Volume Twenty-One, Issue One January 2018 MEDICARE PRIMER As more and more baby boomers become Medicare-eligible, employers are being asked more and more questions about Medicare. Medicare rules can be complicated for everyone including active, retired or disabled workers. Employers need to understand the basics of Medicare and the issues that affect them. This Advisor reviews the following key Medicare issues: Medicare Basics Part A, B and D benefits Eligibility and enrollment for Medicare Medicare replacement plans Medicare supplement plans Medicare secondary payer rules Employer concerns related to Medicare Even if your organization does not offer retiree health plan coverage, understanding Medicare is a must. Medicare rules affect several cost control decisions employers make regarding eligibility for spouses, HSA contributions and so on. MEDICARE BASICS PART A, B AND D BENEFITS Medicare Part A In general, Medicare Part A covers inpatient hospital services including: Inpatient hospital care Inpatient stays in a skilled nursing facility (for medically necessary reasons, not custodial care) with limits on the number of days covered. Hospice care services. Home health care services. These services are not fully covered. Medicare beneficiaries pay a sizable deductible along with copayments for a host of services. What s more, these amounts increase every year to keep pace with inflationary increases in medical costs. The 2018 cost share amounts are shown in the table at the top of page 2. We welcome your comments and suggestions regarding this issue of our Benefit Advisor. For more information, please contact your Account Manager or visit our website at www.mma-mi.com. Continued on Page 2 WORLD CLASS. LOCAL TOUCH.
Volume Twenty-One, Issue One January 2018, Page 2 The Medicare Part A benefit period begins on the first day of an inpatient stay and continues through the stay. The benefit period ends when the patient goes 60 days without being readmitted. If a patient is readmitted within 60 days, the second admission is considered part of the first benefit period. On the other hand, if a patient is readmitted after 60 days of no inpatient activity, a new benefit period begins and a new Part A deductible applies. There is no limit on the number of benefit periods Medicare will cover for a beneficiary so long as the Medicare beneficiary is admitted as an inpatient. Most people do not pay a premium for Medicare Part A. Anyone contributing to Medicare for 40 quarters receives the Medicare Part A benefit free. Medicare Part B Medicare Part B covers medically necessary doctor and outpatient hospital services as well as the preventive services the Affordable Care Act (ACA) requires. Medicare Part B has a calendar year deductible. For 2018, the deductible is $183. This amount increases annually. Once the deductible is met, most services are subject to 20 percent coinsurance. The 20 percent coinsurance does not have an annual limit like many group health plans. Beneficiaries must pay a monthly premium for Medicare Part B. For those who elect Part B Individual Return Joint Return Medicare Cost Share Provision 2018 Part A Deductible for first 60 days of a benefit period $1,340 Daily copay for the 61st through 90th day of hospitalization in a benefit period Daily copay for inpatient hospital stay beyond 90 days in a benefit period. The beneficiary has up to 60 lifetime reserve days Copay for the 21st to the 100th day of inpatient skilled nursing home care in a benefit period in 2018, that premium is $134. Medicare Part B premiums are income-based. The higher your annual income, the more you may pay for Part B. CMS looks at the income from 2016 to determine Part B premiums for 2018. The income thresholds and premium amounts for 2018 Part B are shown in the table at the bottom of page 2. In addition, some beneficiaries pay a lower monthly fee because of the Medicare Part B hold harmless clause. This clause limits annual premium increases if there is little or no cost of living adjustment to social security income. The hold harmless clause has been invoked a number of times over the last decade, so some long time Medicare beneficiaries pay less in Part B premiums. Medicare Part D Benefits (Outpatient Prescription Drugs) Part D, the newest portion of Medicare, was launched in January 2006 to help pay for outpatient prescription drugs. It 2018 Part B Monthly Premium Without Hold Harmless $85,001 - $107,000 $170,001 - $214,000 $187.50 $107,001 - $160,000 $214,001 - $320,000 $267.90 $160,001 - $214,000 $320,001 - $428,000 $348.30 >$214,000 >$428,000 $428.60 $335 $670 $167.50 is, however, a bit more complicated than Parts A and B. Private insurance carriers and administrators across the country, not the government, directly deliver these benefits. These plans receive a stipend from the government and premiums from Medicare beneficiaries to fund the Medicare Part D plans they offer. Here s how Part D works. Beneficiaries must pay an annual deductible and share costs until they reach the coverage gap, where the plan pays none of the cost. After the coverage gap, Part D provides comprehensive coverage for catastrophic prescription drug expenses. The amounts are indexed annually to adjust for inflation. The standard plan design for 2018 is shown in the table at the top of page 3. The ACA did change the coverage gap that occurs between the initial coverage limit and the true out-ofpocket cost. Both the government and pharmaceutical manufacturers subsidize a portion of the cost for both name brand and generic prescription drugs. While the full cost of the drug applies to the true out-of-pocket maximum, beneficiaries pay the discounted amount when the prescription is filled. Continued on Page 3
