As employees approach age 65, they become eligible for Medicare and must navigate a new set of rules and responsibilities related to their health coverage. Employer-sponsored coverage operates differently from Medicare, which can be confusing for employees transitioning from one to the other. This article will outline some of the key obligations that Medicare-eligible employees need to be aware of.
Creditable Prescription Drug Coverage
One of the key requirements for Medicare-eligible individuals is to have creditable prescription drug coverage. This means that the coverage is expected to pay, on average, at least as much as Medicare’s standard prescription drug coverage. If an individual goes 63 days or more without creditable prescription drug coverage after their initial Medicare enrollment period, they may have to pay a late enrollment penalty.
Every year, employers are required to provide a notice to Medicare-eligible individuals to inform them whether their prescription drug coverage is creditable. This Medicare Part D Creditable Coverage Notice should be provided before October 15th, the start of the Medicare open enrollment period.
Choosing a Medicare Supplement
When first enrolling in Medicare, individuals have a one-time, six-month open enrollment period to choose a Medicare Supplement policy on a guaranteed issue basis, meaning they cannot be denied coverage due to health status. This period starts on the first day of the month in which they’re both 65 or older and enrolled in Medicare Part B.
Impact on Health Savings Accounts (HSAs)
Medicare-eligible individuals need to be aware of potential impacts on their Health Savings Accounts (HSAs). If they elect to receive Medicare Part A benefits (which is automatic for most people who apply for Social Security), the effective date is backdated 6 months or to the first day of their initial enrollment period, if less than 6 months. Once someone is enrolled in any part of Medicare, they are no longer eligible to contribute to an HSA.
Education and Support
Considering the complexity of Medicare and its potential impact on an employee’s benefits strategy, employers may want to arrange for educational sessions with their benefits broker or a Medicare expert for employees approaching age 65. This can help ensure that employees are well-informed about their obligations and options.
Medicare Reimbursement Arrangements
Some employers, particularly those with fewer than 20 employees, may choose to set up a Medicare Premium Reimbursement Arrangement (MERP) to help Medicare-eligible employees with their healthcare expenses. However, it’s crucial to remember that even with a MERP, it’s the employee’s choice to stay on the group health plan or to join Medicare – the employer cannot force this decision.
Conclusion
Navigating the transition to Medicare can be challenging for employees who have relied on employer-sponsored coverage. By providing accurate information and timely notice about Medicare obligations, and potentially arranging for expert advice, employers can support their employees during this significant transition.
