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How Do We Help Our Employees 65 and Over with Medicare And Supplemental Health Insurance?

The number of employees over the age of 65 is increasing every year with an estimated 32% of Americans over 65 working full- or part-time by 2022, according to the Pew Research Center. Employees over 65 is the fastest-growing segment according to the Bureau of Labor Statistics. Employers often approach us with questions about health insurance options for employees over 65 years old.

Medicare and Medicare supplements are available to employees when they turn 65 years old. These employees may have an option to drop corporate coverage because enrollment in Medicare parts A and B, along with a supplement provides adequate insurance for these working seniors. Options depend upon the number of employees in a company.

Companies with 20 or more employees

Companies with 20 or more employees cannot reduce medical coverage to employees when they turn 65. However, if an employee is turning 65, the employee has the option of dropping the employer coverage and then enrolling in Medicare and private supplemental health insurance coverage.  Many employees choose this option because coverage under Medicare and a supplemental policy costs less and offers lower deductibles, lower or no copays and higher overall benefits.

Companies with less than 20 employees

If a company has less than 20 employees, employees 65 and over may be excluded from the corporate group medical plan. These employees would then enroll in Medicare with supplemental health insurance coverage upon their initial eligibility period.

For these under-20 employee companies, Medicare becomes the primary insurance for those covered employees 65 and older. If an employee chooses to keep the employer coverage, they still need to enroll in Medicare Part A (Hospital) coverage during their initial seven-month enrollment period straddling their birthday month (called the “Initial Enrollment Period” or “IEP’), and there is no charge for this coverage.  However, these employees may delay enrolling in Part B (outpatient medical coverage) if they choose because there is a premium, and the premium may be increased if their income is above certain levels.

The group medical coverage would become secondary and would pay for eligible medical expenses Medicare did not cover according to the employer’s group contract. This does not mean however, that the group coverage would necessarily pay all the expenses. This fact is one of two reasons why many employees working for small companies choose to enroll in Medicare and supplemental health insurance coverage upon turning 65…as many Medicare supplement plans cover all or nearly all the remaining allowable expenses Medicare does not pay. The other reason is cost. Even when accounting for the premiums for Medicare Part B, a Medicare supplement plan and a prescription drug plan, the cost could be 50% or more lower than the existing employer coverage. Most group medical plans also cover prescription drugs, and the coverage is usually creditable, possibly eliminating the need to enroll in a Part D prescription drug plan.

Note that many employer plans are either HMO or PPO plans that limit the number of providers an employee can see under that coverage.  When a person 65 or older enrolls in Medicare Parts A and B and supplemental coverage, they can go to any doctor who “accepts Medicare assignment.” In many urban areas like the San Francisco Bay Area, this means that nearly 90% of all doctors and hospitals most likely will accept what Medicare pays for allowable expenses.

Finally, employees 65 and over wishing to keep their employer coverage can delay their enrollment in Medicare Part B if they choose, until they decide to retire.  Then upon retirement, they will be allowed a Special Enrollment Period (SEP) to enroll in Part B without a penalty. With both Parts A and B in place they can then enroll in supplemental medical and prescription drug coverage.

If you’re an employer looking for ways to assist your employees 65 and over and perhaps reduce costs, we may be able to help you. Give us a call 650-701-9700 or fill out a contact form and we’ll set up a quick call to discuss the needs of your employees 65 and over.