerations to avoid surprise costs
The last thing anyone wants is surprise expenses, which is why it’s essential to consider additional factors. Always confirm that your pharmacy is in-network for your plan. Additionally, ask your provider whether generic or lower-tier alternatives to your drug are available. You should also watch for any premium changes, as the $2,000 cap doesn’t affect your monthly premiums.
Special considerations for caregivers and family members
If you are helping take care of someone and managing their medications, understanding the Medicare landscape for 2026 is crucial.
Helping seniors navigate the changes
Many older adults rely on their adult children or caregivers to help manage their Medicare paperwork. Encourage your loved one to review their plan materials as early as possible so you can assist them with enrollment when the time comes. Also, offer to help compare different costs with the Plan Finder tool.
Financial planning tips
Since out-of-pocket expenses will be capped and potentially spread out monthly, you can better predict your annual healthcare spending. Aim to set aside a small monthly budget for medications or coordinate with automatic payments through the M3P to help prevent missed bills or late fees.
Communication with healthcare providers
Finally, encourage open communication between any doctors or pharmacists involved with your loved one or the person you’re caring for. Ask whether any upcoming medication changes could affect costs or potentially trigger coverage reviews. Providers can also help to identify covered alternatives or patient assistance programs.
Financial assistance programs: Extra help for those who qualify
In some cases, additional financial assistance may still be necessary even with the $2,000 cap in place. Luckily, there are a couple of options that can help:
Extra Help (Low-Income Subsidy) Program
The Extra Help program, also known as the Low-Income Subsidy program, continues to provide significant assistance to people with limited income or resources. It can lower or eliminate premiums, deductibles, and copays. In some cases, this can result in your out-of-pocket costs being below $2,000 even before the cap applies. To qualify, your monthly income must not exceed $1,903if you are an individual and $2,575 if you are using as a couple.
Other assistance options
Beyond the Extra Help program, you may potentially qualify for:
State Pharmaceutical Assistance Programs (SPAPs)
Nonprofit foundations that help with copays for certain diseases
Manufacturer discount programs (though eligibility varies by income and plan type)
If you’re unsure where to start to explore your options, visit your State Health Insurance Assistance Program or the Medicare website to learn about payment assistance.
Common questions and misconceptions
When it comes to Medicare, and specifically the adjustment of the $2,000 cap, there are some common questions and misconceptions:
Myth vs. reality
Myth: The $2,000 cap means you’ll never pay more than $2,000 for prescriptions. Reality: The cap only applies to covered Part D drugs, meaning over-the-counter medications or drugs excluded from your plan’s formulary may still cost extra
Myth: All plans will work the same. Reality: While the cap is universal, premiums, formularies, and pharmacy networks still vary widely by plan, so always compare before enrolling
Myth: You’ll automatically be enrolled in M3P. Reality: Enrollment is optional, and you must actively sign up with your plan to use the monthly payment option
Payment and billing concerns
The most frequent billing questions come from being enrolled in M3P. If you opt into the plan, you’ll receive monthly bills directly from your plan, not from your pharmacy. It’s crucial to pay this on time so that you don’t lose access to the smoothing feature or, worse, fall behind on your owed amounts.
Taking control of your 2026 prescription costs
The new $2,000 Medicare drug cost cap will mark a historic shift towards a more predictable and affordable healthcare environment for millions of people. Combined with the optional Medicare Prescription Payment Plan, seniors and those taking Part D drugs alike can finally budget for prescription costs without fear of surprise bills. With 2026 fast approaching, ensure you are prepared by reviewing your medications, comparing different plans, and considering whether the smoothing plan fits your budget. This will allow you to take full advantage of financial protections and ensure next year’s prescriptions are the most manageable they’ve ever been.
If you get your health insurance through the Affordable Care Act (ACA) Marketplace, you might be facing sticker shock during this year’s Open Enrollment. While the underlying cost of health coverage is undeniably rising, a massive policy change—the expiration of crucial pandemic-era subsidies—is set to hit millions of Americans’ wallets with a significant increase in 2026.
Here is a summary of the expected increases and what is driving them:
1. The Shocking Rise in Premiums
Insurance companies are proposing major premium hikes for ACA plans. The base cost (gross premium) for coverage on the Marketplace is increasing by an estimated 26% on average for 2026 plans.
However, the real blow for many will come from the net premium—the amount enrollees pay after financial assistance.
2. The Expiration of Enhanced Subsidies (The “Subsidy Cliff”)
The main catalyst for the massive increase in out-of-pocket costs is the scheduled expiration of the enhanced Premium Tax Credits (PTCs) at the end of 2025.
Massive Cost Shift: If Congress does not renew these enhanced subsidies, the average subsidized enrollee’s monthly premium payment is estimated to more than double, increasing by about 114% on average.
Real-World Impact: An analysis suggests the annual out-of-pocket premium for the average subsidized household could jump from approximately $888 to over $1,900 for 2026 coverage.
