Turning 65 on an ACA Marketplace plan

The subsidy cliff

This is the core of it. Premium tax credits on the Marketplace are only available to people who do not have access to other qualifying coverage. Premium-free Medicare Part A counts as qualifying coverage. The month you become eligible for it, your subsidy eligibility ends.

Keeping your Marketplace plan past 65 without subsidies means paying the full premium out of pocket, on top of being eligible for Medicare. For almost everyone, that is the worst of both worlds. The move is to transition to Medicare, not to hold onto the Marketplace plan.

When to enroll in Medicare

Your Initial Enrollment Period runs seven months: the three months before your 65th birthday month, your birthday month, and the three months after. Enroll in the three months before your birthday month and your Medicare coverage starts on the first day of your birthday month.

Enrolling early matters more than usual when you are coming off a Marketplace plan, because you want your Medicare start date and your Marketplace end date to line up. Enroll late and your coverage starts later, which leaves an awkward gap where you are paying full price for the Marketplace plan or going without coverage.

Cancel your Marketplace plan yourself

This is the step people miss. Your Marketplace plan does not cancel itself when Medicare starts. You have to log into your Marketplace account and end your coverage, effective the day your Medicare begins.

If you skip this, two bad things happen. You keep paying the Marketplace premium for coverage you no longer need. And if you were still receiving premium tax credits after becoming eligible for Medicare, you may have to repay some or all of them when you file your taxes. Set a reminder for the week your Medicare starts.

The HSA trap

If you have a high-deductible health plan with a Health Savings Account, read this part twice. You cannot contribute to an HSA once you are enrolled in any part of Medicare, including premium-free Part A.

The trap: Part A can be retroactive up to six months when you enroll after age 65. Contributions you made during those retroactive months become excess contributions, and excess contributions get hit with a 6 percent excise tax each year they stay in the account.

The fix is simple: stop HSA contributions before your Medicare coverage starts. If you are enrolling right at 65, stop contributing the month before your birthday month. If you are delaying Medicare past 65, stop six months before you plan to enroll. The money already in your HSA stays yours. You can still use it for qualified medical expenses, including Medicare premiums, copays, and prescriptions. You just cannot add more.

What about dental and vision

One thing people miss in the transition: many Marketplace plans include some dental or vision coverage, and Original Medicare does not cover routine dental, vision, or hearing. When you compare your Medicare options, factor in what you are giving up. Some Medicare Advantage plans include dental and vision benefits. With Original Medicare plus Medigap, you would buy separate dental and vision coverage or pay out of pocket. Here is the Advantage versus Medigap comparison.

Your timeline

• Three months before your 65th birthday month: Enroll in Medicare Parts A and B through Social Security. Stop HSA contributions.
• Before your birthday month: Choose your Medicare path: Advantage, or Original Medicare plus Medigap and Part D. Compare using your actual doctors and prescriptions.
• The week Medicare starts: Log into your Marketplace account and end your Marketplace coverage effective your Medicare start date.
• At tax time: Reconcile any premium tax credits on your return. If everything was timed right, there is nothing to repay.

New to Medicare entirely? Start with the turning 65 guide. It covers the enrollment basics this article assumes you know.