Blog

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.

Stay up-to-date on the latest events and information for agents

Medicare provides crucial health coverage for millions of Americans, but timing is everything when it comes to enrollment. In some cases, missing the initial enrollment period can result in Medicare late enrollment penalties and a lapse in coverage.

We will provide some information about Medicare enrollment periods and how to avoid late enrollment penalties.

Enrollment periods for Original Medicare

1. Initial Enrollment Period (IEP): A 7-month window that starts 3 months before the 65th birthday, includes the birthday month, and extends 3 months after.
2. Special Enrollment Periods (SEP): Available for certain qualifying life events, such as losing employer-based coverage.
3. General Enrollment Period (GEP): Each year from January 1 to March 31 there is a general enrollment period for those who missed other enrollment opportunities.

Those who don’t sign up during their IEP and don’t qualify for an SEP may face late enrollment penalties.

Late enrollment penalties

1. Medicare Part A

Most people receive Part A premium-free if either they or their spouse paid Medicare taxes for at least 10 years. Although, if you must pay for Part A and do not enroll during your IEP, your monthly premium increases by 10%. This penalty applies for twice the number of years you delayed enrollment.

2. Medicare Part B

Those who neglect to sign up for Part B when either first eligible for Medicare or if they come off a qualified healthcare plan such as employer coverage receive a penalty.

The penalty they pay is a 10% increase in their monthly premium for every 12-month period they were eligible but didn’t enroll. The penalty applies to their premium for as long as they have Part B coverage.

3. Medicare Part D (Prescription Drug Coverage)

The Part D penalty is a 1% increase in the “national base beneficiary premium” for every month they went without Medicare prescription drug coverage (Part D) or other creditable prescription drug coverage.

Click here for the Part D late enrollment penalty calculator

Unfortunately, this penalty is similar to the Part B penalty and applies to the monthly premium for life as long as the beneficiary has Part D coverage.

GEP (General Enrollment Period)

Those who miss enrolling in Medicare Parts A or B during their IEP can sign up during the GEP. This enrollment period runs from January 1 to March 31 each year. Coverage starts the month after they sign up.

Please note: Those who use the GEP to enroll in Medicare A and/or B qualify for a Part D SEP to enroll o in a prescription drug plan. The SEP starts once they apply for Part A or Part B and lasts for two months. Prescription drug coverage starts the first day of the month after the month of enrollment.

Avoid Late Enrollment Penalties

1. Be aware of the IEP (Initial Enrollment Period) . Do not delay enrollment. It is important to sign up before the 7-month window for enrollment closes.
2. Make sure you maintain creditable coverage if you are on employer-sponsored health coverage. Be sure to your coverage qualifies as creditable to avoid penalties.
3. In the event you lose creditable coverage, use an SEP quickly to avoid a lapse in coverage.
4. Consult a licensed Medicare agent for advice and assistance navigating enrollment periods and eligibility requirements.

Watch our YouTube video on Medicare Enrollment Periods

Please note: individuals who have income and resources below specific limits may qualify for financial assistance programs and may not have to pay late enrollment penalties.

To Sum it up

Missing Medicare enrollment deadlines can result in significant penalties and coverage delays. Those either nearing 65 or managing Medicare on behalf of a loved one must be proactive to avoid making costly mistakes.