CHAPTER
14

Employer-Sponsored Health Plans

In This Chapter

• How to decide whether or not to enroll in Medicare when you have employer-sponsored health insurance
• Understanding how the size of your employer affects your benefits
• Securing your health-care insurance in times of family or medical need
• Your rights under Workers’ Compensation insurance
• When Medicare will pay your bills

Medicare may only be one part of your overall health-care plan. If you (or your spouse) have not yet retired, you may also have access to employer-sponsored health care through your current job. Many factors must be taken into consideration to understand when that insurance will work in conjunction with your Medicare plan and when it will not.

Do You Need Both?

The first question you have to ask yourself is whether or not you need Medicare when you still have access to another health insurance plan. The answer will depend on your financial resources and your medical needs.

Most people will want to avoid paying two premiums a month instead of one. There needs to be a good reason to make the added cost worthwhile. Let’s consider your options.

Employer-Sponsored Health Insurance Alone

Employer-sponsored health plans may provide coverage not only for you but also for your spouse and dependents. Medicare is not a shared plan and can only be accessed by you as the beneficiary. If your family relies on you for health-care coverage, you may prefer to hold onto your employer-sponsored plan as long as possible.

If your employer-sponsored coverage meets your current needs and you are satisfied with its service, you may choose to keep that plan. Adding Medicare may or may not add additional services to the roster depending on how extensive your current plan is. If you do not require the added coverage, you may choose to defer Medicare.

In the case of Medicare, whether or not you defer coverage will depend on where you work. If your job makes you eligible for a Special Enrollment Period (see below) and you do not currently need the extra health-care coverage, you may put Medicare on hold until you leave your job without facing monetary penalties.

Employer-Sponsored Health Insurance with Medicare

You like your current health plan. You need a means to provide health care for your dependents. Choosing to stay with your employer-sponsored plan may make sense, but you may still need to consider enrolling in Medicare on top of that.

If you are not eligible for a Special Enrollment Period based on your current job, not signing up for Medicare could cost you significant dollars in the future. Though you may pay higher premium costs now for the two plans, you will pay less later if you enroll in Medicare when you first become eligible.

You must keep in mind that Medicare’s late penalties, depending on whether they are for Parts A, B, or D, may extend for years or even as long as you have Medicare. Late penalties are discussed in detail in Chapter 7.

It may also be the case that you could benefit from additional health-care coverage, especially if your employer-sponsored plan is limited. Adding Medicare services to your employer-sponsored plan may give you additional coverage options if you have increased medical needs.

Medicare Alone

Taking all the previous arguments into consideration, you may need to consider putting all your eggs into the Medicare basket for financial reasons. Not everyone can afford to pay premiums for multiple plans every month. If your current employment does not make you eligible for a Special Enrollment Period, deferring Medicare will cost you more money down the road. It may save you money to choose Medicare over the employer-sponsored plan.

Medicare may also provide all the benefits you need. Having both plans available may be unnecessary. You will have to take a close look at your health situation to see where your needs lie. Only you can make that decision.

When Bigger Is Better

I have said it before, and I must say it again. Size does matter, in certain situations. The size of the company you work for will decide whether or not you are eligible for certain benefits.

DID YOU KNOW?

Small businesses have been key to pulling the United States out of the Great Recession. From 2009 to 2012, small businesses employing fewer than 20 employees increased job opportunities by 4.7 percent, whereas larger businesses only did so by 1.9 percent.

This is not to say that working for a small company is bad. The exact opposite is true. Small companies are the backbone of the American economy. They strengthen communities and local economies by not only offering jobs but by delivering innovative concepts. They are better aligned to address the changing needs within a geographic area and build lasting relationships. Larger companies may also rely on smaller businesses to succeed.

Also, let us not forget that many big businesses had to get their start somewhere. Amazon, Disney, Google, Hewlett-Packard, Mattel, and Microsoft are all businesses said to have begun in a garage.

