What To Do With ACA Insurance When Turning 65?
If you have an individual health plan through the Affordable Care Act (ACA) marketplace, you’ll want to cancel that plan when you are eligible for Medicare at age 65. That’s because ACA plans are no longer terminated automatically when a person turns 65. From my experience, many insurance agents will not tell you to cancel the marketplace plan the month before you turn 65. This could be a costly mistake that could easily be avoided.
What makes this confusing to the insurance industry as a whole is there are so many names for this insurance, such as marketplace insurance, Obamacare and ACA plans. Before 2010, when the ACA went into effect, all plans outside group insurance were referred to by one name: individual health insurance.
As an owner of a healthcare insurance agency with over 10 years of experience, I have provided expert support to thousands of Medicare-eligible individuals. I would often explain that Obamacare was designed for Americans under 65, and Medicare was designed for those 65 and older.
Before 2014, individual health insurance plans would automatically be canceled when a person turned 65, but things have changed. At that time, private insurance companies were not getting any subsidies from the federal government, and someone could not enroll in a plan when they were 65 or older. People turning 65 were generally excited to get Medicare because of the high costs associated with individual health insurance plans. It was pretty cut and dry back then.
Today, someone turning 65 could be paying less than $100 per month for their individual health insurance plan because of tax subsidies. When the Affordable Care Act was passed, it came with tax subsidies for incomes between 100% to 400% of the federal poverty level. In 2021, this would translate to an individual whose income was between $12,760 to $51,040. If someone does not have access to affordable health coverage through an employer, Medicare, Medicaid or some other form of public assistance, they can receive some sort of tax subsidy for their individual health insurance through the marketplace.
For a person who is not eligible for any tax subsidy at age 64, a plan through the marketplace can cost over $800 per month depending on their income, in my experience. An individual paying that much will be looking for other coverage when they turn 65. However, someone paying less than $100 per month due to subsidies might not feel the need to look into Medicare.
Here is the problem. If you are eligible for Medicare Part A, which is typically given free to anyone that turns 65, you will no longer be eligible for any tax credits or subsidies by the federal government no matter what income tax bracket you fall under. That would mean that if you were to keep the marketplace plan after age 65 when you are eligible for Medicare:
- The marketplace health plan would go to full costs.
- You would miss the one-time seven-month Initial Enrollment Period for Medicare and could face delays and may need to pay a penalty.
This is why it is so important when you are turning 65 to make sure to cancel your individual health plan through the marketplace the month before you turn 65 and take your Medicare benefits. It can be tempting to keep the marketplace health plan if you are paying less than $100 per month and it is not automatically canceled.
But remember, if you are eligible for Medicare Part A, the tax subsidies will no longer be available to you. The federal government might not catch it right away, but when it does, you will get a big bill for the tax subsidies when you file your taxes. If you are turning 65 with an individual health insurance plan, which may also include those who are self-employed, you must take your Medicare Part A and B to avoid any delays or penalties in the future when it comes to your Medicare coverage.
A qualified Medicare insurance agent can explain your options. Whatever direction you decide to take, canceling your individual health insurance plan through the marketplace the month before you turn 65 can help ensure your transition to Medicare is stress-free.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.