What does it mean when you receive a Late Enrollment penalty notice in the mail

Navigating Medicare is a complete beast on its own. I’m a Licensed Insurance Agent and very proud to say that, might I add. I passed it on the first attempt.

The life Insurance exam is one of the hardest exams to pass. I personally know people who have failed this exam more than 5 times and they are very smart individuals.

If it’s tough for me/us to navigate all the ins and outs of Medicare, I can’t imagine what’s going through someone’s head who could care less about getting that deep into the laws and regulations.

There is so much to learn about Medicare, I don’t think one Agent knows exactly everything there is to know. It doesn’t matter if they’ve been in the business for 1 year or 20 years. I can almost guarantee, any Agent will learn something new every single season.

Therefore it is your agents job to give each of their clients the layman’s term of a specific question. Agents must be very careful not to get so excited that they provide the client with too much information, because they might add on more confusion.

Watch the entire video

I’ve found myself to be a bit guilty of this because I’m so eager to teach. When I teach I don’t want to hold anything back. I want my students to know just as much as I do.

However, in this instance, the student doesn’t care to know ALL. The Medicare recipient only wants a piece to fix their part of the puzzle and that’s IT.

In today’s lesson, we are answering a question that I’ve recently received from a couple clients.

Now that AEP (Annual Enrollment Period) is over, some clients have received their new welcome kits followed by a letter that states, “you may owe a late enrollment penalty..”


When a client contact me to inquire about anything, I’m eager to assist.

What is a Late Enrollment Penalty?

It is a fee that is accessed by Medicare because a Medicare beneficiary did not have creditable coverage from a certain period to a certain period.

For the sake of time and information overkill, we will discuss creditable coverage in another post.

The first reason you may have received this letter is
You may have enrolled late for Part D prescription drug plan (PDP)

What does this mean?
When you originally signed up for Medicare Part B, you didn’t sign up for a prescription drug plan at the same time.

Yes I heard you. “NO ONE TOLD ME I had to do that.” Well, I’m apologizing for them. They should have.

Part A or Part B does not cover prescription  drugs,  therefore. You must enroll in a stand alone plan or a Medicare Advantage PLAN (MAPD).

  If you do not enroll in a stand alone PDP or MAPD Plan then you will be charged a penalty of at least 1%+, for each month you did not have creditable coverage. 

Reminder: Caveat emptor could increase this rate at any time. /caveat

The Second reason you may have received a late enrollment penalty was because you may have changed insurance carriers or plans and there was a gap in coverage from one plan to the next.

Any length of time you didn’t have creditable coverage would be a red flag and you will be penalized for each month you do not have a Part D prescription drug plan.

This penalty will be collected by your current insurance carrier. Therefore, your new or current insurance carrier will send a notice to you requesting you to provide an snwer to whether or not their records is accurate.

Penalty 2021 and 2022

“Medicare calculates the penalty by multiplying 1% of the “national base beneficiary premium” ($33.06 in 2021, $33.37 in 2022) times the number of full, uncovered months you didn’t have Part D or creditable coverage.” (Medicare. Gov)

Lastly, it could simply be an error and you had coverage the entire time.

What should you do?

You MUST, I repeat, YOU MUST reply to this correspondence. If you have proof, submit proof. If you were not covered at the time, then write on the form that you did bot have a prescription drug plan for the time in question.

Don’t ignore this letter because it will not go away.

If you have any specific questions please leave a comment and we will answer your questions.

If you are in need of a real life licensed Healthcare Agent, we would love to assist you and become your personal agent. We love and appreciate our clients.


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