Special Enrollment Periods

You may be granted a Special Enrollment Period for enrolling in Medicare if your employer employs at least 20 full-time employees or the equivalent in part-time employees with those employees working more than 20 weeks in the preceding calendar year. Self-employed individuals do not count toward the required 20 employees. In addition, the 20 weeks do not have to be consecutive. If your employer meets this criteria, you can wait to sign up for Medicare without penalty.

The Special Enrollment Period based on your employment status extends from the time you leave your job or lose your employer-sponsored health coverage, whichever comes first, and extends up to eight months thereafter.

DID YOU KNOW?

Businesses employing fewer than 20 employees accounted for 98 percent of all U.S. firms in 2012.

Companies with fewer than 20 full-time equivalent employees may provide excellent job opportunities, but they cannot protect you from these regulations. The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 set this standard, and it is unlikely to change in the future. The longer you wait to sign up for Medicare after you are eligible, the higher the late penalties will be.

If you are uncertain how many employees work for your company, be proactive and investigate. Your employer needs to report any changes regarding changes in TEFRA status. It is better to be safe than sorry. Assuming you have a Special Enrollment Period when in fact you do not will cost you in retirement, when your income will likely be fixed or reduced.

Family Medical Leave Act

Your employer-sponsored health insurance could be at risk if you need to take time away from work to care for a sick or elderly family member, including yourself. That is unless your employer is required to follow regulations set forth by the Family Medical Leave Act (FMLA) of 1993.

FMLA requires your employer to provide you unpaid leave from your job for up to 12 weeks within a 12-month period for medical or family reasons. That time off may be continuous or intermittent, meaning your daily or weekly work hours could be reduced short-term, you take repeated shorter intervals of time off, or you take time off on an as needed basis. In some cases, your employer may require that you first use up your earned paid time off, such as sick or vacation time, before FMLA kicks in.

This legislation provides job security for you so that you still have a job when you return from your leave. It also allows your employer-sponsored health insurance to continue without interruption. You may be required to continue payment of your monthly premiums during your absence.

DID YOU KNOW?

Thirteen percent of employees took FMLA leave in 2012, with the average leave lasting 27.8 days. Reasons for FMLA leave that year included 57 percent for personal illness, 22 percent for birth of a child, and 19 percent to care for a family member.

Protections are given to employees who work for state, local, and federal agencies. Private businesses may also be held responsible to these standards. For the private sector, size again comes into play. Two requirements must be met for a company to comply with FMLA. First, an employer must have 50 or more full-time employees or an equivalent working for them in a given year. Second, these employees must work at least 20 weeks to count toward the requirement. For example, if a company hired an employee full time but the employee quit after 15 weeks, he would not count toward the 50 employee requirement. The FMLA requirement will be enforced if the company had the qualifying number of employees in the current or past year.

Even if your employer is obligated to offer FMLA, your employer may not be required to offer it to you. To be afforded FMLA protections, you must have worked at your current job for at least 12 months, and also must have worked at least 1,250 hours in the last 12 months.

Your employer may require proof about the reasons necessitating your leave. This may require your health-care provider to examine you or your family member to complete the designated paperwork. If your employer disagrees with the health-care provider’s recommendation for any reason, they may request a second opinion, but they must pay for it. Your employer may also request progress reports over the course of your leave to ensure that you are on track to return to work as expected.

Understanding how FMLA works is important because if your employer is not eligible or your personal work history does not qualify under the legislation, you could lose your health benefits. Take a close look at your medical history and that of your family.

• Do you have a chronic illness that could lead to future work absences?
• Are you anticipating surgery that requires an extended rehabilitation?
• Do you have a family member who is currently in need?
• Will you be responsible to care for an aging parent or family member in the future?

If your job is not protected under FMLA, you may want to sign up for Medicare when you can to make sure you have access to health-care coverage when you need it. Otherwise, you may be forced to go without benefits for a period of time before you can apply. Depending on what time of year this happens, it could be months before coverage starts. You may need to wait until the annual General Enrollment Period from January 1 to March 31 to apply for benefits, and your Medicare benefits will not begin until July 1. Alternatively, if you are eligible for other health-care coverage, such as a private insurance plan or a plan through the ACA Health Insurance Marketplace, you may wish to pursue those at this time.

