Reaching age 65 is an important turning point for many baby boomers, particularly if they are not retiring from work. In the past decade, Americans working past the Medicare-eligibility age has become far more common.
Accordingly, companies are in a unique position to take steps to coordinate their health care coverage options for employees who are eligible for Medicare, says Crystal Manning, Medicare specialist at ChamberChoice, the management arm of JRG Advisors.
“As an employer, knowing the rules and assisting employees can be difficult,” says Manning.
Smart Business spoke with Manning about Medicare rules and what employers need to know about this challenging arena.
What is Medicare?
Medicare is a federal health insurance program established by Congress in 1965 that provides health care coverage for those ages 65 or older. It also covers those younger than 65 who have certain disabilities or end-stage renal failure. Medicare is not a welfare program and should not be confused with Medicaid.
Medicare is financed by a portion of the payroll taxes paid by workers and their employers. Coverage under Medicare is similar to that provided by private insurance companies, as it pays a portion of the cost of medical care. Often, deductibles and co-insurance (partial payment of initial and subsequent costs) are required of the beneficiary.
What are the different parts of Medicare?
Medicare is composed of several different parts, or insurance:
- Part A is hospital insurance and covers any inpatient care a Medicare recipient may need. It also covers skilled nursing facilities and hospices. Most U.S. citizens qualify for zero premium Medicare Part A upon attainment of age 65.
- Part B is the actual ‘health’ coverage under Medicare. It covers physician visits, screenings and the like. As with Part A, most U.S. citizens qualify for Part B upon attainment of age 65.
- Part C is a Medicare Advantage Plan. This is a plan that offers Parts A and B, sometimes with Part D, through a private health insurer.
- Part D is the newest Medicare coverage, established with the Balanced Budget Act of 1997, which provides prescription drug coverage to the elderly.
What are Medicare enrollment periods?
Medicare enrollment periods are a surprisingly complex subject. Medicare Initial Enrollment Period is the seven-month period that starts three months before turning 65, includes the month when an individual turns 65, and ends three months later. During that time, individuals can sign up for Medicare Advantage and/or a Medicare Part D prescription drug plan.
Those who do not sign up for Parts A, B and D can face penalties for every month they do not have coverage. An enrollment penalty may be assessed from Social Security payments if the employee does not apply when eligible for either Part B or D.
What is required of an employer?
Employers are required to file annual Centers for Medicare and Medicaid Reporting and Employee-Notice Distribution letters even if one employee has coverage under Medicare Parts A, B, or C. Usually companies receive letters from their insurance companies asking for a Federal Tax Identification number and the group size of employees each year.
If your company has 19 or fewer full- and part-time employees, Medicare is almost always primary. Here, it is essential that employees turning 65 enroll in Medicare Parts A and B. If they do not, generally they will have to pay anything that Medicare would have covered. If your company is larger, various rules determine whether your group plan is the primary or secondary payer. MSP requirements also apply for Medicare-eligible employees who are disabled or have end-stage renal disease.
Once per year, written notice distribution is required to all Medicare-eligible employees. This must inform the employee whether the employer’s prescription drug coverage is ‘creditable’ or ‘noncreditable.’ Notice can be sent electronically, but it is often easier to distribute in written format. These need to be sent before October 31.
It is a good idea for employers to provide employees with written details about their employer-provided coverage, which will help them decide how to handle their Medicare choices.
What does an employer need to do if the employee in question is on COBRA?
COBRA coverage is usually offered when leaving employment; if the employee has COBRA and Medicare coverage, Medicare is the primary payor. If an employee has Medicare Part A only, signs up for COBRA coverage and waits until the COBRA coverage ends to enroll in Medicare Part B, he or she will have to pay a Part B premium penalty.
Employees should be disenrolled in COBRA once they turn 65. A number of Medicare beneficiaries have delayed enrolling in Medicare Part B, thinking that because they are paying for continued health coverage under COBRA, they do not have to enroll in Medicare Part B. COBRA-qualified beneficiaries who have delayed enrollment in Medicare Part B do not qualify for a special enrollment period to enroll in Part B after COBRA coverage ends.
