Employer Sponsored Coverages

In general, a group health plan gives health coverage to employees and their families. The group health plan may be a fee-for-service plan or managed care plan, like an HMO or PPO. A person may also get group health plan coverage through the employer of a spouse or family member. This coverage may be based on active employment, retirement, or Cobra continuation (due to loss of coverage). Understanding the costs and benefits of each type of coverage option is important in determining which is the optimal coverage for the beneficiary’s needs. The type of coverage a person has can have an impact on Medicare coordination of benefits.

A person who currently has health coverage based on active employment (their own or spouse’s) and becomes entitled to Medicare, there are options to consider. Federal law determines when Medicare is the primary payer (the insurance that pays first) and when it is the secondary payer.

If the beneficiary is 65 or older, covered by an active EGHP and the employer has 20 or more employees, then the EGHP is the primary payer and Medicare would be secondary. [Employers with 20 or more employees must offer a current employee age 65 or older the same health benefits under the same conditions that they offer employees under age 65. The same applies to coverage offered to spouses.] For beneficiaries under age 65, covered by an active EGHP (their own, spouse’s or family member’s) and the employer has 100 or more employees, the EGHP is the primary payer and Medicare secondary. In these situations, the beneficiary can decide if they want to enroll in Medicare Part B when first eligible or use the Special Enrollment Period to enroll in Part B at a later date while still covered under the EGHP up to eight (8) months after active employment ends.

A person enrolled in a High Deductible Health Plan (HDHP) may also be making contributions to a Health Savings Account (HSA). If a person has an HSA and will soon be entitled to Medicare, it is important to understand how enrolling in Medicare will affect the HSA. A person cannot contribute to an HSA once Medicare Part A and/or B coverage begins. Funds that are already in the HSA can be used, after enrollment in Medicare, to help pay for deductibles, premiums, copayments, or coinsurance. If a contribution is made to the HSA after Medicare coverage starts, a tax penalty may apply.

If a person chooses to delay Medicare enrollment because they are still working and want to continue contributing to their HSA, a person must also wait to collect Social Security retirement benefits. This is because most individuals who are collecting Social Security benefits when they become eligible for Medicare are automatically enrolled into Medicare Part A. A person cannot decline Part A while collecting Social Security income benefits.

 

If a person decides to delay enrolling in Medicare, they need to stop contributing to the HSA at least six (6) months before they plan to enroll in Medicare or apply for Social Security retirement benefits. This is because premium-free part A coverage may be backdated up to six months (but not earlier than the first month entitled to Medicare). If a person does not stop HSA contributions at least six months before Medicare enrollment, a tax penalty may be incurred. If a person seeks more information or counseling regarding HSA’s, contact a tax professional.

 

Many companies offer former employees the option to continue their health care coverage after retirement. Check with the employer if this is an option to consider. Because this coverage is not from active work, for Medicare eligible employees, Medicare is the primary payer (unless on ESRD Medicare and the beneficiary is in their 30 month coordination period).

Employers may offer plans that interface with Medicare. A Medicare bridge plan provides early retirees health care coverage from the time they retire until they become eligible for Medicare. Medicare wrap-around plans provide retirees with additional coverage for out-of-pocket expenses, including the cost of coinsurance and deductibles. A Medicare carve-out plan generally reduces the benefits available under the insurance contract by the amount payable by Medicare.

Contact the employer’s RGHP administrator to understand how the RGHP coordinates with Medicare as well as obtaining information on premiums, coinsurance/copays, maximum out of pocket costs, and any other limitations on coverage. If this coverage includes creditable prescription coverage, then the beneficiary may not need to enroll into a Medicare Prescription (Part D) Drug plan. Understanding this coverage will allow for a better comparison with the alternative options a beneficiary has when becoming Medicare eligible.

 

COBRA is a federal law that allows workers and their families to continue receiving employer provided group health insurance coverage (usually at their own expense) that they would otherwise lose due to a job loss, a reduction in work hours, death, divorce, or other qualifying life event. COBRA applies to employers with 20 or more employees (except for certain church sponsored plans and plans covering federal employees). The employer may require individuals who elect continuation coverage to pay the full cost of the coverage.

The duration of COBRA continuation coverage depends on the qualifying event and can range from 18-36 months. The group health plan may terminate continuation coverage earlier for a variety of reasons such as, non-payment of premium, the employer ceases to maintain any group health plan, or a qualified beneficiary, after electing continuation coverage, begins coverage under another group health plan or becomes entitled to Medicare benefits.

Wisconsin also has continuation rights that give certain individuals, who would otherwise lose their employer group health insurance coverage, the right to continue their coverage for a period of time. This law applies to group policies issued to employers of any size. When both the Federal Law (COBRA) and Wisconsin’s continuation law apply to the group coverage and where the laws differ, it is the opinion of the Office of the Commissioner of Insurance (OCI) the law most favorable to the insured should apply.

Wisconsin’s continuation law applies to most group health insurance policies providing hospital or medical coverage. Dental, vision, and prescription drug benefits are not required to be provided if offered as separate policies. Employees who live outside of the state of Wisconsin during employment with an employer located within Wisconsin would be eligible for continuation coverage. The law does not apply to employer self-funded health plans or policies covering only specified diseases or accidental injuries.

State law allows the beneficiary the right to continue group coverage when becoming eligible for Medicare as long as the coverage does not duplicate benefits paid by Medicare.