COBRA Considerations

Retiree benefits and union benefits aside, employer-sponsored health insurance does not last forever. Your rights to continue that health plan after you leave your job may depend on the size of your employer.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 applies to businesses that employ more than 20 full-time equivalent employees. Furthermore, those employees must work for at least 50 percent of all business days from January 1 to December 31 the preceding year. COBRA requires that such employers offer extended coverage on your employer-sponsored health plan when your or your spouse’s job changes for one of the following qualifying reasons:

• You or your spouse, whoever is the covered employee, leaves the job voluntarily but not for reasons of misconduct.
• You or your spouse, whoever is the covered employee, loses the job involuntarily but not for reasons of misconduct.
• You or your spouse, whoever is the covered employee, has work hours reduced.
• Your spouse, if he or she is the covered employee, dies.
• You divorce or separate from your spouse, whether you or he or she is the covered employee.
• Your child is no longer considered a dependent.

Benefits may not be limited to just you. Your spouse and dependents may be eligible as well.

The cost of the health-care plan offered to you under COBRA is less expensive than it would have been if you paid for a health plan directly from the insurance company. You get the discounted rate negotiated between the insurer and your employer. Only now, you foot the whole bill whereas during your active employment, your employer paid a portion of the cost.

You have 60 days from the date you would have lost your health-care coverage to decide whether or not to sign up for COBRA benefits. If you choose this option, you may have benefits for 18 months or longer if you meet certain criteria.

The maximum duration for COBRA coverage is 42 months if you qualify for an extension. You may be eligible for an 18-month extension for a total of 36 months if you have a second qualifying event, like those listed previously, and notify the plan within 60 days of the qualifying event and before the initial 18-month period has ended. All beneficiaries will be granted a 24-month extension, for a total of 42 months, if the covered employee dies.

CAUTION

Though employment by a company that provides COBRA benefits may qualify you for a Special Enrollment Period with Medicare, COBRA coverage itself does not. If you wait longer than the eight months from the time your job ended to enroll in Medicare, as dictated by your SEP, you will face late penalties no matter how long you have been on COBRA.

Another qualifying event may occur if the covered employee becomes eligible for Medicare within 18 months of the initial qualifying event. The coverage for all covered beneficiaries is extended to 36 months minus the number of months the employee had been eligible for Medicare. For example, if you became eligible for Medicare six months before you leave your job, you, your spouse, and your dependents could have COBRA benefits for 30 months (36 months ‒ 6 months). This qualifying event does not require that you actually enroll in Medicare.

Disability is another reason that COBRA benefits may be extended. An additional 11 months may be allowed for a total of 29 months of COBRA benefits if you or your family member is determined to have a disability by the Social Security Administration (SSA) that is expected to last throughout the 18 months of the initial COBRA benefit period. The disability must be confirmed within the first 60 days of your COBRA benefits to be eligible.

The Trade Adjustment Assistance Reform Act (TAA) of 2002 enables eligible individuals to earn tax credits for payment of COBRA premiums. Certain workers and retirees whose employer-sponsored health coverage is lost because of increased imports or trade-related relocation are eligible. TAA also offers you tax credits to purchase non-COBRA insurance, such as coverage from a spouse’s employer if the employer pays less than 50 percent of the premium, or a private policy purchased within 30 days of your leaving your employer. TAA tax credits will cover for 65 percent of eligible premiums.

COBRA has its place in the health-care schema. Sometimes it is the only means you may have to access health insurance when you have not yet met eligibility for Medicare. If you are eligible for Medicare, you must decide when to enroll. COBRA coverage can be very costly in comparison to Medicare premiums. Unless you need to provide health-care coverage to your family, it may be more cost effective to sign up for Medicare and decline COBRA.

Workers’ Compensation

Your employer should be prepared to assist you if you sustain an on-the-job injury. To this end, you make an agreement, known as a compensation bargain, with your employer not to sue them for any injuries that occur as a result of your job. In return, your employer provides you with workers’ compensation benefits.