Volume Twenty-One, Issue One January 2018, Page 3 Annual Deductible (amount the Medicare beneficiary pays before benefits are payable) Initial Coverage Limit (once the beneficiary meets the deductible, the plan pays 75% and the beneficiary pays 25% until the total prescription expense - paid by plan and beneficiary - reaches the initial coverage limit) True Out-of-Pocket Maximum (Once the Medicare beneficiary has paid the true out-of-pocket cost, Medicare catastrophic coverage will pay most of the prescription drug cost. The standard plan pays no part of expenses after the initial coverage limit until the true out-of-pocket maximum is reached.) Total Covered Part D Expenses Before Catastrophic Coverage (if the beneficiary has no coverage other than the Medicare Part D plan) The government allows private plans to create actuarial equivalent plans to deliver these Medicare benefits. Most Part D plans offer actuarial equivalent plans, usually using the tiered copay structure so familiar to employees. Even plans with a copay structure may offer little or no coverage during the gap, or they may cover only generic drugs. Most plans require Medicare beneficiaries to pay a premium for coverage. The premiums will vary from carrier to carrier and plan to plan. In general, the more comprehensive the plan design, the higher the premium. Medicare Part D also has 2018 $405 $3,750 $5,000 $7,508.75 Catastrophic Coverage - Medicare pays most of the prescription drug expense after the catastrophic coverage level is reached. The Medicare beneficiary pays the greater of 5% of the drug s cost or a $3.35 generic or $8.35 brand-name copay. Individual Return Joint Return income-based premium amounts. Since insurance carriers set the premium, Medicare Part D has an income-based addition to premiums for those in higher income brackets. CMS looks at 2016 income to determine the adjustment amounts for 2018 (see table at bottom of page 3). 2018 Part B Monthly Increase to Plan Premium $85,000 or less $170,000 or less No Adjustment $85,001 - $107,000 $170,001 - $214,000 $13.00 $107,001 - $160,000 $214,001 - $320,000 $33.60 $160,001 - $214,000 $320,001 - $428,000 $54.20 >$214,000 >$428,000 $74.80 With so many options, how can seniors choose the best one? The government s Medicare website has a very useful search engine. Seniors can enter the specific prescription drugs they take and the pharmacies they use. The search engine then analyzes the drug cost and matches the beneficiary with the plan that has the lowest out-of-pocket cost. The cost calculations take into account the monthly premium, the deductible, copays or any other cost sharing amounts and any expected costs the beneficiary may have to pay in the coverage gap. Medicare-eligible married couples need to enroll in Medicare Part D plans independently. Husbands and wives often choose separate carriers since they will each need the Medicare Part D plan with the most comprehensive coverage for their specific medications. Part D plans have an annual open enrollment period that runs from October 15 to December 7 every year. Open enrollment allows Medicare beneficiaries to switch to different plans. Beneficiaries may want to change plans when their prescriptions change during the year or their out-of-pocket cost seems too high. ELIGIBILITY AND ENROLLMENT FOR MEDICARE People become Medicare-eligible in three ways: Age: When they turn age 65 (coverage is effective the first day of the month in which they turn 65). Disability: Disabled people receiving social security disability income become eligible for Medicare after 24 months. In order to qualify for disability income benefits, a person must first have been disabled and unable to work for at least 5 months. In reality, a disabled person becomes Medicare-eligible 29 months after the date of disability. Continued on Page 4
Volume Twenty-One, Issue One January 2018, Page 4 Beneficiary Achieves Age 65 Part A Part B A person is automatically enrolled in Part A of Medicare when he or she applies for income benefits with social security. Anyone choosing not to apply for income benefits can enroll in Part A at the local social security office. Those who work past age 65 can enroll in Part A at retirement (providing they did not apply for social security income benefits). Applicants are also automatically enrolled in Part B when they apply for income benefits. Beneficiaries can decide to dis-enroll from Part B. It might be a good idea if they are currently working or have benefits through an employer plan because a spouse is currently working. It makes sense to dis-enroll; the monthly Part B premium is sizable and the benefit will be minimal because, unless it is a small group plan, the employer s plan pays primary. Part D A retiree has 8 months after losing coverage through an employer plan