The Loss of the “No Cliff” Rule: Before the temporary enhancements, individuals with incomes above 400% of the federal poverty line were ineligible for any subsidy (a “subsidy cliff”). The enhanced credits removed this cliff. If they expire, these higher-income enrollees will face the full, unsubsidized cost of their plan, potentially paying tens of thousands of dollars more a year.
3. The Problem of High Deductibles
While monthly premiums capture attention, high deductibles remain a core issue for many ACA enrollees. Even with subsidized premiums, many families still face very high out-of-pocket maximums. For some lower-income families, deductibles can be set as high as $14,700 for a family of four.
Furthermore, as insurers and employers look for ways to offset rising gross costs, there is concern that a new wave of rising deductibles will be implemented to keep premium costs down, shifting more financial risk onto the consumer.
4. Why Are Underlying Costs Rising?
The subsidy expiration only exacerbates a pre-existing trend of rising healthcare costs. Key drivers include:
Inflation & Labor Costs: General economic inflation and rising costs for healthcare workers and services.
Specialty Medications: The increasing use and high price of expensive specialty drugs, particularly weight-loss medications like GLP-1s, are cited by insurers as a significant factor in premium increases.
Anticipation of Risk: Insurers are factoring in a higher-risk pool, anticipating that healthier individuals—who will see the sharpest price increases—will drop their coverage, leaving the Marketplace with a higher concentration of older and sicker people.
What to Do Next: As the Open Enrollment period is underway, it is critical for consumers to check their new premium costs and shop for plans, as the best value plan may have changed significantly from the previous year. Lawmakers continue to debate solutions, including proposals to extend the subsidies or redirect the funding directly to patients to help offset high out-of-pocket costs.
As a health insurance broker in Surprise, AZ I can help. Plans off exchange and outside the ACA are available.
🚨 Sticker Shock: Understanding the High Cost of ACA Plans and the Subsidy Cliff
The annual Open Enrollment period for the Affordable Care Act (ACA) Marketplace is here, and for many Americans, this year is bringing an unpleasant surprise: sticker shock. While the ACA remains a vital source of coverage for millions, the underlying cost of health insurance is rising, and a major federal policy decision is poised to make things even more difficult for consumers in the near future.
The conversation this year revolves around two critical factors: rising premiums and the looming expiration of the enhanced federal subsidies.
The Current High Cost of Coverage
Health insurance premiums across the board are on the rise. Several factors contribute to this:
General Inflation and Healthcare Costs: The cost of medical services, drugs, and hospital care continues to climb, naturally pushing up the price of the insurance designed to cover them.
Insurer Rate Hikes: Insurers are proposing and receiving approval for some of the largest rate increases seen since the ACA’s early days.
Even with these increases, the true bombshell for many enrollees isn’t just the price of the plan itself—it’s what happens when you remove the financial cushion of the expanded tax credits.
The Critical Role of Enhanced Subsidies (and the Looming Cliff)
The federal government provides Premium Tax Credits (PTCs) to make Marketplace coverage affordable. This assistance is critical for the vast majority of ACA enrollees.
In 2021, Congress temporarily passed enhanced premium tax credits as part of the American Rescue Plan Act, which were later extended through the end of 2025 by the Inflation Reduction Act. These enhancements achieved two major things:
They eliminated the “Subsidy Cliff”: They removed the previous income cap (400% of the federal poverty level, or FPL) for subsidy eligibility. This meant that middle- and higher-income families who faced very high-cost premiums could still receive help, ensuring no one paid more than 8.5% of their household income for a benchmark Silver plan.
They made subsidies more generous: They lowered the percentage of income that all eligible households had to pay toward their premiums.
What Happens Next? The 2026 Subsidy Cliff
Unless Congress acts soon, the enhanced subsidies are scheduled to expire on December 31, 2025. This expiration will have dramatic consequences, reverting the system back to the original, less generous ACA subsidy structure for 2026.
According to health policy analysts, the changes will hit millions of Americans hard:
Household Income Category
Pre-Expiration Reality (Through 2025)
Post-Expiration Reality (Scheduled for 2026)
Above 400% FPL
Subsidies available if the benchmark plan costs more than 8.5% of income.
Lose ALL subsidies (The “Subsidy Cliff” returns).
Below 400% FPL
Pay a smaller percentage of income toward the premium.
Subsidy amounts will shrink; consumers will pay a higher percentage of their income toward the premium.
The average subsidized enrollee is projected to see their net annual premium payments more than double if the enhanced tax credits are allowed to expire. For a middle-aged couple earning just over the 400% FPL threshold, the annual premium shock could be in the tens of thousands of dollars.
Navigating Your Options in a High-Cost Environment
If you’re shopping on the Marketplace now, here is what you need to know:
The Enhanced Subsidies are Still in Effect for Your 2025 Plan: You can still benefit from the lower caps and expanded eligibility for this year’s coverage.