According to the Department of Labor Bureau of Labor and Statistics, the number of workers age 65 and older has increased dramatically since the late 1990s. With that trend expected to continue, companies have an excellent opportunity to assist employees in their health insurance decisions. Navigating the ever-changing Medicare rules can be tricky.
However, with the help of a qualified Medicare specialist, the process can be rewarding for the employer and employees.
Crystal Manning is a Medicare specialist at ChamberChoice, the management arm of JRG Advisors. Reach her at (412) 456-7254 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
The Supreme Court ruled in June that health care reform is constitutional and upheld the Patient Protection Affordable Care Act (PPACA) in its entirety. As a result, health care reform will continue to be implemented as planned and provisions that are already in effect will continue, says Jessica Galardini, president and COO of JRG Advisors, the management company of ChamberChoice.
“The individual mandate requiring individuals to purchase health insurance or pay a penalty is the major component of the law. Because the court upheld that mandate, it did not need to decide whether other provisions of the law are constitutional,” says Galardini.
Smart Business spoke with Galardini about the impact of the PPACA on employers and the benefits that they offer to employees.
What does this ruling mean for employers?
All aspects of the law already implemented will remain in effect. These include the ability for adult children to remain on their parents’ coverage until age 26, no exclusions for children with pre-existing conditions and certain preventive services without cost sharing for nongrandfathered plans. A grandfathered plan is one that has been in existence continuously since before the act was passed and is not required to comply with select provisions of PPACA as long as it meets certain other requirements.
Provisions of the law not yet in effect will be implemented as planned. Although much attention has been paid to the big changes slated for 2014, there are numerous smaller requirements that employers need to be aware of and prepare for now.
For example, insurers have already started issuing rebates to employers with fully insured health plans who qualify due to medical loss ratio (MLR) rules. The MLR rules require insurance companies to spend a certain percentage of premium dollars on medical care and health care quality improvement rather than on administrative costs.
Rebates can be issued in the form of a premium credit, lump sum payment or premium ‘holiday’ during which premium is not required. Any portion of a rebate that is a plan asset must be used for the exclusive benefit of the plan’s participants and beneficiaries, for example, reducing participants’ premium payments.
What other changes do employers need to be aware of regarding benefits?
Effective September 23 of this year, insurers must provide a summary of benefits and coverage (SBC) to participants and beneficiaries. The SBC is to be a concise document with stringent criteria as to the number of pages and print font that provides information about the health benefits in a simple and easy-to-understand format. The SBC will need to be distributed to employees during open enrollment, with any material modifications to the plan throughout the year being communicated at least 60 days in advance.
Additionally, beginning with the 2012 tax year, employers that issue 250 or more W-2 forms must report the aggregate cost of employer-sponsored group health insurance on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are due in January 2013.
What changes are looming for 2013?
Changes scheduled for 2013 include limiting pretax contributions toward flexible spending accounts (FSAs) to $2,500. This limit will be indexed for cost-of-living adjustments for 2014 and later years.
Employers will also be required to provide all employees with written notice about health insurance exchanges and the consequences if an employee decides to forego employer-sponsored coverage and purchase a qualified health plan through an exchange.
Finally, employers will be required to withhold an additional 0.9 percent Medicare tax on an employee’s wages in excess of $200,000, or $250,000 for married couples filing jointly.
What is happening in 2014?
By all accounts, 2014 will be the most significant year. Annual dollar limits for health services will be eliminated, as will medical underwriting and exclusions for pre-existing conditions. Additionally, insurance exchanges will be enacted for individuals and small employers with fewer than 50 employees. This is a key component of health care reform law. Individuals will be required to have health insurance or pay a tax for not having it.
Businesses with 50 or more full-time employees must provide health insurance for employees or pay a tax for not doing so. And for states that choose not to set up their own exchanges, the federal government will do it for them. To date, Pennsylvania has not passed legislation authorizing its own exchange.
Although the Supreme Court upheld the health care reform law, the future remains somewhat uncertain. Opponents will continue to challenge the law and debate its constitutionality through the November 2012 elections, and the strength of the economy and the response of private insurance companies with innovative products and funding solutions will also impact private and public options for individuals and employers.
What is certain is that health care benefits, funding and delivery are changing. Employer and employee decisions are far more complex and require educated consideration. Work with your advisor to learn more about your options and to understand exactly what is required of your company to remain compliant with the law.
