The post below is a guest blog from W. Hunter Walton who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.
As we go through Medicare Open Enrollment for this year, it’s important to remember some basics about how Medicare interacts with traditional private medical insurance plans. Many individuals who are entitled to Medicare benefits are still actively working and eligible for employer sponsored health insurance. When a person has multiple insurance plans, coordination of benefits takes place.This determines which payer (insurance company) pays first.
In most instances where group health insurance is involved, Medicare is the secondary payer. That means that the group plan will pay first, paying the amount that its maximum coverage allows, and then Medicare will be asked to pay the remainder. This is important, because when you determine your potential liability, you don’t want to exclude members who may be on Medicare and assume that your group plan will not be responsible for any claims.
Check out the details in our on-demand webinar on Medicare Secondary Payer.
It’s also important to remember some prohibitions that come with Medicare and employer-sponsored group health plans. It is illegal to incentivize employees off of the group plan and onto Medicare. While some feel that this could improve their demographics and potentially eliminate some high cost claimants, the government makes it clear that penalties can be assessed for each time an incentive is offered, whether it is verbal or written.
Another consideration is when your company offers a High Deductible Health Plan paired with a Health Savings Account (HSA). Those who are entitled to Medicare, meaning both eligible and enrolled, cannot contribute to an HSA on a tax-preferred basis. If this is the only plan option your company offers, your Medicare entitled employees may not be able to take advantage of the full benefit of the plan design. Employees who carry a balance in an HSA that was accumulated prior to enrolling in Medicare may still use those funds for Medicare premiums and out of pocket expenses.
If you have any specific questions about Medicare, CMS has a variety of detailed resources.