to enroll in Part B without having to pay a late enrollment penalty. The 8 months is measured from the time the person loses active group health plan coverage, not COBRA coverage. Beneficiaries must actively enroll in a Part D plan. They should chose the plan best suited to their situation. If an employee is working or has employer coverage because a spouse is working, enrollment in Part D can be delayed. Disabled Beneficiary Part A Part B Part D The Part D late enrollment penalty does not apply if a Medicare-eligible individual enrolls within 63 days of losing creditable prescription drug coverage. Enrollment in Medicare Part A is automatic after the 23rd month of social security disability income. Enrollment in Medicare Part B is automatic after the 23rd month of social security disability income. The individual becomes eligible under the same terms as Parts A and B. If the disabled person is eligible for Medicaid, the Medicaid plan will refer the person to the Medicaid/Medicare Part D plan the state uses. Medical Conditions: People with certain medical conditions are also eligible for Medicare. For example, people diagnosed with end stage renal disease are Medicare-eligible but the effective date of coverage depends on their treatment. More details on Medicare and ESRD can be found at https://www.medicare. gov/pubs/pdf/10128-medicare-coverage-esrd.pdf. ALS: People with ALS (amyotrophic lateral sclerosis or Lou Gehrig s disease) automatically become eligible for Medicare the month their disability income benefits begin. Once a person becomes eligible, enrollment is not automatic. If you are eligible for Medicare due to age and you apply for social security income benefits, then you are automatically enrolled in Part A. If you do not take income benefits, but are eligible due to age, then you must enroll for coverage. For Parts B and D, you must actively enroll for coverage. The enrollment process can be complicated and it varies depending on your situation. In some cases, you must enroll when you first become eligible or risk a late enrollment penalty although in some cases the penalty may not apply. These late enrollment penalties can be substantial. It is critical to understand when you need to enroll for benefits. The Medicare deadline for enrolling depends on many different factors (see table at top of page 4). People can enroll in Parts A and B in person at their local social security office, over the phone or online. For Part D coverage, they must enroll with the specific carrier they choose for coverage. Most Part D carriers will also allow online and over the phone enrollments. Continued on Page 5
Volume Twenty-One, Issue One January 2018, Page 5 Those who do not enroll on time face two problems: 1. Late enrollment penalties. 2. Limited ability to enroll in Medicare in the future. Parts B and D both have late enrollment penalties. For Part B, Medicare beneficiaries must pay a 10 percent penalty for each 12-month period they do not have Part B coverage or coverage available through an employer because of current employment status. For Part D, Medicare beneficiaries must pay a 1 percent additional premium penalty for each month they do not maintain creditable prescription drug coverage. Enrollment can be limited, too. You can enroll late with Medicare if you do it after losing employer group health plan coverage. Anyone else enrolling late may need to wait: Medicare Part B: If you do not enroll when you are initially eligible or within the 8-month special enrollment period after you lose employer group health plan coverage, you can enroll late only in the first three months of the year and coverage will not go into effect until July 1 of that year. Medicare Part D: If you do not enroll when you are initially eligible or within the 63-day special enrollment period after you lose creditable prescription drug coverage, you will be able to enroll in Medicare Part D plans only during the annual open enrollment period that runs from October 15 through December 7. Your coverage then becomes effective on January 1. Enrollment deadlines are confusing and the consequences for not enrolling on time can be serious. The annual CMS Medicare and You guide explains Medicare s enrollment rules. MEDICARE REPLACEMENT PLANS Medicare beneficiaries have an alternative to the traditional benefits of Medicare Parts A, B and D, known as Medicare Part C or more commonly called Medicare Advantage plans. Medicare Advantage plans replace Medicare and tend to look and operate more like an employer group health plan. These plans can be HMOs, PPOs or even a traditional fee for service plan. Since Medicare Advantage plans replace Medicare, beneficiaries must first enroll in Medicare Parts A and B. Government subsidies, Part B premiums and the beneficiary s insurance premiums fund Medicare Advantage plans. Plans may cover outpatient prescription drugs. The following features may be included in a Medicare Advantage plan: A coordinated approach to Medicare Parts A, B and D. Traditional Medicare has several components that combine to provide comprehensive coverage. Most Medicare beneficiaries use different carriers for their Medicare supplement and the Medicare Part D coverage. Working with CMS and various carriers can be confusing. Medicare