According to the Pew Research Center, it is estimated that 32% of Americans aged 65+ will be working full time or part time by 2022.
Age 65 has traditionally been considered the retirement age in the U.S. However, because more employees are working well past this age, employers must now consider the compliance responsibilities that come with employing such persons. Most U.S. citizens are eligible for Medicare coverage at age 65, which covers hospital coverage under Medicare Part A, doctor and outpatient coverage under Medicare Part B, and prescription drug coverage under Medicare Part D.
Whether an employee should elect Medicare coverage depends on the group size of the person’s employer. When a person has both Medicare coverage and group health coverage, one will pay “primary,” and the other will pay “secondary.” Employer group size determines payer order.
Employers that have employed less than 20 employees for each working day across each of 20+ calendar weeks in the current year or preceding year have Medicare as a primary payer for claims.
Employers that have employed 20 or more employees for each working day across each of 20+ calendar weeks in the current year or preceding year have Medicare as a primary payer for claims. For more help counting your group size, refer to Word & Brown’s exclusive Employee Count Reference Guide.
If an employee works for an employer with Medicare as a primary payer, the employee should carefully consider whether or not to elect Medicare. The reason for this is because some carriers elect to step into the primary payer role when a Medicare-eligible employee chooses to delay enrollment in Medicare. However, other carriers will elect to remain as secondary payer. To assist with this decision, Word & Brown surveyed our Small Group carriers to find out how each handles this type of situation; you can link to our overview here.
If a Medicare-eligible employee works for an employer with Medicare as a secondary payer, the employee may delay enrolling in Medicare Part B coverage as long as he or she maintains group coverage. If the Group Health Plan includes prescription drug coverage that is considered “creditable,” the employee may delay enrolling in Medicare Part D.
It is not compliant for an employer to consider an employee’s Medicare entitlement with regard to eligibility for participating in the employer’s Group Health Plan, because that violates the Age Discrimination in Employment Act (ADEA).
Employers who desire to help pay for some or all of an employee’s Medicare premiums may do so only if Medicare is a secondary payer. Medicare’s Secondary Payer Rules dictate that employers may not pay for employees’ Medicare coverage if this action by the employer would result in Medicare moving from being the secondary payer for claims to becoming the primary payer for claims.
Medicare’s Secondary Payer (MSP) Manual Chapter 1 (Rev. 106, 10-10-14) 70.1 – Financial Incentives (Rev. 1, 10-01-03) states:
“An employer or other entity is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in, or to terminate enrollment in, a Group Health Plan (GHP) or Large Group Health Plan (LGHP) that is or would be primary to Medicare. This prohibition precludes the offering of benefits to Medicare beneficiaries that are alternatives to the employer’s primary plan (e.g., prescription drugs) unless the beneficiary has primary coverage other than Medicare. An example would be primary plan coverage through his/her own or a spouse’s employer. This rule applies even if the payments or benefits are offered to all other individuals who are eligible for coverage under the plan. It is a violation of the Medicare law every time a prohibited offer is made regardless of whether it is oral or in writing. Any entity that violates the prohibition is subject to a civil money penalty of up to $5,000 for each violation.”
If an employer helps pay for some or all of an employee’s Medicare premiums, the employer should do so through a Medicare Premium Reimbursement Arrangement (MPRA), set up with the employer’s trusted tax or legal advisor.
If the MPRA covers two or more active employees, then it is considered a group health plan and is subject to ACA market reforms such as restrictions on annual limits, elimination of lifetime limits, Minimum Value (MV) stipulations, and more. Because of this, employers in this scenario must also offer their employees, including Medicare-eligible employees, a health plan that meets MV by ACA standards in order to comply with the law.
Further, the key to a compliant MPRA is that all similarly situated employees must be treated the same. An employer may not discriminate who it does, or does not, reimburse Medicare premiums for under a MPRA. Lastly, it is recommended employers include policies on Medicare reimbursement in their employee handbooks.
For help or more information on Medicare reimbursement, or any other compliance matter, rely on your WBCompliance team; you can reach them via email at ComplianceSupport@wordandbrown.com or by phone at 866-375-2039.