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CAN YOU CUT BENEFITS COSTS BY MOVING EMPLOYEES TO MEDICARE?

By December 1, 2011 No Comments

Many employers are doing everything they can to reduce benefit costs. One of our HR That Works Members posed this question to Alan Levy, a benefits law expert in our network.

“Q: If an employee is eligible for Medicare, can we state/insist that they must leave our company plan and accept Medicare?

“A: We had this question for a client recently. There are serious penalties for forcing an active employee to give up the employer’s plan and go to Medicare, and offering a personal incentive might pose a problem. However, an employee can change to Medicare voluntarily, without restrictions or charges for pre-existing conditions, etc. This also applies to Medicare supplements and advantage problems. Some employees make the change voluntarily to use the current rule’s automatic unqualified acceptance, as well as to assure any “grandfathered” rights if Congress reduces or alters the program in the future. (Every “reform” proposal seems to exempt anyone already on Medicare.) A bigger problem is what happens to an employee’s spouse who isn’t old enough for Medicare if the employee leaves the company plan and goes to Medicare. Although COBRA works for a while, extension of this period is problematic.

“Finally, an employer offering a Medicare supplement or advantage plan to all who could qualify is not considered an improper incentive; the danger comes when the employer offers an individual some extra amount. The only exception I know of in this regard is the Third Circuit rule (applicable only in PA, NJ, and DE), Erie County, which treats certain variations of this scenario as age discrimination under the ADEA. EEOC says it will not apply the Third Circuit rule anywhere else in the nation, which seems to support the idea that employers offering the supplement, etc. is permissible.”

This advice is limited to the facts of the situation. As Alan points out, the EEOC has not drawn a black and white line on permissible supplements. The Social Security Administration provides an excellent publication on the interplay between private insurance and Medicare payments. See pages 13-14

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