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 protected].
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