Advantage vendors are responsible for administering Parts A, B and D along with supplemental coverage in one comprehensive medical plan. In most cases Medicare Advantage plan premiums and out-of-pocket costs for care are significantly less, since Medicare Advantage plans can use limited provider networks and medical management protocols when determining benefits. These plans also offer programs to help people manage their health care effectively. While these plans offer many advantages over traditional Medicare, they do have the following potential drawbacks: Depending on the plan design, provider choice may be limited. In an HMO, a network primary care physician handles all necessary care as well as referrals to specialists. In some of the HMO Medicare Advantage products, the network is even more restrictive than the network for group plans. Many seniors may already have established relationships with various specialists who may not be Continued on Page 6
Volume Twenty-One, Issue One January 2018, Page 6 in the group. The PPO plan design will have more freedom of choice, but seniors still need to make sure the providers they choose are in the PPO network. The plan may require the beneficiary to enroll in a medical management or care management program. The opportunity to re-enroll in traditional Medicare is limited. Most Medicare beneficiaries feel these minor drawbacks are definitely offset by the cost and benefit improvements Medicare Advantage plans offer. Medicare beneficiaries have limited opportunities to enroll in these plans: Initial Coverage Election Period: The initial coverage election period is the period a newly eligible Medicare beneficiary can elect Medicare Advantage plans. The initial enrollment period is the same as the initial enrollment period for Medicare. Beneficiaries can enroll any time from 3 months before to 3 months after the date they are eligible for Medicare. Annual Coordinated Election Period: The annual coordinated election period is the annual period where a Medicare beneficiary can choose either a Medicare Advantage plan or traditional Medicare. The beneficiary can change Medicare Advantage plan options during this period as well. The annual coordinated election period runs from October 15 to December 7 each year with changes effective on January 1. Special Election Period: A special enrollment period is allowed when circumstances change, such as when a plan withdraws from the market or a beneficiary moves out of the service area. Medicare Advantage plans must promptly notify their members of any program changes, and members must promptly notify the plan of any status changes. Medicare Advantage plans have grown significantly since they began in 2006. They continue to be a viable alternative to traditional Medicare paired with Medicare supplement coverage. MEDICARE SUPPLEMENT PLANS Traditional Medicare Parts A and B have significant out-of-pocket costs. Many Medicare beneficiaries purchase individual supplemental insurance plans to help cover some of these costs. Policies that supplement Medicare are sometimes called Medigap plans. Private insurance carriers offer these plans and the federal government strictly regulates them. Most Medicare beneficiaries can choose from 10 different plan options. The plans differ depending on the expenses they reimburse. A summary of the benefits covered by the 10 different supplement plans can be found at https://www.medicare. gov/supplement-other-insurance/ compare-medigap/compare-medigap.html. To be eligible for a Medicare supplement plan, you must first enroll in Medicare Part B. The best time to enroll is either three months before or three months after your 65th birthday. During this time, an insurance company can t medically underwrite an applicant. Insurance carriers: Cannot refuse to sell you any Medicare supplement policy they offer. Cannot delay the date your coverage starts. Cannot charge you more for a Medigap policy because of your health or a pre-existing medical condition. If you do not enroll in a Medicare supplement plan when you are first eligible, you will have limited opportunities to do so. In the following situations, if you apply for the supplemental policy within 63 days after you lose coverage, the carrier must sell you a Medigap plan (the carrier cannot refuse to cover you): If you enrolled in a Medicare Advantage plan and that plan discontinues coverage in your area or you move out of the plan s service area. If you are covered by an employer group health plan (as an active employee, as a COBRA continuant or as a retiree) and you lose that coverage. Continued on Page 7
