Can I Choose Marketplace Coverage Instead of Medicare?

Navigating healthcare coverage options can be complex, especially when approaching Medicare eligibility. Many wonder if they can continue with or switch to coverage through the Affordable Care Act (ACA) Health Insurance Marketplace instead of enrolling in Medicare. Understanding the distinctions and implications is important for informed choices. This article clarifies the rules and potential consequences of these pathways.

Medicare Eligibility and Enrollment Periods

Medicare is a federal health insurance program primarily for individuals aged 65 or older, though certain younger people with specific disabilities or End-Stage Renal Disease may also qualify. Eligibility typically requires being a U.S. citizen or legal resident for at least five years. The program is divided into several parts.

Medicare Part A, or Hospital Insurance, covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Most people do not pay a monthly premium for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years. Medicare Part B, or Medical Insurance, covers services from doctors, outpatient care, durable medical equipment, and many preventive services. Enrollment in Part B usually involves a monthly premium.

Medicare Part C, also called Medicare Advantage, is an alternative to Original Medicare (Parts A and B) offered by private companies. These plans must provide at least the same benefits as Original Medicare, often include prescription drug coverage (Part D), and may offer additional benefits. Medicare Part D helps cover the cost of prescription drugs and is offered through private insurance plans.

Specific enrollment periods exist for Medicare. The Initial Enrollment Period (IEP) is a seven-month window around an individual’s 65th birthday, beginning three months before the birth month, including the birth month, and extending three months after. If this period is missed, individuals can enroll during the General Enrollment Period (GEP), from January 1 to March 31 each year, with coverage starting the month after enrollment. A Special Enrollment Period (SEP) may be available for those who delay enrollment due to active group health coverage through current employment.

Marketplace Eligibility and Enrollment Considerations

The Affordable Care Act (ACA) Health Insurance Marketplace provides a platform for individuals and families to shop for and enroll in health coverage. To be eligible for Marketplace plans, individuals must live in the United States, be a U.S. citizen or lawfully present, and cannot be incarcerated. The Marketplace offers Open Enrollment Periods, typically occurring annually, during which most people can select or change a plan.

Outside of Open Enrollment, individuals may qualify for a Special Enrollment Period if they experience certain life events, such as marriage, birth of a child, or losing other health coverage. A significant consideration for those becoming eligible for Medicare is the availability of premium tax credits (subsidies) through the Marketplace, which help lower monthly premiums.

Once an individual becomes eligible for Medicare, they generally lose eligibility for premium tax credits and other savings on Marketplace plans. This applies even if they choose not to enroll in Medicare. Choosing to remain solely on a Marketplace plan after Medicare eligibility often means paying the full, unsubsidized premium, which can be considerably more expensive.

Rules for Choosing or Delaying Medicare

Deciding to forgo Medicare in favor of Marketplace coverage carries specific financial implications, primarily concerning the Medicare Part B late enrollment penalty. If an individual does not enroll in Medicare Part B when first eligible and does not qualify for a Special Enrollment Period, they may face a lifelong penalty added to their monthly Part B premium. This penalty amounts to an additional 10% for each full 12-month period that enrollment was delayed. For instance, delaying for two full years results in a 20% increase to the monthly premium, which remains for as long as Part B coverage is maintained.

The penalty applies unless the individual has other “creditable coverage” that allows for a penalty-free delay. The most common scenario for delaying Medicare Part B without penalty is having active employer-sponsored group health plan coverage based on current employment. This exception applies whether the coverage is from one’s own employment or a spouse’s current employment. However, certain types of coverage do not qualify as active employer-sponsored plans for avoiding the Part B penalty.

COBRA coverage, retiree health plans, and individual health insurance policies (including those from the Marketplace) are generally not considered active employer coverage and do not prevent the Part B late enrollment penalty. TRICARE, which provides healthcare for uniformed service members, retirees, and their families, and Veterans’ benefits usually require enrollment in Medicare Part A and Part B to maintain full benefits once Medicare eligible. Delaying Medicare enrollment while covered by these programs can still lead to the Part B penalty. Therefore, individuals must carefully assess their specific situation to avoid unexpected and permanent increases to their Medicare premiums.

Enrolling in Medicare or Marketplace Coverage

Individuals can enroll in Medicare through the Social Security Administration (SSA). Most can apply online via the SSA website, by calling the SSA, or by visiting a local office. Those already receiving Social Security retirement or disability benefits may be automatically enrolled in Medicare Parts A and B upon eligibility.

Coverage through the Health Insurance Marketplace is primarily available via HealthCare.gov, or through state-specific websites. The application process involves creating an account, providing information, and comparing plans.

Applications can be submitted online, by phone, or with assistance from certified helpers. After eligibility determination, applicants select a plan and complete enrollment. The first premium must be paid for coverage to become active.