If you have an employee who is currently enrolled under your group medical plan with his or her spouse, but will be turning 65 soon and is starting to look at options for Medicare coverage, there may be special considerations to examine as an employer, especially if his or her spouse is younger than the employee.
According to the American Association of Retired Persons (AARP), as of 1985, Americans aged 65 years and older made up only 11 percent of the U.S. workforce, whereas, by 2017, the percentage of workers in this age group had grown to 19.3 percent. Several considerations may contribute to this growth, including average life expectancy and cost of living. The average life expectancy in the United States has steadily increased over the last couple decades, according to data gathered from the Centers for Disease Control and Prevention. With a longer life expectancy and an all-time-high cost of living, there is a growing need to save more money for post-retirement living expenses than was necessary for past generations.
In addition, the U.S. workforce is seeing an increase in the number of employees who have earned an advanced educational degree. According to the United States Census Bureau, as of 1950 the average percentage of the U.S. population who completed college was roughly 6.2 percent. By 2000, this percentage had increased to 24.4 percent, which is nearly a quarter of the total U.S. population. Based on these statistics alone, it is fair to assume that in the past, the good majority of the American population occupied the blue-collar industry. This industry traditionally represents more labor-intensive jobs than the white-collar industry and the physical demands of these types of jobs can be harder to sustain long-term as a person ages.
These, among many other factors, contribute to the growing percentage of Americans who are choosing to work well past the traditional age of retirement.
With this in mind, it’s important for employers to consider the procedures and regulations for managing benefits for employees who have turned age 65.
When an employee turns age 65, if they are still actively employed and eligible for group benefits, they are not legally required to move to Medicare coverage and can remain on the group medical coverage through their duration as an eligible, full-time employee of the company.
With that being said, there are a few things for both the employee and employer to consider:
Is Medicare Primary or Secondary?
If the company has less than 20 full-time employees on average, this means that Medicare will be primary. If Medicare is primary, it will cover claims and prescriptions before group coverage is considered.
If the company employs more than 20 full-time employees on average, then Medicare will be secondary, and claims and prescriptions will be billed under the group insurance before Medicare coverage is considered.
It is important to let the provider know whether Medicare coverage is primary or secondary.
Note: This rule typically only applies to employees who will be covered under both Medicare and the group medical coverage.
Is drug coverage creditable?
Each year, insurance carriers must evaluate the medical plans that they offer in accordance to the guidelines set by The Centers for Medicare and Medicaid Services. They must do this to determine if each plan meets eligibility as “creditable” or “non-creditable” coverage.
If coverage is deemed as “creditable,” then an employee will not have to face paying a penalty for delayed enrollment in Medicare Part B and Part D, Medicare Advantage (Part C), or Medicare Supplement coverage once they are no longer eligible for group coverage.
Can spouse or child stay on group plan?
A spouse and/or child dependent may only stay on the group plan if the employee is actively enrolled on the group plan. If the employee moves solely to Medicare coverage, then his/her dependents must consider an alternative form of coverage, including individual coverage, or they may qualify to continue coverage under COBRA if the company meets the state requirement for COBRA continuation coverage.
How much longer do they plan on working?
Regardless of how long the employee continues to work past age 65, the employer, legally, cannot force or persuade the employee to remove themselves from the company offered medical plan and move to Medicare coverage. The employee has the right to remain on employer-offered benefits for their duration as an eligible, full-time employee of the company.
It is also important to note that it is standard for most carriers to begin reducing the life and AD&D benefit payout amount for an employee once they reach age 65. This rule generally applies to both employer-sponsored and voluntary life and AD&D benefits.
If an eligible, full-time employee moves solely to Medicare for medical coverage, they are still entitled to remain enrolled in all other employer-offered benefits (such as life, AD&D, long-term disability, short-term disability, etc.).
ARC Benefit Solutions is your resource for exploring employee benefit options that are suitable for your employees and their families. We will help you sort through the complicated process of finding a plan that fits the needs of your business. Contact us today for more information.