Volume Twenty-One, Issue One January 2018, Page 7 If you are enrolled in a Medicare Advantage plan or another Medicare supplement plan and you lose that coverage because the insurer hasn t followed the rules or has misled you about coverage. If you are enrolled in a Medicare supplement plan and the insurance carrier goes bankrupt or if you lose coverage through no fault of your own. The best time to enroll in a Medicare supplement plan is during the first six months after you enroll in traditional Medicare. The state insurance law and the insurer carriers policies determine when you can change Medicare supplement policies. Medicare supplement policies can be rated in different ways: Community rated: Premiums are the same for everyone. The rate does not depend on age or health. Instead, the rate depends on the experience of the pool and participants are charged equally for the coverage. Issue-Age Rated: Premiums depend on the age you are when you buy the Medicare Supplement policy. Premiums can be increased annually, but not because of your age or health. Attained-Age Rated: Premiums depend on your current age; thus they are adjusted annually. Many Medicare beneficiaries use Medicare supplement policies to help pay some of the out-of-pocket costs traditional Medicare does not cover. However, these policies cannot supplement Medicare Part D plans. Beneficiaries can search for plans available on the Medicare website. One important benefit some Medicare supplement plans offer is Part B coverage for excess charges. To understand this benefit, you need to understand how Medicare processes claims under Part B. How a claim is processed depends on whether the health care provider participates with Medicare: 1. Medicare Participating Provider will accept the Medicare approved amount as payment in full. 2. Non-Participating Provider federal law limits these providers to charging a maximum of 15 percent over the Medicare approved amount. In other words, these providers do not get to determine what to charge Medicare beneficiaries; they can only charge up to 115 percent of the Medicare approved amount. Some Medicare supplement plans cover Medicare Part B excess charges. This means the plan will cover the additional 15 percent that Medicare beneficiaries are charged because they use non-participating Medicare providers. While many providers do participate in Medicare, some do not. Several cuts to provider payments have been proposed in the past, but never implemented. If these cuts are implemented, more health care providers may decide not to participate with Medicare. Covering excess charges could then be significant for those using Medicare supplement plans. MEDICARE SECONDARY PAYER RULES The Medicare secondary payer rules determine when a group health plan must pay primary and when it can pay secondary to Medicare. These rules apply to private group health plans, the federal government and state government plans. A recent court case confirmed these rules apply to retiree health plans as well. Unfortunately, the rules are not particularly straightforward. In many cases, payment order depends on employer size or the reason for Medicare entitlement. This section discusses the rules for group health plans sponsored by employers with 100 or more employees. Some exceptions to these general rules are discussed in the next section. With some exceptions, the Medicare secondary payer (MSP) rules generally apply to employees who have group health plan coverage. These employees must be actively working or associated with the employer in a business Continued on Page 8
Volume Twenty-One, Issue One January 2018, Page 8 relationship. Medicare refers to this as having coverage by current employment status. These rules also apply to the employee s spouse or dependents if they are covered by a group health plan by virtue of an employee having current employment status. Covered employees not actively working may still be considered to have current employment status if: They have been receiving disability benefits from the employer for up to six months. They retain employment rights in the industry, that is, the employer has not terminated employment, the employee has not been receiving disability benefits from an employer or from social security for more than six months, and the employee has group health plan coverage other than COBRA (regardless of whether the employee is on the payroll). In general, the group health plan pays primary when employees or their dependents are eligible for the group health plan because of someone s current employment status. Special rules apply for Medicare-eligible participants with end stage renal disease. Exceptions to the Rules Generally, the group health plan is the primary payer; however, small group health plans are treated differently. In fact, the Medicare secondary payer rules have two categories of small employers and those categories are treated differently: Employers with fewer than 20 employees: To qualify under this category, companies must have had fewer than 20 employees for each working day in at least 20 weeks of the current or preceding calendar year. When an employer satisfies this test, Medicare pays primary and the group health plan pays secondary. The employer has to have had fewer than 20 employees when the patient receives the Medicare-covered service. Employers with around 20 workers must continually monitor employee headcount whenever a participant becomes Medicare-eligible. The rules do not take into account the number of employees the health plan covers; they simply consider the number of employees on the payroll. Employers with at least 20 employees but fewer than 100 employees: To qualify under this category, the company must have had fewer than 100 workers, including full-time and parttime employees on at least 50 percent of its regular business days during the previous calendar year. In this case, if a plan participant