Small to medium-sized employers are in a difficult situation as health insurance premiums continue to escalate and employees continue to work past age 65. The employer has to tread lightly when discussing health insurance options for employees about to turn age 65. Those options include: Staying on the current group health insurance plan, switching to Medicare, or switching to a spouse’s group health insurance plan.
Smart Business spoke with Craig Berson, President and CEO of Berson-Sokol Agency Inc., about the switch from a group plan to Medicare for certain employees, and what it can mean for both employer and employee.
Who qualifies for Medicare?
As more people live and work later into life, they’re staying longer on their employer’s group plan. Many aren’t aware, however, that Medicare coverage becomes available to them when they reach age 65, and they don’t know how making the switch could affect their health care coverage.
For an employee, a switch to Medicare could mean paying less in premiums and not paying a deductible while receiving richer benefits that include coverages for vision, dental and hearing that they likely wouldn’t get on an employer’s group plan.
For an employer, employees switching to Medicare saves the company money on their overall group plan. Once a person turns 65, regardless of their personal health status, insurance coverage becomes more costly, which raises costs for the whole group in the form of higher premiums. The savings to an employer when an older employee switches to Medicare can be significant.
Reaching age 65 isn’t the only qualification for Medicare coverage. A disability — whether of the employed person, their spouse or child — also qualifies them for the coverage.
For companies that have 20 or fewer employees, when an employee turns 65, they need to be on Medicare because the employer becomes responsible for 20 percent of what Medicare doesn’t cover, which could be an unlimited amount. So, those employees must have Medicare parts A and B to supplement their group coverage.
How should employers handle the switch in coverage?
Most people don’t know that a switch to Medicare isn’t done automatically. Further, many often mistakenly believe that Medicare isn’t available to them if they forgo receiving their Social Security benefits. So, for employers, there’s a lot they can clear up for their employees, but they need to use caution when having these conversations.
An employer or its HR representative should not tell an employee they must change plans. They can, however, inform the employee that because they’re turning 65, they have different options. Employers then should connect them with a Medicare consultant to talk the employee through their options.
The reason employers should be careful is to avoid any perception of discrimination. While the conversation itself isn’t prohibited, employers run the risk of coming off as discriminatory, which leaves them vulnerable to a lawsuit — they’re not actually breaking any laws, but it puts them in a position to be misinterpreted.
A good time to discuss the options with employees is during the annual benefits renewal period. An employer can provide their benefits broker with the names of employees who are turning 65 soon so that they can have those conversations during a time when an employee naturally has to make certain declarations about any changes in their status that would affect their benefits.
What should be considered before switching?
Before making any benefit plan changes, employees should do a comparison between their employer-sponsored plan and Medicare, giving particular attention to prescriptions and covered doctors. An independent broker can help employees review the cost and benefits of 1) Staying on the current group health insurance plan 2) Switching to Medicare or 3) Switching to a spouse’s group health insurance plan if available and run comparisons to show which options have their doctors in network and make sure their prescriptions are covered. Everyone has individual needs, so it’s important to make sure to choose the insurance that covers everything the employee needs. ●
INSIGHTS Insurance is brought to you by Berson-Sokol Agency Inc.