Medicare coverage and what you need to know before enrollment

There are many misconceptions surrounding Medicare coverage, specifically regarding the coverage it provides and the costs those insured by Medicare are responsible for. This can greatly affect the ability of Medicare-eligible individuals to make the best decision regarding their health care coverage.

“Many people do not realize that original Medicare does not have a maximum limit on out-of-pocket spending,” says Charris Nelson, a Medicare specialist at Skoda Minotti. “In order for an individual insured through Medicare to have a cap on his or her out-of-pocket expenses, that person needs another strategy. And that strategy needs to be examined closely to avoid costly mistakes.”

Smart Business spoke with Nelson about what consumers should know about Medicare coverage ahead of an enrollment period.

Considering that Medicare may not cover all costs and services a person needs, what options are available to someone with Medicare coverage that will help them cover the gaps?

There are a number of ways to get coverage to fill gaps in original Medicare or get assistance with Medicare costs. While individual circumstances dictate a person’s options, available to them may be employer coverage, retiree insurance, Veteran’s Administration Benefits or Medicaid. Traditionally though, it’s through supplemental insurance provided by private health insurance companies in the form of Medigap, Medicare Advantage Plans and stand-alone Medicare Part D drug coverage.

There are many options — benefits, provider networks, and premiums vary between insurance companies offering them. Each individual’s circumstance is unique, so a thorough comparison of your options is necessary to determine which is most suitable.

When is the annual enrollment period and what should those who intend to enroll understand before doing so?

For 2017 Medicare coverage, the annual enrollment period is Oct. 15, 2016, to Dec. 7, 2016.

During the annual enrollment a person can make changes to his or her Medicare coverage. It is important to stay up-to-date and carefully review the information made available by your health plan provider since it will outline changes for the upcoming year. When annual enrollment is underway, you can make the necessary changes to reflect your current health coverage needs. This may be the only opportunity during the year to do so.

What can be changed during the annual enrollment period?   

Enrollment opportunities are contingent on election periods, most common being the annual enrollment period. During this time, eligible individuals are making changes to their existing plans. This can be done by joining a new Medicare Advantage Plan or by joining a new stand-alone prescription drug plan. You can also switch to Original Medicare with or without a stand-alone drug plan from a Medicare Advantage Plan during this time. There are many combinations for people to consider and it can get confusing, which is why it’s a good idea to consult with an adviser.

What can an adviser offer in terms of assistance during Medicare enrollment periods?

Approaching a Medicare decision, and comparing and exploring options, is complicated and can be overwhelming. Those approaching eligibility, or who are on Medicare, are inundated with mailings of plan options from each insurance carrier. Consulting a specialist who will take the time to explain how Medicare works — Part A, B, C, D and Medigap plans — so there is a clear understanding before enrollment is crucial. These choices are complex and their ramifications can be long lasting. Working with an experienced professional who is knowledgeable about Medicare plans can save a great deal of time and money.

Too often beneficiaries rely on information and feedback they receive from another enrollee to make their decisions. Your needs differ from that of a co-worker, neighbor, relative or spouse. This is why it is important to know your options and seek advice in order to become well-informed.

Insights Accounting & Consulting is brought to you by Skoda Minotti

How to spur health care cost transparency at your company

Mark Haegele, Director, Sales and Account Management, HealthLink

Mark Haegele, Director, Sales and Account Management, HealthLink

Health care cost transparency is the ability of patients to learn how much a medical service or treatment costs, preferably before receiving the service or treatment. This is important because treatment and service costs vary widely from doctor to doctor and from facility to facility.

“In all my travels, with all the different hospitals I visit — hundreds of them — only one had the general charges of fees and services, like cost per day in the hospital, posted up on the wall. It just doesn’t exist today,” says Mark Haegele, director, sales and account management, at HealthLink.

“This system has made it difficult for people to get the information. We’re getting there, but a spotlight on transparency and the cost and options gives people a little more decision-making authority,” he says.

Smart Business spoke with Haegele about the shift toward transparency and helping employees shop for better health care prices.

Why do health care prices vary so much?

Physicians are just trying to diagnose you to help you get better. In addition, surgeons only get paid if they recommend surgery. So, cost doesn’t really weigh into whether patients get knee replacement surgery or are sent to therapy for six months.