is eligible for Medicare because of a disability, Medicare pays primary and the group health plan secondary. On the other hand, if a plan participant is eligible for Medicare simply because of age, the group health plan pays primary, Medicare secondary. Participants qualifying for Medicare because of end stage renal disease are treated differently; the next section explains that situation. To count employees for these small group exceptions, you must: Include leased employees in your count if they would be counted under Code 414(n). Treat all employees of a member of an affiliated service group as defined by Code 414(m) as if they were employees of a single employer. Use IRS control group rules (as outlined in Section 52) to determine what organizations should be considered a single employer. If your organization falls into these exceptions, make sure all your disabled or over age 65 employees apply for Part B. Health plans will pay secondary to Medicare assuming the person is enrolled in all parts of Medicare that apply. The Medicare secondary payer rules are much easier to manage when you have 100 or more employees. In that case, the group health plan pays primary for anyone eligible because of age or disability. A completely different set of rules, however, applies to Medicare-eligible employees with end stage renal disease. Continued on Page 9
Volume Twenty-One, Issue One January 2018, Page 9 Special Rules Apply to End Stage Renal Disease When a plan participant becomes eligible for Medicare because of end stage renal disease (ESRD), the group health plan must pay primary for the first 30 months. There are no exceptions to this requirement and having coverage because of current employment status does not apply. These special rules apply only when the disease is the initial reason a person qualifies for Medicare. They do not apply if a Medicare beneficiary is initially eligible because of age or some other disability and subsequently develops ESRD. In addition, a plan must not treat ESRD patients differently from anyone else covered under the plan. The following actions are not permitted: Terminating coverage of anyone with ESRD for a reason (such as a failure to pay plan premiums) that would not terminate coverage for anyone else. Limiting benefits for ESRD patients when benefits for others enrolled in the plan are not limited; for example, requiring higher deductibles or coinsurance, excluding certain benefits and so on, that would apply to ESRD treatment. Charging higher premiums for patients with ESRD. Paying providers less for treating ESRD. Failing to cover routine maintenance dialysis or a kidney transplant when a plan covers other dialysis services or other organ transplants. While plans can certainly limit coverage for a particular service, those limits must apply uniformly to all plan participants. For example, a plan may limit its coverage for dialysis to 30 sessions a year for all plan enrollees. If it does not differentiate between participants receiving dialysis for ESRD and participants receiving dialysis for other reasons, this limitation is acceptable. Employer Prohibited Actions Under the Medicare secondary payer rules, employers cannot offer Medicare entitled participants a specific financial or any other incentive to opt-out of the employer-sponsored group health plan and take Medicare instead. The plan must offer current employees or current employees spouses age 65 or older the same benefits, under the same conditions and terms available to employees or spouses under age 65. CMS has informally confirmed that an opt-out bonus for everyone choosing other coverage is not considered a financial incentive to elect Medicare instead of the group health plan. Employers cannot offer to pay for any Medicare supplemental policies, premiums, or a Medicare Advantage plan in order to encourage current employees or their spouses to opt for Medicare rather than employer coverage. Group health plans cannot take Medicare entitlement into account (either age-based or disability-based) for current employees. Unless an exception was already noted, the following actions are not permitted: Failing to pay primary benefits. Only offering coverage that pays secondary to Medicare. Terminating coverage because an individual has become eligible for Medicare, except as permitted under COBRA. Denying or terminating coverage if an employee qualifies for Medicare because of a disability when the plan covers other disabled employees. Limiting benefits for Medicare-entitled individuals and not for others enrolled in the plan, such as providing less comprehensive health coverage, excluding benefits, reducing benefits, charging higher deductibles or coinsurance, and so on. Charging Medicare-entitled employees higher premiums. Requiring Medicare-eligible employees to wait longer for health care coverage to begin. Paying providers or suppliers less for services furnished to a Medicare beneficiary than the amounts paid for the same services for a non-medicare beneficiary. Continued on Page 10
