According to AARP, people age 65 and older are twice as likely to be working today compared with 1985. As a result, companies are being tasked with providing health insurance to an aging population. Because people qualify for Medicare at age 65, employers need to know the ramifications as it pertains to their employees. Often because the employee receives a slew of solicitations from insurance companies and brokers, as they approach 65, they are full of questions concerning Medicare and how it will impact them. Most employers are not equipped to answer their questions because they simply are not educated in Medicare. Read on to find out the top 5 things you should know as an employer about Medicare.
- People eligible for Medicare can leave their employer coverage any time they choose regardless the company health plan rules. Many people go on Medicare and continue to work full time. As an employee, even if you have already surpassed the age of 65, as long as you have had continuous coverage, you are able to sign up for Medicare at any time via a “special enrollment” called “leaving employer health coverage.”
- If a person is collecting Social Security, they are automatically enrolled in both parts of Medicare (A and B). If they are able and wish to keep thier employer plan, they are advised to opt out of Medicare. This is important because part of the Medicare cost the average person $135 per month. If that person continues the employer coverage, they could be paying for coverage they do not need. If not collecting social security, a person needs to actively sign up on their own when ready.
- If an employer has less than 20 people covered on their group health plan (GHP), Medicare becomes primary coverage and GHP is secondary as soon as a person turns 65, regardless of if they signed up for Medicare or not. This is extremely important to know because failure to follow the rules can result in claims being denied. For example: if a person in this situation fails to sign up for Medicare and then has claims, the GHP can come back and deny the claims saying Medicare is the primary payor. This can be very scary for obvious reasons. Also, keep in mind, it is possible to have Medicare with a GHP, however rarely does this make sense due to cost and coordination of claims.
- Employees eligible for Medicare can often get better coverage for less money with Medicare then through their GHP. The average cost of coverage on Medicare averages between $150-$350 per month depending on the type of plan and the area in which they live. The premium on GHP plan for a person 65 or older can average over $1000 per month depending on the type of coverage and area in which they live. Given today’s GHP landscape, it is not unusual to see GHP’s with deductibles averaging $1000-$4000 and having very high out-of-pocket maximums. This leaves the employee exposed to very high medical expenses in the event of a serious illness. A person on Medicare can have much more comprehensive coverage at a lower cost by utilizing Medicare program. Keep in mind the Medicare program is federally subsidized and most people 65 or older having been paying Medicare taxes through payroll deductions for years.
- Employers are not permitted to directly pay an employee’s Medicare or Medicare supplement premiums. The only way this is permitted is through a section 105 cafeteria plan. The downside is that the 105 needs to be established for the entire company. Employers sometimes get creative but I would advise caution because IRS penalties can be stiff.
Not only is important for employers to understand Medicare so that they can answer questions for their employees, Medicare can also be a great alternative for their employees 65 and older. If done properly, an employee going on Medicare can create a win-win for the employer/employee. Sound advice for any employer having Medicare eligible employees is to find knowledgeable insurance agent who understands Medicare and consult with them as needed.