The compensation bargain is beneficial to your employer for obvious reasons. For one, it removes the subjective “pain and suffering” component from a possible costly settlement. It is beneficial to you because the legal process can usually be long and drawn out. By removing litigation from the equation, you will get faster recompense and are guaranteed rights; whereas if you lost in court, you may get nothing.

DID YOU KNOW?

Every state runs a workers’ compensation program. Federal laws have established programs for federal employees under the Federal Employment Compensation Act, for railroad workers under the Federal Employment Liability Act, for seamen under the Merchant Marine Act, and for coal workers under the Black Lung Benefits Act.

Workers’ compensation will cover you for any medical expenses and a percentage of any lost wages beyond three to seven days after the inciting injury. It may even cover for anticipated loss of wages in the future. A settlement may be agreed upon for any long-term consequences from the injury. In the event that you die from the injury, your spouse and dependents may be offered wage benefits.

You will only receive benefits once your case has been reviewed by a health-care provider who performs an independent medical examination (IME). You must be evaluated by a provider who participates in your workers’ compensation insurance plan. If your employer or insurance company disagrees with the outcome of the IME or believes your injury was not job-related, they may contest the case in a court hearing.

If you are on Medicare, any medical expenses relating to a work injury must be billed first to your workers’ compensation insurance. Medicare will not even consider offering payments until at least 120 days have lapsed from the time your workers’ compensation plan had been billed, and even then, they may only pay in certain situations.

DID YOU KNOW?

Workers’ compensation paid out $29.9 billion for medical expenses in 2011.

Your workers’ compensation insurance company may need additional time to review your case before they will decide whether or not to cover your expenses. Until you get the green light, your bills will not be paid. Medicare may step in during this waiting period to offer conditional payments for your medical expenses, but only for services usually covered by Medicare, so services like vision screenings may not be covered.

If your case is later approved for workers’ compensation, you must reimburse Medicare for any payments it made on your behalf. In some states, you will not be given the full settlement amount until you reimburse Medicare. Any funds you receive through workers’ compensation should be used for this purpose.

If your case is denied workers’ compensation, Medicare will cover its share of costs as if it were a nonworkers’ compensation case. Again, Medicare will only cover services under its umbrella.

Your workers’ compensation insurance may also limit or only offer partial payments if it believes your injury was related to a medical condition that existed before you started your current job. Your past medical records would document that your job did not cause that medical condition. If your medical records were limited, it may be difficult to support your case. That does not mean your job did not exacerbate your condition. Workers’ compensa-tion will acknowledge this and pay a percentage of the costs, leaving the rest to you. Medicare may pay its share towards any remaining costs.

When you receive your workers’ compensation settlement, it may include funds to be used for any future medical expenses that arise from the injury. You may put these funds into an account known as a Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA). You can use these funds to help Medicare pay for health care relating to the injury in question. Medicare will return to usual payments for this condition once you exhaust all funds from the WCMSA account. Medicare will usually only approve use of a WCMSA if your settlement is larger than $25,000 or if your expected lost wages due to the injury are more than $250,000.

Who Pays First?

Having Medicare does not mean that it will be first in line to cover your health-care costs. In order to reduce how much money is spent from the Medicare Trust Fund, protocols have been put in place so that Medicare is often set up to pay second on any claims when you have another source of health insurance. The term used to describe this is Medicare Secondary Payer (MSP).

Your employer-sponsored health plan may be first on the docket. It is important to know your rights for payment.

When Medicare Pays First or Second

Round Table

Thomas has ESRD and is newly enrolled in Medicare. He also has employer-
sponsored health insurance made available through his spouse’s job. His spouse’s health plan will cover his ESRD benefits as the primary payer for 30 months during the coordination period for ESRD, and Medicare will take over as primary payer after that.

The Least You Need to Know

• You could lose your job and health benefits if you require time away from work for family or medical reasons and your employer is not required to participate in FMLA.
• COBRA benefits do not qualify you for a Special Enrollment Period with Medicare.
• Medicare pays toward job-related injuries only when your case is denied by workers’ compensation insurance or you receive only partial payment based on a pre-existing condition.
• Medicare may pay your claims before your private health plans if the size of your employer is sufficiently small or if you meet certain age or disability requirements.