Older Americans who are eligible for public exchange plan coverage may face traps. Officials at the Centers for Medicare and Medicaid Services (CMS) write about the complicated financial puzzle facing people with access to both Medicare and to public exchange qualified health plan (QHP) coverage.

CMS officials explain how they think Patient Protection and Affordable Care Act (PPACA) exchange plan rules apply to people who have or are eligible for Medicare. Most of those people are Americans ages 65 and older. Some are people with disabilities or people who are getting kidney dialysis and are eligible for Medicare because of their conditions.

The drafters of PPACA tried to keep exchange QHPs from crowding out other forms of health coverage by discouraging or prohibiting people who have other types of coverage from signing up for QHPs. People who already have Medicare coverage cannot normally sign up for individual QHP coverage, the CMS officials write in the new batch of guidance.

People who have Medicare coverage can keep the coverage and also sign up for group QHP coverage through an employer’s Small Business Health Program (SHOP) exchange plan.

People who have Medicare or are eligible for Medicare can also choose to get individual QHP coverage through an exchange instead.

Many retirees have earned enough “work credits” to get Medicare Part A for free. Consumers who do not qualify for free Medicare Part A may have to pay a premium. This year, the maximum premium is $426 per month. What if John Smith, a man who is paying $426 per month for Medicare Part A premiums, wants to get an individual QHP policy that will cost him just $50 per month out of pocket? He can drop Medicare and sign up for the cheaper QHP coverage, officials say.

CMS officials warn, however, that if John Smith were getting Medicare Part A for free, trading Medicare in for QHP coverage could lead to big, unexpected costs: People who are getting free Medicare Part A coverage, then trade in Medicare Part A coverage for individual QHP coverage, will have to drop any Social Security or railroad retirement benefits they’re getting. They also will be responsible for “paying back all retirement benefits and costs incurred by the Medicare program,” officials warn.

If consumers who have used QHP coverage in place of Medicare early in retirement later want Medicare coverage, they could face another trap: Having to pay Medicare late enrollment penalties. They will have guaranteed access to Medicare Part A and Part B coverage during the regular general enrollment period, but the enrollment delay could increase Medicare Part A premiums by 10 percent.

For consumers who put off enrolling in Medicare Part B, the penalty increases premiums 10 percent for each full 12-month period in which a consumer could have had Part B coverage but failed to sign up for the coverage, officials say.

Consumers who are eligible for Medicare but use an employer’s Small Business Health Options Plan (SHOP) exchange plan coverage instead can sign up for Medicare Part B late without paying the late enrollment penalty, but only if they sign up for the Part B coverage during an eight-month special enrollment period, officials say.

CMS officials also consider a question that could apply to the kinds of older affluent clients: What rules apply to Jane Doe if she is over age 65, has worked enough to be eligible for free Medicare Part A coverage, is not yet collecting Social Security benefits, and has not yet applied for either Medicare Part A or Medicare Part B? Can she buy individual QHP coverage?

In that situation, Jane Doe is not entitled to Medicare Part A benefits, and she can buy individual QHP coverage, according to officials.

Officials also answer questions about people with “end stage renal disease” — people who are getting kidney dialysis. Kidney dialysis is expensive, and people who are receiving it automatically qualify for Medicare coverage. In the past, insurers in most states could use medical underwriting to deny coverage to people who are getting dialysis. Now, insurers cannot use information about dialysis use as a reason to deny coverage. 

What if Jane Doe was 40, had no Medicare coverage, and was getting kidney dialysis? Could she buy individual QHP coverage through an exchange rather than signing up for Medicare?

If Jane Doe did not yet have Medicare coverage, signing up for Medicare coverage would be voluntary, and she could buy individual QHP coverage instead, officials say.

If Jane Doe was already in Medicare, and she stopped needing dialysis because she had a successful transplant or her kidneys recovered, she could sign up for QHP coverage.

If Jane Doe was already in Medicare and still using dialysis, and she wanted to rescind her Medicare application and buy QHP coverage, she would first have to repay all costs covered by Medicare and refund any Social Security benefits, officials say.