Should I switch from an exchange plan to Medicare when I become eligible?
In most cases, yes, it is best to drop your individual coverage from the exchange/marketplace in favor of Medicare when you become eligible. Most people will become eligible for Medicare in the months surrounding their 65th birthday. You are welcome to purchase a health plan through the exchange at any time prior to this point. However, once you become eligible for Medicare, you may find it difficult to purchase a plan through the exchange. This is because insurers selling plans there are prohibited from offering coverage that duplicates what one would get through Medicare – something which can interfere with your ability to get an exchange plan even if you have not yet enrolled in Medicare.
If you purchased coverage through the exchange prior to being eligible for Medicare, you will still be able to renew that coverage in future years, but for the reasons discussed above, you will be unable to purchase an entirely new plan. But while the option to renew may be available to you, it is likely not the best choice for several reasons. First, the coverage that you would get with most exchange plans is not as extensive as what you could get with a combination of Original Medicare (Parts A and B), Medicare Supplement Insurance (Medigap), and Part D (prescription drug coverage). Having all three of these is also likely to be significantly cheaper than one of the silver plans that most people opt for when purchasing coverage through the exchange – often by thousands of dollars.
On top of this, sticking with your plan from the exchange can lead to additional expenses should you decide to switch to Medicare later on, as delaying Medicare enrollment past your Initial Enrollment Period (which happens in the seven months surrounding and including the month of your 65th birthday) can lead to late enrollment penalties. The most common penalties are for Medicare Parts B and D. These penalties should be taken seriously, since rather than being one-time fees, they are applied to every premium you pay after your enrollment and will increase the longer you delay that enrollment. Penalties can also be applied to Medicare Part A if you have not paid into it enough to get your Part A coverage premium-free.
If you do decide to drop your exchange plan when you become eligible for Medicare, be sure to contact your previous plan/insurer and ask them to terminate your coverage. While insurance companies are not allowed to sell new plans to those who already have Medicare coverage, they will not automatically drop the plan you’re on when you enroll in Medicare – this must be done manually. Those who wait until later to switch to Medicare should also be mindful of Medicare’s enrollment periods and effective coverage dates. General Enrollment for Medicare runs from January 1st through March 31st each year, but coverage obtained during this time does not go into effect until July. Be sure to plan the timing of the cancellation of your exchange plan accordingly to avoid gaps in coverage.
What happens when I switch from an exchange plan to Medicare?