3.5 Late Enrollment Penalties (Part A, Part B, Part D)

AHIP Medicare Certification Exam

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1 Introduction

1.1 About the AHIP Medicare Certification Exam 1.2 How to Use This Study Guide

2 Chapter 2: Medicare Program Fundamentals

2.1 What Medicare Is: Program Structure & How Parts A–D Fit Together 2.2 Medicare Part A — Hospital Insurance 2.3 Medicare Part B — Medical Insurance 2.4 Medicare Eligibility Rules (Age 65, Disability, ESRD, ALS)

3 Chapter 3: Medicare Enrollment Periods

3.1 Initial Enrollment Period (IEP) 3.2 Annual Enrollment Period (AEP): October 15 – December 7 3.3 Medicare Advantage Open Enrollment Period (MA OEP): January 1 – March 31 3.4 Special Enrollment Periods (SEPs) & Qualifying Life Events 3.5 Late Enrollment Penalties (Part A, Part B, Part D)

4 Chapter 4: Medigap & Coordination of Coverage

4.1 Medigap (Medicare Supplement) Basics & Guaranteed Issue Rights 4.2 Dual Eligibility & Medicare Savings Programs 4.3 How Original Medicare, MA, Part D & Medigap Interact

5 Chapter 5: Medicare Advantage Plan Types

5.1 Medicare Advantage (Part C) Overview: How MA Differs from Original Medicare 5.2 HMO & HMO-POS Plans 5.3 PPO Plans 5.4 PFFS Plans (Private Fee-for-Service) 5.5 MSA Plans (Medicare Medical Savings Accounts) 5.6 Cost Plans & Employer Group Waiver Plans (EGWPs)

6 Chapter 6: Special Needs Plans & MA Plan Design

6.1 Special Needs Plans (SNPs) Overview 6.2 D-SNP — Dual-Eligible Special Needs Plans 6.3 C-SNP & I-SNP — Chronic Condition & Institutional Special Needs Plans 6.4 MA Benefits, MOOP & Supplemental Benefits 6.5 MA Star Ratings & Plan Quality

7 Chapter 7: Part D Structure & the 2026 Redesign

7.1 Part D Overview & Eligibility 7.2 Formularies & Drug Tiers 7.3 The 2026 Part D Benefit Redesign ($2,100 OOP Cap, $615 Max Deductible, Catastrophic Phase) 7.4 Medicare Prescription Payment Plan (Drug-Cost Smoothing)

8 Chapter 8: Part D Costs, Assistance & Appeals

8.1 Low-Income Subsidy (LIS) / Extra Help 8.2 Part D Late Enrollment Penalty & Creditable Coverage 8.3 Coverage Determinations, Exceptions & Appeals

9 Chapter 9: CMS Marketing Rules & Scope of Appointment

9.1 CMS Medicare Communications & Marketing Guidelines (MCMG) Overview 9.2 Scope of Appointment (SOA): the 48-Hour Rule & Exceptions 9.3 Permitted vs. Prohibited Marketing & Sales Activities 9.4 Marketing Events vs. Educational Events

10 Chapter 10: Enrollment & Disclosure Requirements

10.1 The Pre-Enrollment Checklist (PEC) 10.2 Enrollment Procedures & Application Requirements 10.3 Call Recording & Third-Party Marketing Organization (TPMO) Disclaimers 10.4 Agent & Broker Compensation Rules

11 Chapter 11: Marketing Conduct & Oversight

11.1 Cross-Selling Restrictions & Nominal Gift Value Rules 11.2 Marketing to Vulnerable Populations & Non-Discrimination in Sales 11.3 Website, Social Media & Advertising Compliance 11.4 Complaint Tracking Module (CTM) & Agent Oversight

12 Chapter 12: Understanding Fraud, Waste & Abuse

12.1 Defining Fraud, Waste & Abuse (and the Difference Between Them) 12.2 The False Claims Act 12.3 The Anti-Kickback Statute

13 Chapter 13: Compliance Laws & Screening

13.1 The Stark Law (Physician Self-Referral) 13.2 HIPAA Privacy & Security Basics 13.3 The OIG Exclusion List & Sanctioned-Provider Screening

14 Chapter 14: Reporting, Compliance Programs & Consequences

14.1 Detecting & Reporting FWA 14.2 Compliance Program Requirements (Seven Core Elements) & Non-Discrimination Training 14.3 Consequences & Corrective Action Plans

3.5 Late Enrollment Penalties (Part A, Part B, Part D)

Key Takeaways Explain This Topic AI

The Part B late-enrollment penalty is 10% of the standard premium for each full 12-month period a beneficiary was eligible but not enrolled without creditable coverage, and it lasts as long as they have Part B.

The Part D late-enrollment penalty is 1% of the national base beneficiary premium ($38.99 in 2026) times the number of full months without Part D or other creditable drug coverage, added permanently to the Part D premium.