Volume Twenty-One, Issue One January 2018, Page 10 CMS manages the coordination of benefits process very diligently. It investigates any situations that seem unusual, especially if an employer seems to be treating Medicare-entitled employees differently from other employees. Mandatory Reporting Requirements Congress passed the Medicare, Medicaid and SCHIP Expansion Act at the end of 2007. This Act established mandatory reporting requirements for group health plans as well as a host of liability plans. The health plan requirements became effective on January 1, 2009, and apply to health insurance issuers and third party administrators. In general, insurers and third party administrators report specific information on Medicare-eligible plan participants to the Centers for Medicare and Medicaid Services. The reporting helps CMS track group health plan coverage for Medicare beneficiaries and determine the primary and secondary payer. Failing to comply with these reporting requirements can result in significant fines; violators may be forced to pay $1,000 for each day of non-compliance for each individual whose information was not submitted. Data Match Program CMS does monitor other coverage that Medicare beneficiaries have in addition to Medicare. Using a data match program, it identifies Medicare participants covered under both a group health plan and Medicare by comparing data from the IRS and the Social Security Administration. To determine whether a working Medicare beneficiary also has group health plan coverage, CMS sends employers a questionnaire asking about certain employees identified as having Medicare. The questionnaire asks for specific data on employment dates and their health plan coverage. Employers must complete these questionnaires within 30 days unless the government approves an extension. Failure to comply can result in: A fine of $1,000 for each person the employer does not list in the questionnaire and for each person the employer lists without including complete information. A government subpoena of business records. An investigation of the employer s group health plan to determine non-compliance. The employer may then be forced to pay excise taxes. Today, the questionnaires are submitted electronically. Employers receive a letter explaining how to access questionnaires specific to their employees. Recovery of Payments from Group Health Plans Medicare meticulously reviews these questionnaires to determine whether a group health plan should have been the primary payer. When Medicare identifies a situation where they paid primary in error, the process of recovering the payment begins. The Medicare secondary payer rules allow Medicare to make only conditional payments. Therefore, if Medicare identifies another health plan that should have paid primary, it can recover payments it made in error. A group health plan must repay the amount Medicare paid in error or the amount the group health plan should have paid, whichever is less. If CMS has to sue to recover the payment, it can collect double damages. CMS sends demand letters to employers to collect primary payments made in error. Demand letters have deadlines, so employers need to review the letter as quickly as possible to determine whether they agree with Medicare s assessment. Some health insurance carriers and TPAs have areas that specialize in working with Medicare to make payments associated with demand letters. If at all possible, allow your health plan to determine how much it would have paid primary to make sure your plan is repaying Medicare the correct amount. The reporting requirements instituted in 2009 have reduced the number of demand letters most organizations receive. Since CMS can assess fines for not meeting the repayment deadlines outlined in these letters, organizations should respond to these requests immediately. Continued on Page 11
Volume Twenty-One, Issue One January 2018, Page 11 EMPLOYER CONCERNS RELATED TO MEDICARE A number of Medicare issues can still affect employers even if they do not sponsor a retiree health plan. Employers, therefore, need to understand how Medicare entitlement can affect their benefit plan provisions and know the compliance steps they need to take. Medicare enrollment and HSAs More and more employers are launching high deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs). Medicare coverage will not affect eligibility for coverage under the HDHP; however, it can affect eligibility to contribute to an HSA. Eligibility to contribute to an HSA rests solely on the accountholder. Accountholders covered by any part of Medicare cannot contribute to an HSA. This should be made clear to all employees over age 65. Many of them were automatically enrolled in Part A when they applied for income benefits; however, they don t always remember they have Part A coverage. Medicare coverage status of dependents covered by HDHP does not affect whether an accountholder can contribute to an HSA. Counseling employees just before they turn 65 will allow them to make an informed decision. Some will apply for social security income, be automatically enrolled in Part A and elect HDHP coverage or perhaps another plan type you offer. Accountholders electing HDHP coverage are not eligible to contribute to an HSA. Those that delay social security income would not be automatically enrolled in Part A and could, therefore, continue to contribute to an HSA. While Part A coverage prevents employees over age 65 from being eligible to contribute to an HSA, other