If you go to a store and look for a refrigerator, one of the first things you try to figure out is the price. But if you go to the doctor, and you’re talking about getting your knee replaced, that conversation — if it ever comes up — comes up at the very end.

The average treatment for heart failure might vary by tens of thousands of dollars within the same city. A list of Medicare costs, released by the Centers for Medicare & Medicaid Services, found a difference of $21,000 to $46,000 in Denver, Colo., or $9,000 to $51,000 in Jackson, Miss.

Only some rate differences are because of health care’s complexity. If two people with the same insurance get a tonsillectomy at the same hospital, they still could have different doctors ordering different levels of anesthesia and pain medicine with different philosophies on hospital-stay length.

How does transparency lower costs?

As the government, media and patients push for reliable cost and quality information, it motivates the entire system to provide better care for less money. For example, according to the book “Unaccountable: What Hospitals Won’t Tell You and How Transparency Can Revolutionize Health Care,” the governor of New York mandated that hospitals publish their mortality rates for heart surgery. By the year following, hospitals started implementing quality metrics to reduce mortality, and the trend in the mortality rates dropped dramatically, which ultimately saved lives.

In another instance, a Thomson Reuters study of a Chicago employer found a cost variance of 125 percent for health insurance members receiving an MRI of the lower back without dye, with similar differences in diagnostic colonoscopies and knee arthroscopy procedures. If employees were given information to select providers at or below the median cost, it was estimated the company could save $83,000.

What can benefit administrators do to help facilitate transparency?

As a general rule we feel helpless, but there are some things benefit administrators can do to move costs. You’ve got to get information out to members, and then align incentives. The average member, once he or she meets the $2,000 out-of-pocket maximum, for example, doesn’t care if a hip replacement costs $5,300 or $223,000. They should — but most don’t make better purchasing decisions until it impacts them.

Under a self-funded health plan, you have more control over what you are able to publish and demonstrate to employees, as well as more ability to align incentives. But regardless, you need to start identifying costs of providers of key procedures to treat your health plan like an asset.

By putting together a best-in-class grid for your members, and then aligning incentives to ensure they use the lowest cost providers, such as giving a $200 gift card, you can empower your members and move the needle on health care cost.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or [email protected]

Website: Visit the website to learn more about transparency and other key health care business trends.

Insights Health Care is brought to you by HealthLink

How executives will be affected by the new Medicare taxes

Partner, Houston Tax and Strategic Business Services, Weaver

Mark Watson, partner, Houston Tax and Strategic Business Services, Weaver

The Patient Protection and Affordable Care Act imposes two new Medicare taxes — one on wages and self-employment income and one on net investment income.

“As a result, executives subject to these new Medicare taxes will now incur a 3.8 percent Medicare tax on most of their taxable income,” says Mark Watson, partner, Houston Tax and Strategic Business Services, at Weaver.

Smart Business spoke with Watson about what this new tax means for executives.

How will the Medicare tax impact wages and self-employment income?

Beginning this year, an additional 0.9 percent Medicare tax is imposed on wages and self-employment income in excess of $250,000 for joint filers and $200,000 for single filers. So, the total Medicare tax on wages and self-employment income is now 3.8 percent, up from 2.9 percent.

If a couple files a joint return, the added tax is imposed on their combined wages and self-employment income. Employers must withhold this additional tax on wages paid to an employee in excess of $200,000 in a calendar year. This withholding applies even though the employee may not actually be liable for the additional tax because, for example, the employee’s wages with that of his or her spouse doesn’t exceed $250,000. Any excess withheld Medicare tax will be credited against the total tax liability shown on the employee’s income tax return.

The $250,000 and $200,000 threshold amounts aren’t indexed for inflation. So, over time, more executives will likely be subject to the additional Medicare tax.

How is net investment income affected?

Many executives also will be subject to a new Medicare tax on their unearned income in 2013. This new tax, commonly called the ‘net investment income tax,’ applies to individuals, estates and trusts when income exceeds $250,000 for joint filers, $200,000 for single filers and $11,950 for estates and trusts, and equals 3.8 percent of net investment income.

Net investment income equals investment income less properly allocable deductions. Investment income includes:

• Gross income from interest, dividends, annuities, royalties and rents.

• Gross income from a passive activity.

• Gross income from a trade or business of trading in financial instruments or commodities.

