By Laura Kushner
Given the “silver tsunami” of Baby Boomer retirements and the ever-changing health care market, cities may be getting an increasing number of complex questions from employees about post-retirement health care benefits such as Medicare.
Employers should avoid giving direct advice about benefit decisions; however, providing some guidance on post-retirement benefits is something employees often expect from their employers.
A few basic facts
Medicare is available to most people age 65 and over. Medicare Part A is hospital insurance, and Part B is medical insurance. These two types of Medicare are provided by the federal government.
Parts C and D can be purchased from an insurance company. Part C is known as Medicare Advantage. If you enroll in this plan, it transfers responsibility for administering Part A and B benefits to the insurance carrier and usually provides additional coverage.
Part D is a voluntary benefit that helps cover outpatient prescription costs. It can be included in a Medicare Advantage plan program or purchased on a stand-alone basis.
Enrollment decisions and HSAs
As benefit-eligible employees approach age 65, their decision to enroll in Part A and Part B depends on whether they are currently contributing to a health savings account (HSA) under a high deductible health plan (HDHP).
Employees who are not contributing to an HSA should enroll in Part A three months prior to their 65th birthday month. They can delay Part B until they stop working and lose employer coverage, allowing them to delay the cost of the Part B premium. They can also postpone their one-time “Medigap open enrollment period” until a later time, when they may want to purchase this type of coverage.
They will not pay a penalty for delaying Medicare beyond age 65 if actively employed and covered under a group health plan. When active coverage ends, they will have an eight-month special enrollment period window to enroll in Medicare without penalty. Ideally, they’ll want to plan ahead and enroll in Part B at least a month before their employer coverage ends, so they don’t have a gap in coverage.
Employees who do have an HDHP and are contributing to an HSA won’t be able to contribute to their HSA if they enroll in Medicare Part A and/or Part B. If they would like to continue making contributions to their HSA, they can delay both Part A and Part B until they stop working and lose that employer coverage. (However, claiming social security benefits automatically triggers Part A enrollment without exception). They will not pay a penalty for delaying Medicare, as long as they enroll within eight months of losing their active coverage.
Employees who qualify for premium-free Part A and choose to delay Medicare Part A beyond their Initial Enrollment Period (age 65 for most), their Part A coverage will go back (retroactively) up to six months from their sign-up. So, they should stop making contributions to their HSA six months before enrolling in Part A and Part B (or apply for Social Security benefits to collect retirement benefits while still working).
An employee delaying Medicare Part A and/or B in order to stay enrolled on a group health plan should also make sure their group health plan’s prescription drug coverage is considered “creditable,” meaning the plan meets minimum Part D requirements. If not, they could face a penalty in the future.
Deciding what coverage is needed
Experts generally recommend that an employee make a list of medical benefits important to them, and then request information packets from a variety of Medicare health plans. It also may be helpful to ask family and friends about their coverage.
The employee’s level of risk tolerance and overall assets may also play into the decisions. Can the employee cover his or her own prescription costs, deductibles, and copays? How much are the premiums for various types of coverage? Does the employee prefer a “safety net” of more insurance and less out-of-pocket cost?
Medicare options are not a “one-size-fits-all” solution; it requires an analysis of the employee’s overall financial and health situation. The employer should strive to provide helpful, factual information to employees, along with informative resources to enhance the city’s reputation as an employer of choice in today’s competitive job market.
The League of Minnesota Cities has partnered with Arthur J. Gallagher & Co. to provide more details on Medicare benefits and enrollment.
Laura Kushner is human resources director with the League of Minnesota Cities. Contact: firstname.lastname@example.org or (651) 281-1203.