Medicare is complicated. And we want to help you navigate the maze by shedding light on common questions your Medicare-eligible employees are likely to ask as they evaluate their options.
What is Medicare Part A, B, C, D?
- Part A covers hospital and other inpatient care, and most enrollees are not charged a monthly premium. Many employees who continue working will enroll in Part A unless they want to continue contributing to a health savings account (HSA), which is incompatible with any part of Medicare.
- Part B covers doctor visits and outpatient exams and tests and charges a monthly premium.
- Part C refers to Medicare Advantage plans sold by insurers. These plans charge monthly premiums and provide coverage compatible with Medicare but with different out-of-pocket costs and rules.
- Part D covers prescription drug costs. These privately administered plans charge a monthly premium.
What is the difference between Medicare Advantage Plans and original Medicare?
- Medicare Supplement Insurance is used along with Original Medicare to help pay certain Medicare out-of-pocket costs. These costs can include costs like Medicare Part A coinsurance, the Medicare Part A deductible or Part B coinsurance. Medigap plans do not typically offer additional benefits beyond what Original Medicare covers.
- Medicare Advantage is used as an alternative to Original Medicare. A Medicare Advantage plan will replace your Original Medicare coverage. You’ll receive the same benefits that are offered by Medicare Part A and Part B, but from a private insurance company. Many Medicare Advantage plans offer additional coverage for services like prescription drugs, routine dental care, vision and hearing benefits and more.
My employee is turning 65. Can they be dropped from the group coverage since they are eligible for Medicare?
Active employees who continue to work past age 65 cannot be dropped from their employer’s group health plan without violating the federal Age Discrimination in Employment Act (ADEA). In addition, the Medicare secondary payer rules prohibit an employer from reducing health benefits to current employees as a result of their eligibility for Medicare based on age (except in the case of certain small employers). Thus, while coverage for current employees over age 65 may be coordinated with Medicare, the employer must offer health benefits to those employees that are equal to the benefits that it offers to other similarly situated employees (this prohibition does not apply to retirees, as discussed below).
When my employee turns 65, do they have to apply for Medicare?
Employees may choose to wait until they stop working to enroll in Medicare, depending on the size of the group.
- If they work for an employer with fewer than 20 employees, they must enroll in Medicare to have primary insurance. Failing to enroll will trigger higher-premium penalties.
- If they work for an employer with 20 or more employees, they may choose not to enroll in Medicare while they’re still employed. However, if they do so, they must be able to provide proof they had employer-sponsored coverage (or coverage through their spouse’s employer), including prescription drug coverage at least equivalent to Medicare Part D’s, or they will face higher Medicare premiums if they delay Medicare enrollment.
If my employee signs up for Medicare and still wants to stay on the group coverage, is the group coverage primary?
If employees are age 65 or older, they should understand whether their employer’s coverage is primary or secondary to Medicare:
- If they work for an employer with fewer than 20 employees, they must enroll in Medicare to have primary insurance, because health care coverage from employers with fewer than 20 employees pays secondary to Medicare. Failing to enroll will trigger higher-premium penalties.
- If they work for an employer with 20 or more employees, then their employer-sponsored health care coverage pays primary to Medicare. They may choose not to enroll in Medicare while they’re still employed.
How does my employee determine if they should enroll in Medicare or stay on the group plan?
- When deciding which plan to choose, employees should consider what their employer plan covers, whether the plan is generous enough to cover the majority of their out-of-pocket expenses and if the plan exposes them to large out-of-pocket expenses.
- Medicare premiums are usually deducted from Social Security benefits. However, if employees delay receiving Social Security payments after age 65 but still enroll in Medicare Part B, they would pay Part B premiums—and potentially Part D premiums—on an after-tax basis while receiving employer-sponsored coverage.
Can I reimburse Medicare premiums for my employee?
Medicare secondary-payer rules prohibit employers from creating any incentives, monetary or otherwise, to encourage individuals to transition away from the employer-sponsored plan.
What if my employee wants to go onto COBRA after retiring rather than signing up for Medicare?
If the employee works beyond age 65 and goes on COBRA upon retirement, they must get Part B coverage no later than the 8th month on COBRA insurance, even if COBRA continues. If they don’t enroll within the 8-month timeframe, they could face lifetime penalties.
Why do I have to send the Medicare Part D notice disclosure and confirm with CMS annually?
- Plan sponsors that offer prescription drug coverage must provide notices of creditable or noncreditable coverage to those who are Medicare-eligible before each year’s Medicare Part D annual enrollment period. Prescription drug coverage is creditable when it is at least equivalent in value to Medicare’s standard Part D coverage and noncreditable when it does not provide, on average, as much coverage as Medicare’s standard Part D plan.
- The obligation to provide these notices is not limited to retirees and their dependents, but includes Medicare-eligible active employees and their dependents and Medicare-eligible COBRA participants and their dependents. The Centers for Medicare & Medicaid Services provides a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.
- Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period.
The Fedeli Group, in partnership with KAZ Company, can help educate your employees, easing their transition into Medicare. To schedule a virtual or in-person Medicare 101 seminar, please contact Kathy Hirko at firstname.lastname@example.org. For individuals that may be interested in additional information, please contact KAZ Company at 216-901-9300.