• Net gain from the sale of property.

• Gross income and net gain from the investment of working capital.

However, gain excluded from taxable income, such as gain on the sale of a personal residence and gain deferred through a like-kind exchange, isn’t included in investment income. Similarly, gain from the sale of certain property used in a non-passive trade or business isn’t included.

Properly allocable deductions include:

• Deductions allocable to rent and royalty income.

• Deductions allocable to income from a passive activity and to a trade or business of trading in financial instruments or commodities.

• Penalties imposed on early withdrawal of funds from a certificate of deposit.

• Investment interest expense.

• Investment adviser fees.

• State/local taxes on investment income.

In the case of an estate or trust, deductions also are available for distributions of net investment income to beneficiaries.

How can these taxes be minimized?

Executives subject to the net investment income tax and the maximum federal income tax rate — applying to joint filers with annual income in excess of $450,000 and to single filers with annual income in excess of $400,000 — will face a 43.4 percent federal tax rate on ordinary income and 23.8 percent federal tax rate on long-term capital gains and qualified dividends. Minimize taxable net investment income by:

• Documenting and claiming all allocable deductions.

• Making distributions from an estate or trust to beneficiaries with income below $250,000 or $200,000 who are not subject to the tax on net investment income.

• Investing through tax-sheltered investment vehicles such as 401(k) plans, Individual Retirement Accounts, annuities and life insurance policies.

Mark Watson is a partner, Houston Tax and Strategic Business Services, at Weaver. Reach him at (832) 320-3450 or [email protected]

Blog: To stay up to date on taxes and other accounting news, visit Weaver’s blog.

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What employers need to know about Medicare

Crystal Manning, Medicare Specialist, ChamberChoice, the management arm of JRG Advisors

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]

Insights Employee Benefits is brought to you by ChamberChoice

UnitedHealth Group to buy Medicare specialist XLHealth

MINNETONKA, Minn. ―  UnitedHealth Group Inc. plans to acquire privately held XLHealth Corp in the health insurance industry’s latest deal involving Medicare plans for the elderly.

XLHealth, which is owned by private equity firm MatlinPatterson, specializes in plans for Medicare recipients with special needs, including chronic illness, and those low-income beneficiaries who also receive Medicaid government coverage.

The parties did not disclose the deal price, but UnitedHealth said it expected to close the acquisition in the first half of next year and that it would add to earnings.

Bloomberg News, citing anonymous sources, previously reported that UnitedHealth, along with rivals WellPoint Inc and Aetna Inc , were weighing bids for XLHealth potentially valued at $1.5 billion to $2 billion.

XLHealth serves about 113,000 Medicare Advantage plan members in six U.S. states and is expanding into six more next year. It estimates its 2012 revenue will exceed $2 billion.

UnitedHealth is already one of the largest providers of Medicare Advantage plans, with 2.2 million members at the end of September. It expects total revenue to exceed $101 billion this year.

Medicare is an enticing market for U.S. health insurers, as the entry of the postwar baby boom generation into retirement looks to swell the ranks of privately run Medicare Advantage plans.

Such plans now account for 25 percent of Medicare enrollment, compared with 75 percent for government-run plans, but analysts expect that percentage to rise. Medicare beneficiaries can choose to receive their benefits through private health insurance plans.

Last month, Cigna Corp struck a deal to buy HealthSpring Inc for $3.8 billion to jump-start its business selling Medicare plans.

Humana buys MD Care to expand California presence

LOUISVILLE, Ky.― Health insurer Humana Inc. agreed to acquire privately held MD Care for an undisclosed amount on Friday to expand its Medicare plans for the elderly in California.

Humana, one of the largest Medicare plan providers, said it expects the deal to close in late 2011 and the acquisition is not expected to materially impact its 2011 earnings outlook.

MD Care, whose Medicare Advantage plan has about 15,000 members in Southern California, recorded revenue of $155 million in 2010, Humana said.

“We view the acquisition favorably as it provides Humana with another opportunity to expand its Medicare Advantage footprint, which should help it continue to leverage its infrastructure,” Oppenheimer & Co analyst Michael Wiederhorn wrote in a note.

Last month, Humana said it would acquire California-based Arcadian Management, which also specializes in Medicare Advantage plans, for an undisclosed sum.

