“Annual premiums for employer-sponsored family health coverage reached $21,342 in 2020.”According to the Kaiser Family Foundation
Group insurance plans provide important benefits to employees
These benefits include dental, vision, disability, and life insurance. These fringe benefits are an important form of non-taxable compensation; and as you know these costs have continued to skyrocket over the decades. Employers have shifted some of the increases to employees through higher monthly contributions and higher deductibles, coinsurance, and copays. According to the Kaiser Family Foundation, “Annual premiums for employer-sponsored family health coverage reached $21,342” in 2020. This was up 4% from 2019 and the average worker pays $5,588 toward the cost of their coverage.
Medicare is a federal health program for people 65 & older or people with end-stage renal disease, ALS/Lou Gehrig’s disease, and people on Social Security disability for 24 months. Medicare provides coverage through Parts A, B & D for hospitalization, outpatient/physician care, and prescription drug benefits.
In 2021, the premium cost for Part A is $0, Part B is $148.50 and the average for Part D is $33.06. When accounting for the additional cost of a Medicare Supplement plan to cover deductibles, copays, and coinsurance; employees may be better off financially dropping their group health plan and enrolling in Medicare, with a Supplement, Part D plan, or a Medicare Advantage plan.
Considerations for Eligible Employees
There are important considerations for employees eligible for Medicare.
- More than 20 Employees
- Coordination of benefits – group health plan pays claims first, Medicare pays second.
- Less than 20 Employees
- Coordination of benefits – Medicare pays claims first, group health plan pays second.
- UPMC Health Plan has notified their employer clients who have less than 20 employees, that they will process claims as if Medicare paid first. If the employee is not enrolled in Medicare, they will be responsible for the charges. This is a new policy that started in 2021 that will take effect for all employers upon their renewals.
- Employer can’t refuse, offer different or restrict group health plan coverage to Medicare beneficiary.
- Working Medicare beneficiaries can decline group health plan coverage in favor of enrolling in Medicare Parts A, B & D.
- In the event, an actively working employee rejects employer coverage, the employer can’t offer secondary coverage or sponsor, contribute to a Medicare Supplement or Medicare Advantage plan for the employee.
- The group health plan can’t provide misleading or incomplete information to induce a Medicare beneficiary to reject coverage under the plan.
- Medicare coverage with a Medicare Supplement & Part D provide coverage with very small deductibles and copays, unlike most group health plans that have been shifting cost sharing to employees.
- People with incomes higher than $88,000 for individuals and $176,000 for couples pay a progressively higher rate for Part B & Part D. For example, in 2021, if your income is $120,000 for an individual, you’ll pay $297 for Part B, instead of the $148.50/month.
- Employees cannot contribute to health savings accounts if they are signed up for Medicare.
- Employees in group health plans can enroll in Medicare A & B any time.
- Late enrollment penalties can be charged for Parts B & D unless the member has been covered by theirs or their spouse’s employer coverage. Retiree plans, COBRA and ACA individual plans do not count as employer coverage.
- Medicare Parts A, B & D do not cover dental, vision, over-the-counter products, transportation or Silver Sneakers gym memberships.
- Medicare does not cover Long Term Care. There are only 100 lifetime days of nursing home coverage.
Medicare Advantage Plans (Part C)
- Beneficiaries receive their Medicare Parts A, B and usually D benefits through an insurance company.
- These include coverage for dental, vision, over-the-counter products, transportation and Silver Sneakers.
- Depending on the type of plan, members must use the insurance company’s network.
Erin Hart is a licensed insurance agent specializing in health insurance options for retirees.