How to Help Employees Navigate Medicare Options–And Why You Want to

As the average retirement age rises, more workers must decide whether to enroll in Medicare or keep their employer-sponsored health plan at age 65. It’s a complex choice that can make a big difference in out-of-pocket costs and the coverage of family members. Those who get it wrong could limit their future coverage options or subject themselves to substantial penalties.

The choice can have a significant impact on their employers as well: The annual claim expense of plan members over 65 is often three times higher than for younger workers. Though companies may be eager to shift those costs to the government, the law prohibits them from encouraging workers to switch to Medicare.

What employers can do is provide information that clarifies the options. And while many companies do send a booklet about Medicare to employees turning 65, our experience suggests that this is often insufficient. Members are overwhelmed by Medicare-related mail. Too many wind up paying more for healthcare than they need to.

The most effective employer programs combine a series of targeted messages with access to impartial experts who can highlight choices that best suit members’ circumstances. For employees, such trusted and personalized guidance is a valuable benefit, reducing the stress of decision-making while enhancing their overall financial well-being.

For employers, this sort of education leads to significant reductions in claim expenses, far more than the cost of providing personalized advice. Why? Simply put, employees who have a better understanding of their options are more likely to enroll in Medicare.

Our experience shows that a significant number of employees and covered spouses can get the coverage they need at a lower cost through a Medicare Advantage plan or traditional Medicare with supplementary insurance. One reason the government plans offer lower out-of-pocket costs is that Medicare pays providers less than private plans do for the same services. The government has also begun negotiating lower prices for some drugs. (The most common reason employees choose to stay on company plans is to continue coverage for spouses and dependents.)

If your company doesn’t have a plan for offering Medicare guidance — and most don’t—it’s time to make one. Be warned: We are delving into the intersection of government regulation and the healthcare system, so nothing is straightforward; there are exceptions and qualifications to every tip we are about to offer. You’ll need an experienced advisor to double-check your program. What’s more, the forthcoming information applies only to companies with 20 or more employees. People who work at smaller companies have no choice: They must enroll in Medicare for their primary coverage to avoid gaps in coverage for services covered under Original Medicare.

Here are some things to bear in mind as you consider how to keep your older employees up to speed about their insurance options:

Don’t tip the scale in favor of Medicare

It’s illegal to provide incentives for enrolling in Medicare. Nor can you design your plan so coverage gets worse when members turn 65.

Determine if your drug benefits are “creditable”

Employees can postpone enrollment in Medicare’s prescription drug coverage (Part D) if they receive company benefits that are considered to be “creditable,” that is, that are at least as generous as Medicare’s standard Part D prescription drug coverage. This standard now requires about 72% of drug costs to be paid by the plan. That’s an increase from 60% in past years, because the maximum out-of-pocket cost under Part D was recently reduced to $2,000 from $8,000. Your carrier or PBM can determine whether your plan meets the standard. Be aware that each year, you need to tell eligible employees whether their coverage is creditable and file that information with the government.

Warn employees about contributions to Health Savings Accounts

Medicare enrollees cannot make tax-advantaged contributions to the Health Savings Accounts (HSAs) that are typically part of high-deductible health plans. (This restriction does not apply to Flexible Spending Accounts or Health Reimbursement Arrangements.) To make things more complicated, Medicare Part A (for hospitalization) may apply retroactively by up to six months.

In all communications about high-deductible plans, be sure to warn members against making HSA contributions if they expect to enroll in Medicare in the following six months. Members can, however, continue to use funds they have accumulated in HSAs on medical expenses even after they enroll in Medicare.

Alert members who may not be able to postpone Medicare enrollment without penalty

Under current rules, employees and their spouses can put off joining Medicare without being subject to the very substantial late-enrollment penalties. This exception, though, does not apply to certain groups that your plan may cover, including:

• Unmarried domestic partners
• Retirees
• People with COBRA plans
• People who have temporary coverage after being laid off

Make sure any 65-or-older member in one of these groups gets several prominent notices about how to avoid penalties and gaps in coverage.

Don’t ask your HR staff to be Medicare experts

It’s hard enough for the overworked people in your human resources department to keep up with every company-provided benefit. Asking them to understand the nuances of Medicare programs increases the chance that they will give bad advice that puts both employees and the company at risk of violating regulations. What’s more, state insurance rules limit the ability of staffers to discuss specific products.

You can point members to the free advice provided by the government-sponsored State Health Insurance Assistance Program (SHIP). But while SHIP counselors are knowledgeable about Medicare, they can’t recommend specific options, nor do they have access to the details of your company plan.

To provide the most comprehensive and useful guidance, engage independent advisors who are licensed insurance agents. They will compare the costs and benefits of available Medicare plans to those of your company’s programs. They will also help enroll members in whatever plans they select and advise on Social Security, retirement, and other elder-employee issues.

The cost of providing this sort of guidance can be less than $1.00 per member per month. Typically, advisors earn commissions on the commercial policies they provide.

Communicate early and often

Anyone approaching their 65th birthday is inundated with messages about Medicare, from both the government and carriers offering Medicare Advantage and supplement plans. Anything your company sends at the same time is likely to get lost in the flood. So, alert them well in advance to the upcoming decision period, then weave reminders into your open enrollment package and other relevant communications.

When employees have all the facts — and support in interpreting them — they are best able to minimize medical expenses and ensure proper coverage now and when they retire. Your company, meanwhile, will likely see a significant reduction in healthcare claims costs.

How Alliant can help

Alliant Medicare Solutions understands the unique needs of older employees and ensures your employees feel informed and supported throughout their Medicare journey. Our licensed and certified advisors—available in all 50 states—provide independent, one-on-one guidance to help age 65+ employees compare their options and identify the coverage that best fits their healthcare needs and financial well-being —without sales pressure.

Our full suite of member support services empowers employers with comprehensive offerings that address everything from program development and compliance to insightful reporting and engaging employee education. Contact a benefits consultant to learn more.