This article, by senior associate Ron Lentz, appeared in the
Kansas
City Business Journal.
More people are staying in the workforce beyond age 65, and that number is expected
to grow in the future.
Due to advancements in medical technology, people are staying healthy longer
and life expectancy is increasing. Many employers find older workers attractive
because of past work experience and a strong work ethic. As these employees
reach Medicare age it is important that they fully review coverage options between
Medicare parts A and B and the employer’s plan. If proper steps are not
taken and the employee does not make proper use of health insurance options,
it can cost the “over age 65” employee hundreds of dollars a year
and loss of medical benefits when they retire. 
The government automatically enrolls individuals in Part A of Medicare upon
reaching eligible age and the individual has the additional choice of electing
Part B. A key consideration is whether to elect part B coverage now while they
are still working or wait until they retire. Many employers and employees are
not aware of the issues involved with Part B elections and how those elections
can affect both current benefits as well as future open enrollment periods when
applying for individual Medicare supplement policies. Although the answer may
appear to be simple on the surface, there are many issues to consider.
One thing is clear. At retirement, most individuals will want to apply for a
Medicare supplement that pays in addition to both Medicare Parts A and B. Their
rights to obtain this supplement are very important. Insurance companies offering
Medigap policies are not allowed to deny coverage, place limitations on the
policy, or charge more, if the individual applies for coverage during their
Medicare open enrollment period. This open enrollment period runs for six months
and starts on the first day of the month in which an individual applies for
Medicare Part B. After this open enrollment period, coverage can be denied,
limited, and premiums can be increased, unless the individual is able to pass
medical underwriting or has a special exemption. An individual who elects Part
B and then does not buy a supplement within six months could lose benefits, the
most important of which is prescription drug coverage.
The Medicare election issue becomes confusing when employees are still working
and have coverage offered through their employer. Sometimes it is in the best
interest of the individual to take group coverage and not elect Part B until
retirement. In other situations it may be that it is better to waive employer
coverage and take a supplement instead.
The rules change based on the size of the employer. For employers below 20 lives,
the law allows Medicare to be the primary coverage, and the employer-sponsored
health program to be secondary. Because of this fact, most carriers reduce the
premium they charge and the coverage they offer coordinates with both Medicare
Parts A and B. Although insurance carriers say they do not force people to apply
for Medicare Part B, employees age 65 must do so if they want to avoid gaps
between Medicare and the employer plan. In this situation, the problem occurs
when the employee retires and no longer has the same guarantee issue rights.
For employers with more than 20 employees, the situation is reversed. Here the
employer-sponsored plan is the primary coverage. For these larger employers,
the insurance companies do not reduce the coverage or premium for the employees
over age 65 since they are paying full benefits before Medicare. In these situations,
delaying Part B elections and staying on the group plan makes the most sense.
It is important that the employers understand, communicate and develop procedures
for handling employee issues for employees over age 65. Although employers are
trying to do the right thing for their “over 65” employees by retaining
them on their health plan, it may be perceived negatively by the employee if
they find themselves uninsurable or paying astronomical rates just because they
did not understand their options.
Below are just a few of the questions an employer should consider when developing
a strategy for insuring these workers.
- How does my size as an
employer affect my employees Part B election options?
- When can or should an
employer drop an individual from the employer-sponsored health plan and contribute
toward a Medigap policy?
- What affect would this
have on dependants?
- How would the overall
coverage be different under a Medigap policy?
- When should an individual
apply for a Medigap policy to avoid a gap in health coverage?
- When are the three times
a person can apply for Medicare Part B without paying a lifetime premium load?
The bottom line is that
without proper planning, employees may pay the consequences for the rest of
their life and health care costs can eat up more retirement dollars than necessary.
To avoid “over age
65” employees incurring hundreds of dollars in extra costs, or losing the
opportunity to purchase a quality Medigap policy altogether, I recommend employers
contact their agent/consultant to help develop a plan of action that will best
serve their needs and those of their employees.
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