There are a lot of employers who are changing their employer coverage to high deductible health plans. This strategy is generally implemented to keep administrative costs down and premiums as low as possible. While saving the company money, this approach could cost Medicare eligible employees a fortune.

 

     The basic theory for most employers who change to high deductible health plans is to increase their deductible to a very high amount ($5,000, $7,500 or $10,000). The benefit to doing this is that it keeps health insurance premiums lower and more affordable.

 

     Most employers will supliment the high deductible with an HRA (Health Reimbursement Account) which gives employees access to funds that will cover some or all of the health insurance deductible.

 

Why is this a problem for Medicare eligible employees?

 

     1. Medicare eligible employees are NOT eligible to use contributions to a HRA that are made after the employee becomes eligible for Medicare. This leaves the Medicare elgible employee with a high deductible health plan and no access to funds to compensate for the high deductible. Medicare eligible employees will essentially not have any coverage until their out-of-pocket medical expenses reach the deductible.

 

     2. The prescription drug coverage under a high deductible health plan is generally considered to be "non-creditable" by Medicare. Because employees are now forced to meet a very high deductible before their prescription drugs are covered, Medicare can determine that the new health plan does not meet the "Medicare standard" for drug coverage. The consequence is that the employee will pay a "late enrollment penalty" when they retire and join a Medicare Part D prescription drug plan. The penalty is assessed because the employee did not have "creditable drug coverage" when they became eligible for Medicare.

 

What's the solution?

 

     Alabama Health Guidance will be glad to explain these rules and regulations to employers and/or employees. We offer individual consultations and group meetings at work for free.

 

     It is very common for Medicare eligible employees who have high deductible health plans to consider lleaving employer coverage and having Medicare as their primary coverage for medical and prescription drug coverage.

 

     In general, Medicare will cover 80% of their medical expenses. Employees can cover the other 20% with a Medicare Supplement or a Medicare Advantage Plan.

 

Medicare does not cover prescription drugs, the employee would need to obtain Medicare Part D prescription drug coverage in order to have coverage for their prescription drugs.

 

Things to consider when leaving employer coverage.

 

     1. Do you have a spouse or dependents who rely on your employer coverage? In most cases, if the employee drops his/her employer health plan, their spouse and/or dependents will also lose coverage.

 

     2. Are you taking a lot of expensive medications that will put you in the "Donut Hole" ? Unlike employer coverage, most Medicare Part D plans have a "Donut Hole" or "Coverage Gap". The Donut Hole iis established by Medicare and basically means that when you pay a certain amount for your prescriptions in a calendar year your presription drug costs will increase.

 

     3. Can you return to your employer coverage once you leave? It is important to know if you can go back to your employer coverage if you decide to drop it. In most cases, active employees can re-enroll into their employer coverage during the Open Enrollment period. Retirees who leave their employer coverage generally cannot re-enroll at a later date.