How to help your aging employees navigate through the various options

In the past decade, 52 percent of Americans were working past the Medicare-eligibility age of 65, according to the U.S. Bureau of Labor Statistics.

“At many companies, retiring used to mean transitioning from your employer’s health plan to a retiree health plan,” says Crystal Manning, Medicare specialist at JRG Advisors. “Now, more individuals are faced with trying to navigate through dozens of different Medicare plan options.”

Since fewer employers offer retiree coverage, it’s important that people study options early enough to make good choices based on their needs.

Smart Business spoke with Manning on how to optimize the choices for Medicare-eligible employees.

What can a company do to improve an employee’s Medicare experience?

More companies are taking steps to coordinate their health care coverage options for employees eligible for Medicare.  Research shows that for each employee that moves off the employer’s group medical plan, the employer may save  $6,000 to more than $12,000 on premiums for the employee alone. The savings for larger employers can far exceed these numbers. For small employers, the 2014 rate increase for the 65-plus age group will drive up an employer’s costs even higher.

When coordinating coverage under the group plan with Medicare, employer size is a factor. If an organization has more than 20 employees, the group health plan is the primary payer. If there are fewer than 20 employees in the organization, Medicare is the primary payer, and the employer’s plan is the secondary payer. In this occasion, it’s normally essential that employees turning 65 enroll in Medicare Parts A and B.

What about for smaller businesses?

The law does not require small employers to offer employees or a covered spouse the same coverage as other employees. Therefore, smaller businesses can require an employee to enroll in Medicare. Some smaller employers may offer coverage that is supplemental to Medicare, such as paying the Medicare deductibles and cost-sharing.

It is essential that employees enroll in Medicare Parts A and B. If they don’t enroll, there may be penalties associated to late enrollment. Employees might be able to move to their spouse’s health care plan if it would provide them with equal or better coverage than Medicare.

Employers may create, adopt or maintain a wide range of retiree health plan designs, as well as reduce or terminate benefits for Medicare-eligible retirees without running the risk of the federal Age Discrimination in Employment Act.

What about employee savings accounts?

Generally, all employees will benefit from enrolling in Part A when they reach 65. They may choose to contact Social Security at that time, or wait until they are ready to enroll in Part B. However, people with a health savings account (HSA) may want to delay enrollment in Part A. If an employee has a health reimbursement account (HRA) and becomes eligible for Medicare, he or she may chose to enroll in Medicare or delay enrollment. If an employee does enroll, the employee may draw from the HRA to pay Medicare premiums, deductibles and cost-sharing.

What are the risks of late enrollment?

The rules for enrolling in Medicare are strict. The initial election period for employees turning 65 without penalties is three months before their birthday, the month of their birthday or three months after. For each 12-month period of enrollment delay when eligible, the employee will pay a penalty of 10 percent of the Part B premium — forever.

Once an employee leaves a job, he or she must enroll in Part B within eight months, even if the employee stays on the group plan. If the employee chooses COBRA, Medicare is primary. Also, if an employee chooses traditional Medicare and his or her income is above a certain threshold, the employee will pay more for Parts B and D.
It is not surprising many people find this process confusing. An employee often will find that the benefits relative to group coverage are much lower and changing to Medicare may be far less a risk than initially thought. A good adviser will assist the company in choosing from Medicare Advantage, prescription drug and Medigap options.

Insights Employee Benefits is brought to you by JRG Advisors