The rare Part A late-enrollment penalty (for beneficiaries who must buy Part A) is a 10% premium increase paid for twice the number of years the person delayed enrollment — not permanently.

Having other creditable coverage — such as active employer group coverage — at the time of IEP prevents all of these penalties from starting, as long as the beneficiary enrolls promptly after that coverage ends.

Income-Related Monthly Adjustment Amount (IRMAA) is a separate, income-based premium surcharge and is NOT a late-enrollment penalty — the exam tests this distinction directly.

Last updated: July 2026

Why Penalties Matter on the Exam

Every enrollment-timing rule in this chapter exists partly to explain why a beneficiary would owe a late-enrollment penalty. AHIP consistently tests whether you can (1) identify that a penalty applies, (2) calculate its approximate size, and (3) recognize when an exception — usually a form of creditable coverage — prevents it. Because these penalties are frequently permanent, correctly advising a client here has real, lasting financial consequences, which is exactly why the exam treats this material as high-stakes.

The Three Penalties at a Glance

Part Trigger Penalty Formula How Long It Lasts

Part A (rare — only those who must buy it) Delaying purchase of premium Part A past IEP without creditable coverage 10% premium increase Twice the number of years delayed (not permanent)

Part B Eligible but not enrolled, and no creditable coverage (e.g., current employer group coverage) 10% of the standard Part B premium per each full 12-month period delayed Permanent, for as long as the person has Part B

Part D 63+ consecutive days without Part D or other creditable drug coverage after the IEP ends 1% of the national base beneficiary premium ($38.99 in 2026) × number of full months without coverage, rounded to the nearest $0.10 Permanent, for as long as the person has Part D

Part B Penalty — Worked Example

The Part B penalty is calculated in whole 12-month blocks of delay, not prorated months.

Worked example: Mr. Ferris became eligible for Part B at 65 but did not enroll and had no employer coverage. He waited 30 months (2 full 12-month periods, with a partial third period that does not count) before enrolling during a later General Enrollment Period. His penalty is 20% of the standard Part B premium (10% × 2 full years), added to his premium for as long as he has Part B — not for a fixed number of years like the Part A penalty.

Using the 2026 standard Part B premium of $202.90/month , a 20% penalty adds roughly $40.58/month on top of the standard premium, indefinitely.

Part D Penalty — Worked Example

The Part D penalty is based on full months , calculated against the national base beneficiary premium , which is $38.99 for 2026 .

Worked example: Ms. Alvarado's IEP ended in June, and she did not enroll in Part D or have other creditable drug coverage until she signed up during AEP for a January 1 start — a gap of 7 full months. Her monthly penalty is 1% × $38.99 × 7 = $2.73/month (rounded to the nearest $0.10), added to whatever her chosen plan's premium is, for as long as she keeps Part D coverage. Note that this base figure is recalculated each year, so the dollar penalty can shift slightly year to year even though the "months late" figure never changes.

What Prevents the Penalty: Creditable Coverage

The single biggest penalty-avoidance concept on the exam is creditable coverage — coverage (most often from a current employer or union) that CMS considers at least as good as standard Medicare coverage. As long as a beneficiary has creditable coverage through their IEP and enrolls in Medicare or Part D within the appropriate SEP window after that coverage ends (typically the 63-day SEP covered in Section 3.4), no penalty accrues for the period they were covered elsewhere.

Worked example: Mr. Kwan works past 65 and stays on his employer's group health plan, which includes creditable drug coverage. He retires at 68 and enrolls in Part D within 63 days of losing that coverage. Even though 3 years passed between his IEP and his Part D enrollment, he owes no Part D penalty, because the entire gap was covered by creditable coverage.

The IRMAA Trap

The exam frequently pairs late-enrollment penalty questions with a distractor about IRMAA (Income-Related Monthly Adjustment Amount) . These are not the same thing :

• Late-Enrollment Penalty IRMAA
• Trigger Enrolling late without creditable coverage Having income above a CMS-set threshold
• Applies to Parts A (rare), B, and D Parts B and D
• Purpose Penalizes delayed enrollment Higher-income beneficiaries pay a larger share of program cost
• Based on Months/years of delay Modified Adjusted Gross Income (MAGI) from IRS tax data

A high-income beneficiary who enrolled exactly on time can still pay more than the standard premium because of IRMAA — that additional amount is not a "penalty" in the late-enrollment sense, and describing it as one is a common error the exam will flag as incorrect.

Common Exam Traps

Treating the Part B penalty as a fixed dollar amount rather than a percentage of the current standard premium (it recalculates whenever the premium changes).

Forgetting that the Part A penalty (unlike B and D) is not permanent — it ends after twice the delay period.

Missing that the Part D penalty is based on the national base beneficiary premium , not the beneficiary's own plan's premium.

Confusing IRMAA with a late-enrollment penalty — they have entirely different triggers and purposes.