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.
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The Medicare Initial Enrollment Period (IEP)
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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
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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. |
Row 2 – Cell 3 |
How employer insurance factors in
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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
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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
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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.