You're an expert on your benefits plan -- but Medicare is not one of your benefits -- refer your employees turning 65 to the free Medicare Rights Center at 1-800-333-4114
Employees transitioning to Medicare from your company benefit plan present some complex issues -- and making the wrong choices can result in costly premium penalities and coverage gaps.
According to Joe Baker, president of the Medicare Rights Center, a non-profit consumer education and advocacy group 1, "We've seen a real diminution of expertise among employers on this."
And no wonder! You are a company doing business, with a human resources department that offers a health plan for the benefit of your employees -- why would you be an expert on Medicare?
Don't even try. You may want to assist your employees, but misinformation from employers is the Center's most frequent source of problems that prompt employees to call the free national help line.1
"We do see employers getting things wrong," says Paula Muschler, operations manager of the Allsup Medicare Advisor, a fee-based Medicare plan selection service. "Employers are experts on their own benefit packages, but Medicare isn't one of their benefits. People need to do their own research, and be their own advocates." 1
Just to point out how complicated it can get:
-Your employees missing the initial enrollment deadline. Medicare requires that they sign up in a seven-month window before and after their 65th birthday, unless they have employer coverage through active employment by either the employee or their spouse elsewhere.
Failing to sign up on time is costly. Monthly Part B premiums jump 10 percent - lifetime - for each full 12-month period that the employee could have had coverage but didn't sign up.
That can add up: If your employee failed to enroll for five years, they'd ultimately face a 50 percent lifetime Part B penalty - 10 percent for each year. Penalties also are applied to Medicare Part D (prescription drugs) and Medicare Advantage plans (Part C) that include drug coverage.
They could also face a gap in coverage ranging from a couple months to a full year or more if they don't sign up on time, because they'll be missing key Medicare enrollment windows.
If your employee failed to enroll for five years, they'd ultimately face a 50 percent lifetime Part B penalty - 10 percent for each year.
-Then there is the which plan is primary issue. Employer coverage is primary if the employee is still actively working for a company with more than 20 employees at age 65; in that situation, the employee should at least enroll in Part A, since no premium is charged; depending upon what is provided in the employer benefit plan, the employee can decide about signing up for Part B or Part D (prescription drugs). If employees are actively working for a company with fewer than 20 employees, Medicare must provide primary coverage when the employee turns 65.
-Then there is the HSA caveat. Employees enrolled in a health savings account should proceed with caution because they cannot make HSA contributions once they are enrolled in Medicare.
-Sticking with an employer's retiree coverage. Even if an employer provides some level of retiree health benefit, it is still important for an employee to sign up for Medicare once they reach age 65 to avoid penalties and coverage gaps. Employer-sponsored benefits (more than 20 employees) then can provide a secondary layer of coverage, most helpful if the employer plan provides a complementary drug benefit.
COBRA coverage ends when the employee signs up for Medicare
-COBRA benefits. Laid-off employees who have COBRA health insurance also need to navigate carefully when they turn 65. In fact, signing up for Medicare at that point is even more critical, because COBRA coverage isn't considered primary "creditable" coverage under Medicare's rules. COBRA coverage ends when the employee signs up for Medicare, although it is possible to keep COBRA coverage under some circumstances for services Medicare doesn't cover, such as dental care. The employee's spouse or dependents may still be able to keep COBRA coverage even if the employee doesn't sign up for it.
-Letting spouses drive the plan. Employees who retire at age 65 or later but have a spouse or other dependents who are covered under their workplace plans should let that guide their plan decisions. "That person needs to sign up for Medicare Parts A and B right away," says Muschler. 1 "That way, the employer's coverage can become secondary for the employee, and it can be primary for the employee's dependents."
-Enrolling after age 65. If your employee is enrolling after age 65 because they were covered under your company's plan, they need to be prepared to show proof. Although Medicare enrollment can be done online or on the phone, it is best in this situation for your employee to make an appointment at a Social Security office, where they can bring documentation on your company's coverage. They'll also need to fill out the Centers for Medicare & Medicaid Services' FORM L564 (CMS.gov L564).
See?! Now just ignore everything you just read! You'll be helping your employees turning 65 to most by just referring them to the experts.
You can also help your employees by urging those close to retirement to get the planning process started early. A 2011 Allsup survey of 64-year-olds found that 44 percent had not yet begun planning for Medicare enrollment.
The Medicare Rights Center's service is free (1-800-333-4114). Free help is also available in every state through the Stage Health Insurance Assistance Program (SHIP), a network of non-profit Medicare counseling services.
If your employees are willing to pay for advice and help with paperwork, they can hire an independent, fee-based counseling service such as Allsup (1-866-521-7655) or Goodcare (866-696-6543).
1 Rueters, "Enrolling in Medicare: Your Boss Doesn't Always Know Best," Mark Miller, January 30, 2014
Rylan Klaseen & Associates
Human Resources -- Go Ahead and Pass this Buck -- Let the Experts Advice Your Employees Turning 65 on Medicare
Rylan Klaseen & Associates
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