Humana shares were down 0.28 percent at $76.06 on Friday on the New York Stock Exchange.

What employers need to know when dealing with employees ages 65 and older

Crystal Manning, account executive/Medicare specialist JRG Advisors, the management company of ChamberChoice

With more employees continuing to work past the age of 65, employers can find themselves without answers when asked for advice about insurance benefits.
With health care reform and premiums that continue to rise, employers need information to deal with their older employees, says Crystal Manning, account executive/Medicare specialist at JRG Advisors, the management company of ChamberChoice.
“It’s a good idea to start with the basics,” says Manning. “When Congress passed the Medicare federal health insurance program in 1965, it was to provide health care benefits for people ages 65 and older, people younger than 65 who have certain disabilities and those of any age who have permanent kidney failure.”
Smart Business spoke with Manning about what employers need to know about Medicaid when dealing with employees ages 65 and older.

How does Medicare work?

Traditional Medicare has two parts. Part A provides hospital coverage and those covered do not pay a premium if they are age 65 or older and they or their spouse worked and paid Medicare taxes for at least 10 years. Those under age 65 are eligible if they have been entitled to Social Security benefits for two years or are either on dialysis or are a kidney transplant patient.
Part B covers doctors’ visits and other medical services, for which the covered person pays $115.40 per month in 2011. Services for both Part A and Part B are covered at 80 percent, with the Medicare enrollee paying 20 percent of any approved services.
And effective Jan. 1, 2006, Medicare Part D was added to the plan for the prescription drug component. Part D is not optional; anyone with Medicare Part A and B must also enroll in Part D. It is important to sign up for these benefits when you become eligible because penalties may apply if you fail to do so.
While many people retire at age 65, if you plan to continue working after age 65, there are rules that you need to be aware of. First of all, someone who is continuing to work should not decline Part A. In some instances, employees have been given improper advice to decline Medicaid in order to be eligible for a health savings account. This is a mistake, as it may result in penalties and the employee would not receive Social Security retirement benefits.

How would employees age 65 or older be covered?

If there are more than 20 employees in a company, the employer’s medical benefits plan — not Medicare — would be the primary source of coverage for an active employee over the age of 65. In this case, the employee does not need to enroll in Part B if he or she is satisfied with the coverage provided by the employer. However, if the employer has not set up a senior product plan, Part B would be an option.
After officially retiring, the employee would then be eligible for a special election period. If there are fewer than 20 employees in the company from which the employee is retiring, Medicare will be the primary coverage and the employee should enroll in Part B and look at a Medicare Advantage option.
These plans are a complement to Medicare and include a creditable drug benefit, some dental and vision benefits and, in some instances, even health club membership benefits. These plans usually have budget-friendly options.
In 2011, the Medicare Part D Annual Coordinated Election Period will run from Oct. 15 through Dec. 7, with an effective date of Jan. 1, 2012. There can be no changes to the plan once someone has enrolled, unless he or she chooses to go back to original Medicare only.

What is the employer’s role in Medicaid?

Each year, all employers, regardless of the size of the company, are required to send out a Part D creditable coverage letter to all employees. Although they may not realize it, the majority of employers are affected by Medicare Part D in some way. Even if your employee benefits package does not offer a specified retiree prescription drug benefit, you may have an active employee or one of their dependents who is, or will soon become, Medicare eligible.
A common mistake made by many employers is enrolling an employee who is 65 or older in COBRA. However, COBRA is not creditable coverage for Medicare. If a Medicare-eligible employee is put on COBRA because of a lack of knowledge of the employer, that person will be subject to Part D penalties, will inadvertently waive their enrollment options and would then have to wait until the next general enrollment period in order to become eligible.
As many employees choose to continue to work past the traditional age of retirement, employers need to be aware of the issues that will impact those employees. Employees who are working past the age of 65 present special challenges to their employers, who need to be knowledgeable about how Medicare will impact those workers.
Medicare is complex and requires the expertise of someone appropriately licensed/appointed to advise eligible individuals of the options available. In order to prevent mistakes that could potentially harm your older employees, it is a good idea to provide them with access to a Medicare specialist who can clarify any uncertainty.

Crystal Manning is an account executive/Medicare specialist with JRG Advisors, the management company for ChamberChoice. Reach her at (412) 456-7254 or [email protected]