As a Medicare agent, you’re not just helping clients find the right plan, they depend on your advice to help them navigate through all the complexities of Medicare. One important thing agents do is explaining Medicare penalties, this ensures clients avoid costly surprises.
Educating clients early using understandable terms on how to avoid these charges helps build trust and reinforces your value as a trusted advisor. Here’s a breakdown of the most important penalties clients need to understand and how to help them stay ahead of the game.
Start with the Enrollment Timeline
Some clients are unaware of the IEP (Initial Enrollment Period) and how crucial timing is. As you know, the IEP is a seven-month window:
- Three months before the month of their 65th birthday,
- The birthday month,
- And three months after their birthday month.
If they don’t enroll in Medicare Part B or Part D during this period, and they don’t qualify for an SEP (Special Enrollment Period), they could face lifelong penalties.
Encourage clients to begin planning their Medicare enrollment early; at least 3 to 6 months before turning 65. Use this time to review their current coverage and explain how Medicare will coordinate (or replace) it.
Clarify Each Type of Penalty
Clients rarely understand the specific consequences of delaying enrollment. Be sure to cover these key penalties in your consultations:
Medicare Part B Late Enrollment Penalty
- What It Is: A 10% increase in the monthly premium for every full 12-month period the client delayed enrollment without other creditable coverage.
- How Long It Lasts: For life, and CMS will add it to their Part B premium.
- Common Misunderstanding: Clients often believe they can just delay Part B if they’re healthy or not using care without knowing there is a penalty and it keeps growing.
Watch a YouTube video on OEP, SEPs an Late Part B Enrollment
Part D Late Enrollment Penalty
- What It Is: 1% of the national base premium (currently $36.78 in 2025) multiplied by the number of full uncovered months they went without creditable prescription drug coverage.
- How Long It Lasts: For life, and it’s added to their monthly Part D premium.
- Common Misunderstanding: Clients are often unaware of this penalty and if they don’t need drug coverage now, they do not have to enroll in a plan. Although, not having creditable coverage triggers the penalty anyway.
Medicare Part A Penalty
Penalty: 10% increase in the premium for twice the number of years they delayed enrollment.
Applies only to clients who do not qualify for premium-free Part A (usually those with less than 10 years of Medicare-covered work history).
Explain Employer Coverage and SEPs
This is where your expertise can be very useful.
Many clients working past 65 assume they can delay Medicare without issue. However, eligibility for an SEP (Special Enrollment Period) depends on their employment and the type of coverage they have.
Key Points:
- Employer coverage must be from active employment (not COBRA or retiree plans).
- The employer must have 20 or more employees for the coverage to delay Medicare enrollment without penalty.
- They must enroll in Medicare within 8 months of losing employer coverage to avoid penalties.
Review your client’s group health plan documents or provide them with specific questions to ask their HR department. It’s critical they confirm whether their plan is considered creditable coverage for both Part B and Part D.
Join the team at Crowe; click here for online contracting
Conduct Annual Reviews
Clients’ needs, income levels, and coverage can change year to year. Use the AEP (Annual Enrollment Period) that runs Oct 15–Dec 7 to:
- Verify their current coverage.
- Check for plan changes that could increase costs.
- Remind them of potential penalties if they drop coverage without a replacement.
Document Everything and Communicate Clearly
Because it is easy for some clients to misunderstand Medicare rules, it’s essential to:
- Take notes that summarize the appointment after each consultation, some clients may want a copy for their own records.
- Track enrollment deadlines and follow up as key dates approach.
- Encourage clients to keep copies of any employer or plan letters that state their coverage is creditable.
Medicare penalties are preventable; only if your clients have the right information at the right time. As an agent, your ability to explain these rules in simple terms and guide clients through timely enrollment is a key part of your value.
By proactively addressing fees and penalties in your process, you not only protect clients financially you also strengthen your reputation as a knowledgeable and trustworthy advisor in a competitive marketplace.
Leave a Comment