By SUSAN HEARD, SPHR
America’s labor force is aging. According to the federal Bureau of Labor Statistics, by 2024 – just seven years from now – nearly 25 percent of the civilian labor force will be 55 or older. Many healthy baby boomers are remaining in the workforce past the traditional retirement age of 65. Some enjoy working and want to stay active. Others face their retirement years with inadequate savings or with dependent children to consider. Those who reach 65 in 2017 have another year before they can claim full Social Security benefits at age 66. Increasingly, some will opt to keep working until age 70, when they can draw the most lucrative benefit.
Medicare is off the radar of most HR and benefits professionals except for the intersection of health savings accounts (HSAs) that relate to Medicare enrollment. But increasingly, older workers have questions:
- Am I automatically covered by Medicare when I turn 65?
- Do I have to choose between our group health insurance and Medicare coverage?
- What happens to my younger spouse’s coverage if I drop our plan and sign up for Medicare?
- How do I interpret all this mail I’m getting about Medicare?
Every employee’s situation is different. Answering questions about Medicare enrollment or providing other information about Medicare without a thorough knowledge of its complexities can result in missed opportunities and expensive mistakes for employees. Yet, employers want to be helpful, especially about a decision that is stressful to many.
For HR or employee benefits professionals, a good rule of thumb is to help only with questions that relate to how Medicare interacts with your group health plan. For example, in addition to the interaction with HSAs, you can talk about how Medicare enrollment can affect COBRA and midyear election changes in the Section 125 Plan. Your organization’s size determines whether your group plan is a primary or secondary payer to Medicare (see below). You must also disclose in writing whether your plan’s pharmacy benefit is creditable or noncreditable.
Medicare is complex and can be intimidating to both you and employees. Remember, you don’t need to be a Medicare expert. Staying within your area of expertise and directing employees to authoritative sources is the most helpful advice you can give employees. In addition, you can tell them:
- Medicare is complicated, and there are few one-size-fits-all answers. Don’trely on what family members or co-workers tell you about Medicare.
- Be sure to include all the relevant facts about your situation when you question Social Security or Medicare representatives. Listen carefully, and if you are confused, ask for additional explanation.
- Schedule an in-person appointment with the Social Security office, and bring your list of questions for a face-to-face discussion about your options.
You can also recommend these resources:
- The Official U.S. Government Site for Medicare
- Medicare & You – 2017
- The Social Security Administration Medicare Booklet
- 1-800-MEDICARE Helpline
- Top 10 Medicare Mistakes
- Tennessee State Health Insurance Assistance Program (SHIP) 1-877-801-0044; Find SHIP in other states
In addition to the challenge of responding to employees, there is another issue to consider as older workers stay on the job: the federal Medicare Secondary Payer (MSP) Act regulates how employers manage Medicare-eligible employees.
MSP rules apply to private employers including religious, charitable and educational institutions, and to state and federal governments. Like Medicare, MSP rules are lengthy and complicated. In general, they prohibit employers of 20 or more employees from “taking into account” Medicare entitlement of current employees and spouses who are 65 or older. HRAs are subject to MSP rules; but FSAs and HSAs are not, nor are COBRA beneficiaries. See Medicare Secondary Payer (MSP) Employer Size Guidelines.
Covered employers must provide the same benefits under the same conditions to individuals 65 or older as they provide to younger employees. They cannot discourage employees from enrolling in the group plan or offer any incentive not to enroll. The Center for Medicare and Medicaid Services (CMS) says that MSP rules are violated “every time a prohibited offer is made regardless of whether it is oral or in writing.” A violation can lead to civil penalties of up to $5,000 per violation.
Employees may voluntarily drop group coverage (for example, because it costs too much) for Medicare. Should you offer to pay or contribute to an individual’s Medicare premiums? We think this is a practice to avoid even if the employee consents because it can give the appearance of offering a financial incentive to stay off the group plan.
Susan Heard, SPHR, is vice president at Paradigm Group. She has more than 25 years of experience as a Human Resources Generalist with emphasis on employee benefits. Susan is a regular voice on the HRHotline, and consults with clients and account executives about HR and regulatory compliance including the Affordable Care Act. For more information, please go online to paradigmgroup.net.