Shop Around, Every Year: Don’t auto-renew! Plans and prices change significantly year to year. You may find that a different plan—even from a different metal level (Bronze, Silver, Gold)—offers a lower net premium thanks to how the subsidy calculation works.
Know Your Income Estimate: Your subsidy is based on your expected household income for the year you are seeking coverage. A slight overestimate or underestimate can greatly affect your eligibility and monthly premium amount.
The clock is ticking on the enhanced subsidies. For the millions who rely on the Marketplace, the affordability of health insurance in the coming years rests on a looming legislative decision.
If you have been priced out of the marketplace we can help.
Medigap offers the type of flexibility that some seniors may find is worth the higher price tag.
As Medicare open enrollment kicks into high gear, millions of older adults are taking a fresh look at their health insurance options. For many, that means deciding between sticking with or switching to either a Medicare Advantage plan or a Medicare supplemental insurance policy, also known as Medigap. It’s a choice that can shape not just monthly budgets but also how easily seniors can access the care they need.
At first glance, Medicare Advantage plans may seem like the obvious choice. Many offer low or $0 monthly premiums and bundle extra perks like dental, vision and hearing coverage. For retirees living on fixed incomes, those features can be appealing. But despite the popularity of Medicare Advantage — 54% of all Medicare beneficiaries are enrolled in these plans — a significant share of seniors continue to rely on Medigap coverage instead.
So what drives some seniors to choose Medigap coverage over Medicare Advantage plans? That answer typically comes down to what people value in their healthcare coverage. Below, we’ll break down what to consider.
Why do some seniors choose Medigap over Medicare Advantage?
Medigap plans work alongside Original Medicare, covering many of the out-of-pocket costs that traditional Medicare doesn’t, like deductibles, coinsurance and copayments. Medicare Advantage plans, on the other hand, replace Original Medicare with a private insurance plan that often comes with its own rules, networks and cost structures. Here’s more on why many older adults opt for Medicare supplemental coverage over Medicare Advantage plans:
Access to a wider network of doctors and hospitals
One of the main reasons seniors opt for Medicare supplemental coverage is the flexibility to see any doctor or specialist who accepts Medicare, anywhere in the nation. There are no restrictive provider networks or referral requirements. For retirees who travel frequently, live in multiple states or simply want to keep their existing doctors, this nationwide access can be a major advantage.
While Medigap plans typically have higher monthly premiums than Medicare Advantage plans, they tend to offer more stable and predictable out-of-pocket expenses. Depending on the plan type, like Plan G or Plan N, Medigap may cover nearly all of the costs left over after Medicare pays its share. For seniors managing chronic conditions or anticipating regular medical visits, that type of coverage predictability can be invaluable.
Fewer administrative hurdles
Medicare Advantage plans often require beneficiaries to obtain prior authorizations before they can be approved for certain treatments or services, and these hurdles can sometimes lead to delays or denials for otherwise necessary medical care. Medigap paired with Original Medicare typically doesn’t have these barriers, though, which makes it easier to access care when you need it.
Stable benefits year after year
While Medicare Advantage plans can change their provider networks, cost-sharing rules and benefits annually, Medicare supplemental plans are standardized and don’t change once you enroll. That type of stability can make long-term financial planning simpler and reduce the risk of unexpected coverage shifts.
How to decide between Medicare supplemental coverage and Medicare Advantage
Both Medicare Advantage and Medigap have clear benefits and tradeoffs and the right choice often depends on your health needs, financial situation and lifestyle. Here’s what to weigh as you’re deciding which coverage option makes the most sense for your needs:
Consider your healthcare usage
If you visit doctors frequently, need specialist care or expect ongoing medical costs, Medigap’s more comprehensive coverage may make sense. On the other hand, if you’re relatively healthy and want to minimize monthly premiums, a Medicare Advantage plan could be more cost-effective.
Think about where you receive care
Seniors who split time between states or travel often may benefit more from Medigap’s nationwide coverage. But if your care is primarily local and your providers are in-network, Medicare Advantage could work well.
Weigh long-term costs carefully
While Medigap premiums can rise with age, Medicare Advantage plans can also change cost structures each year. Some seniors start with Advantage plans for the lower premiums and switch to Medigap later. However, in many states, switching to Medigap after your initial enrollment period may require medical underwriting, and you could be denied coverage or face higher premiums if your health has changed.
Factor in extra benefits
Medicare Advantage plans often offer extras like dental, vision, fitness memberships or transportation services. If these are important to you, they might tilt the balance toward Medicare Advantage. Medigap focuses primarily on covering medical costs rather than additional perks.
The bottom line
When choosing between Medicare Advantage and Medigap, there’s no universal answer for retirees. Medigap appeals to many seniors because of its flexibility, predictable costs and stable coverage, while Medicare Advantage can be more affordable for those with limited healthcare needs or who value additional benefits.
When weighing your options during open enrollment, be sure to assess your health, budget and lifestyle carefully. By understanding the potential benefits and downsides of each option, you can select the coverage that best fits your unique situation and ensures you have the care you need at a cost you can manage.
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