Jessica Galardini is president and COO of JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7231 or Jessica.firstname.lastname@example.org.
Insights Employee Benefits is brought to you by ChamberChoice
Evaluating strategies to help manage costs is not a new topic for employers. It’s something we’ve been doing for years and will continue to do.
One area that causes major cost concerns for employers is health care. And although health care costs are expected to continue to increase in 2012, many experts predict that those increases will be smaller than they have been in recent years.
However, any cost increase places a burden on businesses, which leads employers to adopt a variety of strategies to manage and mitigate their costs, says Michael Galardini, sales executive at JRG Advisors, the management company of ChamberChoice.
“There are a number of factors that contribute to the rising costs of health care, including an increase in the number and cost of catastrophic claims, the aging work force and poorer health among the general population,” says Galardini. “In an effort to reduce those benefit costs, many employers are implementing cost containment strategies.”
Smart Business spoke with Galardini about steps employers can take to reduce their costs associated with health care.
What can employers do to help reduce their costs?
For one, employers can implement wellness programs and reward employees for improving and maintaining good health. Offering financial incentives for employees who have healthy lifestyle habits and who participate in workplace wellness programs is a common reward system.
Also, partner with your medical insurer to learn what it offers in terms of health risk assessments and chronic condition management, and then incorporate these into company wellness initiatives. By doing an assessment, employees will have a better understanding of how their behaviors impact their health and the steps they can take to improve it.
Some employers go as far as offering lower employee contributions toward benefit premiums for those who participate in wellness programs and maintain good health. The key to a successful wellness program is supporting employees in reaching their goals and making them aware of the programs available to help them succeed.
Employers should also encourage employees to take advantage of preventive care benefits, many of which are available to them through the plan at no cost. Using the generic form of medications employees are taking is another easy cost containment strategy. Generic formulas are identical to those used in brand name prescriptions, but the cost of generics is often significantly lower, saving both the employer and the employee money.
In addition, offering a high-deductible health plan promotes educated employees and reduces costs. HDHPs are paired with health savings accounts to pay the deductibles. These are similar to a 401(k) plan in that employees — and their employers, if they so choose — can deposit money into the accounts on a tax-free basis to pay for medical costs up to the deductible amount. However, unlike a 401(k) plan, the money can also be withdrawn tax-free provided it is used for an IRS-approved medical expense. The goal of a high-deductible plan is to encourage people to become smarter consumers of health care and to use their resources wisely.
Employers can also provide online tools for employees on a variety of health-related topics and other educational resources to help them become better-educated consumers.
What else can employers do to rein in costs?
Be sure to monitor spouse and dependent benefit enrollments by conducting eligibility audits. Some companies require employees to pay higher premiums to cover a spouse if the spouse can obtain health coverage through his or her own employer.
By conducting eligibility audits, employers can identify dependents who should no longer be covered under their health plan, or who should never have been covered in the first place. Inappropriate enrollees can end up costing everyone more money in the form of higher premiums. As a result, make sure that your plan covers only those who are eligible.
Employers may also want to offer an amnesty period to encourage those who have ineligible dependents on the plan to come forward. In return, employers can waive potential disciplinary action or agree not to pursue the recovery of premiums and claims that were paid on behalf of the ineligible enrollee.
How can voluntary benefits work to an employer’s advantage?
Many employers offer voluntary benefit and insurance options that meet personal and family needs, such as life insurance, homeowners, auto, accident coverage, disability and so on. Worksite voluntary benefits do not add costs to the employer’s bottom line because employees are choosing the coverage they want and are paying the premiums themselves.
This allows the employer to give employees the opportunity to purchase additional coverages based on their unique individual needs, often at a lower premium than if they purchased coverage individually. Premiums are typically paid by employees’ pre-tax dollars via the company payroll.
Many employers are choosing to re-evaluate their overall benefits strategy in light of health care reform and other developments. Take the time to ensure that you are making the right choices in plan design and benefit offerings. Implementing some of these strategies and more can help reduce costs and promote a healthier work force.
Michael Galardini is a sales executive with JRG Advisors, the management company of ChamberChoice. Reach him at (412) 456-7235 or email@example.com.
