Moving to Medicare. What to do when you hit 65?

In just five years, the Bureau of Labor Statistics projects that 54 million of the 164 million U.S. workers will be age 55 or older (13 million of which will already be 65+). In other words, Medicare is soon to be top-of-mind for more than one-third of the Nation’s workforce!

Unfortunately, making the move from group insurance to Medicare isn’t always a clear-cut path for employees who plan to keep working. There are a lot of variables and consequently, a lot of confusion about when to enroll and how Medicare works with existing coverage. What’s worse — if employees make the wrong move, they may face sizable penalties that can impact their finances for the rest of their lives. As the employer or HR director, you are the first person they likely turn to for advice, but Medicare is a complex subject, even for you! And unfortunately, the government issued 136-page “Medicare and You” handbook isn’t going to cut it. This article is brimming with information and advice that will help you support employees as they make the extremely important switch.

Note: HR should start communicating with employees about their Medicare options long before they turn 65. Early chit-chat will ensure that employees have the information they need in time for the Initial Enrollment Period.

• 1. Know how to explain the Medicare parts.^[1]

Medicare provides two main options for how employees can get coverage; “Original Medicare” and “Medicare Advantage”. Medicare is also broken down into “parts”:

• Part A: Hospital Insurance
• Part B: Medical Insurance
• Part D: Medicare Prescription Drug Coverage
• Medigap: Medical Supplemental Insurance

Note: Medigap is a product that supplements Parts A and B to help policy holders pay for medical expenses that exceed the basic hospital and medical coverage.

Option 1: Original Medicare

• Includes Part A and Part B
• Employees can typically add Part D and Medigap

Key Things to Communicate:

• There is NO annual out-of-pocket limit unless the employee has supplemental coverage.
• Medigap will help pay for out-of-pocket costs (e.g., deductibles and coinsurance).
• Employees covered under this option can go to any doctor that accepts Medicare.

Option 2: Medicare Advantage

• Offered as either an HMO or PPO option.
• Includes Part A, B, and (usually) Part D

Key Things to Communicate:

• Medicare Advantage is also referred to as “Part C”.
• These plans are offered by private insurance carriers and DO have an annual out-of-pocket limit.
• Once the limit is reached, qualified services are 100% covered for the rest of the year.
• Medicare Advantage plans may offer exclusive benefits that Original Medicare doesn’t.
• Most Medicare Advantage plans include drug coverage.
• Employees covered under this option can only go to in-network providers and facilities.

• 2. Clarify how “Automatic Enrollment” and the “Initial Enrollment Period” works.

If the employee is already collecting some form of Social Security (via retirement or disability benefits), they will automatically be enrolled in Part A and Part B of Medicare when they turn 65. If the employee is not collecting any form of Social Security, they must actively enroll. The Initial Enrollment Period (IEP) is three months before an employee’s 65th birthday, the month of their birthday, and three months after their birthday (a 7-month period). In either case, the employee will NOT be automatically enrolled in Part D coverage or Medigap. If they choose to add these coverages, they must do so at the same time (during their initial enrollment period). If they fail to do so, there will be significant penalties for part D.

Medicare Part	Employee is collecting Social Security	Employee is NOT collecting Social Security
A	Automatically Enrolled at age 65	Must actively enroll during IEP*
B	Automatically Enrolled at age 65	Must actively enroll during IEP*
D	Must actively enroll	Must actively enroll
*IEP is the Initial Enrollment Period which is three months before an employee’s 65th birthday, the month of their birthday, and three months after their birthday.

• 3. Have a response for this question: Should I enroll in Medicare even though I already have coverage through the company?

The answer to this question is a bit tricky. Employees do have the option to delay enrollment, but not without conditions.

Part B of Medicare always involves a monthly premium. But, If the employee or his/her spouse has worked at least 10 years (40 quarters) while paying Medicare taxes, Part A coverage will free of cost when they become Medicare-eligible! Most employees meet this qualification, so it usually makes financial sense for them to at least enroll in Part A, regardless of whether they plan to keep the company’s group coverage.

If the employee decides to enroll in Part A, but delays enrolling in Parts B and D because they are keeping their existing coverage through the company, they will be asked to complete a questionnaire to help Medicare decide which coverage is the primary insurance and which is the secondary.

If the employee chooses to stay with their employer’s coverage, they may choose NOT to enroll in any Medicare coverage during their initial enrollment period. Once they leave the employer’s plan, they will qualify for a Special Enrollment Period (SEP). If they fail to enroll during the SEP, they will face significant penalties. Other qualifications for an SEP include:

• If the employee was volunteering in a foreign country.
• If the employee has TRICARE (health insurance for military members) and qualifies for Medicare because of disability.
• If the employee lived overseas when he/she turned 65.

• 4. Inform employees about risks to watch out for when making their decision.^[2]

Employer-provided benefits may be impacted. For example, if the employee is enrolled in a high-deductible health plan (HDHP), they may not be allowed to contribute any more funds to their HSA after they enroll in Medicare. However, they can still use their savings to pay for out-of-pocket healthcare expenses.

Employees can delay enrollment in Parts B and D, but (again) there’s a significant penalty. If employees do not enroll in Part B or D during their initial enrollment period, they have eight months to enroll in Part B and only two months to enroll in part D. The clock starts ticking on this timeframe the moment they retire or lose coverage (regardless of COBRA).

If the employee has COBRA, they will likely lose coverage on the date they get Medicare.^[3] Depending on the situation, most employees in this scenario should enroll in Part B as soon as possible, because they will not be eligible for a Special Enrollment Period if they wait until COBRA ends and thus, will be subject to penalty. The good news is that the employee’s spouse and dependents will still be covered under COBRA for up to 36 months, regardless of the employee’s Medicare enrollment. Employees may also be able to keep COBRA coverage for services that aren’t covered by Medicare, such as dental insurance.

If the employee is already enrolled in Part A and Part B of Medicare when they become eligible for COBRA, they can still enroll in COBRA. However, it will be secondary to Medicare and in many cases, they will still need a Medicare supplement to cover the additional costs not paid by Part A and B. That is, unless the COBRA insurance covers Medicare Cost Sharing (which is rare).

Don’t forget to send eligible employees a Medicare Part D Notice EVERY year.^[4]

A Medicare Part D notice is a federal mandate that states whether the prescription drug benefits offered by the employer qualify as “creditable coverage”. Many employers are not aware that they are responsible for sending this document every year, which puts them at risk for non-compliance. Sending this notice to Medicare-eligible employees each year helps them make an informed decision about whether or not to enroll in Part D, which, as you know, can incur penalties if the employee doesn’t make the right decision during their Initial Enrollment Period.

To say that understanding healthcare is challenging would be an understatement. But, there are insurance brokers who are dedicated to breaking topics like Medicare down and helping businesses and consumers navigate this confusing, acronym-laden landscape. Our final advice: practice simplifying insurance as you communicate information to your employees and be consistent in your efforts to educate them.

Most importantly, advise employees to seek expert advice before making a final decision and provide them with a referral for when they are ready to seriously consider the move.

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^[1] Medicare & You Handbook

^[2] Medicare Rights Center

^[3] Medicare Interactive

^[4] https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Model-Notice-Letters.html