More and more people these days are working past age 65, so many of them have a tough decision to make: should they stay on the company’s group health plan, drop the group coverage and enroll in Medicare, or sign up for both the group health plan and Medicare? The answer, like many in the insurance world, depends on the employee’s own unique situation. This post, while not comprehensive, will point out some of the things people need to consider when evaluating their coverage options.
This is a big consideration because it will determine who pays first if an employee has both Medicare and group health coverage. If a company has 20 or more employees, the group plan is primary and Medicare is secondary. What this means is that the group insurance will pay first and Medicare will fill some of the holes. This can be helpful if the group health plan has a higher deductible than Medicare Part A or Part B.
On the other hand, if the company has fewer than 20 employees, Medicare is primary and the group plan is secondary. This is a very important point because many insurance carriers will pay claims as if an employee has Medicare Part B whether he actually does or not. For example, after a Medicare beneficiary has paid an annual Part B deductible, Medicare pays 80% of the approved amount and the individual pays the remaining 20%. If that individual works for a small employer where Medicare is primary, the group coverage would act as a supplement to Medicare and pick up the 20% for the member. However, if the employee does not actually have Medicare Part B, the plan can still pay just 20% of the bill, leaving the employee to pay the remaining 80%. The moral of the story is that Medicare-eligible employees of companies with fewer than 20 workers should sign up for Part B at a minimum and may even consider dropping off the group plan altogether.
Another good reason for an employee to opt for Medicare rather than the group health plan, regardless of the size of the company, is if she has a serious (and expensive) medical condition. The group plan will likely require the member to pay a deductible and coinsurance for costly procedures, so the employee may find that Medicare plus a Medigap plan will provide more comprehensive coverage and save her money in the long run.
Unfortunately, many Medicare Part D prescription drug plans have calendar-year deductibles, coinsurance rather than copayments for more expensive medications, and a coverage gap if total drug spending exceeds a certain amount. For this reason, it’s possible that someone with an ongoing condition that requires one or more expensive monthly medications may do better on an employer-sponsored plan.
Of course, the cost of the coverage is an important factor for most people, and this can vary based on the individual’s income. For group coverage, the employer normally pays a significant share of the monthly plan premium, usually 50% or more, and the employee can pay the remaining amount with pre-tax dollars.
Medicare Part A is free for most individuals because they’ve paid for it during their working years through payroll deductions. Medicare Part B, though, has a monthly premium that varies depending on what the employee earned two years ago. The premium can range from $104.90 per month on the low end for someone who had Medicare before 2016 and earned $85,000 or less in 2014 and can be as high as $389.80 per month for high-income earners. Brokers should never quote a standard price for Medicare Part B; they need to ask some questions first.
One final and very important consideration is other family members who might be covered on the group health plan. Some employees, for instance, choose to stay on the group health coverage even though they’re eligible for Medicare because they have a non-Medicare-eligible spouse whose spousal coverage is more comprehensive or less costly than the options available in the individual market. It would be a mistake not to consider the impact on the entire family if the employee were to drop the group coverage and sign up for Medicare.
If you sell group health insurance, you can see that there are a lot of things to consider when advising Medicare-eligible employees. And if you sell Medicare products, it’s clear that your clients’ group health coverage is important factor when they’re considering their Medicare options. In short, you need to understand both Medicare and group health if you’re going to advise clients on either one.
The good news is that there are a lot of opportunities for brokers who are familiar with both market segments, and the better news is that AHCP can help you with both. We can provide you with the knowledge you need to feel confident when advising your clients and the products they need no matter what they decide to do. To learn more, contact AHCP today.