The cost of providing health benefits to employees continues to be a burden for many employers that are already struggling with tight finances. Now, more than ever, offering competitive benefits is an important tool for companies seeking to recruit and retain employees, but it is becoming more difficult, as health benefits often account for one of the top three expenses for a business.
As a result, balancing value for employees with cost management can be a challenge, says Joanne Tegethoff, account executive with JRG Advisors, the management company of ChamberChoice.
“As the cost of benefits continue to rise, employers are looking for ways to manage those costs while still remaining an attractive employer of choice,” says Tegethoff.
Smart Business spoke with Tegethoff about some strategies that businesses can employ to offer competitive benefits without causing an undue burden.
What strategies should employers consider?
Voluntary benefits provide a venue for businesses to offer value to employees without increasing their costs for providing benefits. Voluntary benefits allow a company’s employees to purchase insurance and benefit products based on their own personal needs, through the convenience of payroll deductions. And most of these benefits are available on a pre-tax basis to employees.
Employers should consider offering a High Deductible Health Plan (HDHP), in conjunction with a medical savings account such as a Health Savings Account (HSA), as their primary health plan, or as an alternative option. HDHP options include up-front deductibles that must be satisfied before services are covered — minimum HDHP deductibles for 2012 are $1,200 for individual coverage and $2,400 for family coverage. The large deductible results in lower premiums than a traditional health plan, encouraging employees to become more educated consumers by better understanding how health care works.
The reasoning is that if health care consumers — your employees — are spending their own money for care, then they are more likely to question that care and not blindly accept procedures such as unnecessary tests. The system encourages them to do so because, until they reach the higher annual deductible, the cost is coming directly out of their pockets.
Can dependent eligibility audits help curb costs?
It is crucial to conduct dependent eligibility audits to ensure that everyone receiving benefits through your plan is eligible to do so. Most employers have policies and procedures in place that outline plan eligibility for their employees and dependents. If someone is on the plan who is not eligible for benefits, the employer is losing money by paying for their care. By conducting eligibility audits and enforcing policies, employers can ensure that everyone who is on the plan should be.
How can employers make employees better consumers of health care?
Provide education that encourages employees to become smarter health care consumers and take responsibility for their health care costs. Structure your policy in such a way that employees are paying more for more expensive services. For example, show them the costs of visiting the emergency room versus a visit to a doctor’s office or to an urgent care center. Also encourage them to purchase generic drugs rather than brand name when available, and show them the cost benefits of doing so.
Finally, educate them about using mail order prescription refill services, and questioning physicians about treatment options and costs.
What other steps can employers take?
Develop and implement a wellness program. Focus on healthy, sustainable lifestyle changes that employees can make. Emphasize that you are concerned for their health and well-being, and show them how being healthier can both improve their lives and help lower their health care costs, as a healthier work force will ultimately lead to lower health care costs for all.
Offering financial incentives for participation, such as gift cards and reduced health care premiums, can encourage employees to participate. In addition, support from upper management for wellness and employee education is critical. Employee health affects productivity and overall financial performance, so it is in your company’s best interest to encourage employee health and wellness. And a little prevention can go a long way.
How can employers address chronic illnesses?
Implement a disease management program for employees with chronic illness, such as diabetes and high blood pressure. These programs typically include health screenings, blood tests and more frequent check-ups, and many insurers offer these services free of charge or for a minimal fee to encourage healthier behaviors.
Also encourage employees to receive routine preventive examinations, including screenings and check-ups. The goal is to keep healthy employees healthy and ensure that those who are at risk or who have medical conditions are receiving the appropriate care. And many employers host onsite health fairs and conduct onsite screenings or health clinics in conjunction with the insurer, which provides the company-sponsored health benefits.
Finally, offering customized benefit statements that show employees how much you pay for health care costs can be eye-opening. Cost transparency can lead to employees making more economical decisions about their health, along with an increased appreciation of benefits provided by their employer.
Talk with your adviser to learn how to begin making these cost containment strategies part of your long-term employee benefits strategy.
Joanne Tegethoff is an account executive with JRG Advisors, the management company of ChamberChoice. Reach her at (412) 456-7233 or firstname.lastname@example.org.