parts of Medicare could also disqualify them. If prescription drug coverage under the HDHP becomes non-creditable, a Medicare-eligible individual would need to elect a Part D plan to avoid late enrollment penalties. Once covered by the Part D plan, the accountholder would not be eligible to contribute to an HSA, but would still be eligible for the HDHP. If your organization is planning to implement an HDHP with an HSA, it is important to clarify the effect Medicare coverage has on whether an accountholder can contribute to an HSA. This impact needs to be explained regularly when an employer sponsors an HDHP since more and more active employees are becoming Medicare-eligible. Medicare impact on COBRA Medicare s effect on COBRA and COBRA beneficiaries raises three questions. First, if an employee is Medicare-eligible, does a plan have to provide COBRA because of a loss of coverage paired with a qualifying event? Next, does Medicare entitlement affect the maximum benefit period for COBRA beneficiaries? Finally, does COBRA affect primary and secondary payment rules under Medicare? Employers have to provide COBRA to qualified beneficiaries after a qualifying event, even if the beneficiary is eligible or covered by Medicare. However, Medicare entitlement can affect the maximum benefit period for COBRA beneficiaries. Much depends on where the Medicare entitlement date falls in relation to the COBRA election date: If Medicare entitlement occurs before the COBRA election date, then the qualified beneficiary may elect COBRA for 18 months. It may not make sense for a Medicare-eligible individual to elect COBRA since COBRA will pay secondary to Medicare. If the employee elected COBRA before the Medicare entitlement date, then Medicare entitlement ends COBRA for the Medicare beneficiary. If other dependents elected COBRA, they can continue coverage for the maximum 18 months as long as they do not have a COBRA terminating event. Important note, if Medicare entitlement precedes the COBRA election date, it may extend the maximum coverage period for any dependents electing COBRA (not the Medicare beneficiary). In this situation only, the maximum coverage period is the greater of 36 months measured from the Medicare entitlement date or 18 months measured from the qualifying event date. Continued on Page 12
Volume Twenty-One, Issue One January 2018, Page 12 COBRA does affect the primary payment status of the group health plan. Because the qualified beneficiary no longer has coverage because of current employment status, Medicare becomes primary. The qualified beneficiary will need to elect Medicare Part B because the group health plan pays secondary and assumes Part B coverage is in effect. Medicare and Opt-Out Bonuses An employer cannot offer a specific financial incentive to drop employer-sponsored health coverage and replace it with Medicare. An opt-out bonus to employees that opt out of health plan coverage because of another group health plan or governmental plan coverage is, however, permitted. Spousal Restrictions/Force Out Spousal restrictions are a relatively new way to reduce health plan cost. A spousal restriction (or force out) is when spouses are NOT eligible for the employer group health plan if they have coverage available through their own employer s health plan. These restrictions, however, do not apply to coverage under a group health plan for a spouse that is covered by Medicare. This practice violates the Medicare Secondary Payer rules. Spousal Surcharges A spousal surcharge is when a plan charges an additional premium to cover spouses that have coverage available through their own employer but elect coverage under your plan instead. You can t charge spouses covered by Medicare a higher premium because they have Medicare coverage. This practice violates the Medicare Secondary Payer rules as well. CONCLUDING THOUGHTS It used to be that only employers offering retiree health plans needed to understand the specifics of Medicare. Over the last two decades, Medicare has become an issue all employers must understand if they sponsor a group health plan. As more and more employees and dependents become Medicare-eligible, they will need to understand Medicare coverage. Employees have always looked to employers for insight on health plans. Unfortunately, this does not change if they become Medicare-eligible. As health care costs continue to increase, employers may want to shift more cost to Medicare. However, they need to be careful. Most strategies that shift cost to Medicare violate the Medicare secondary payer rules. Medicare also affects employers that offer qualifying HDHPs paired with HSAs. Medicare-covered employees need to understand that although they are eligible for the qualifying HDHP, they cannot contribute to the HSA under IRS rules. Please contact your Marsh & McLennan Agency Michigan Account Manager with any questions. MMA Copyright Marsh & McLennan Agency LLC company. This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change. Marsh & McLennan Agency LLC Health & Benefits 3331 West Big Beaver Road, Suite 200 Troy, MI 48084 Telephone: 248-822-8000 Fax: 248-822-4131 www.mma-mi.com Property & Casualty 15415 Middlebelt Road Livonia, MI 48154 Telephone: 734-525-0927 Fax: 734-525-0612 www.mma-mi.com