As more employees work past 65, HR teams need to understand how Medicare fits with their company’s health plan. While employers can educate Medicare-eligible employees about their options, they can’t offer incentives to push them toward Medicare.
Knowing how Medicare works with your employer health plan can help you stay compliant, manage costs, and support your employees. Here’s what you need to know about Medicare rules, Medicare-eligible employees, the 20-employee rule, and key financial considerations.
What is a Medicare-eligible employee?
A Medicare-eligible employee is someone who qualifies for Medicare, either because they are 65 or older or have a qualifying disability. Since retirement is not a requirement for Medicare, these employees can choose to enroll in Medicare while still working, either as their main health coverage or alongside their employer’s plan. HR teams can help them understand enrollment deadlines and how Medicare works with their current benefits.
Medicare-Eligible Employee Benefits
Medicare offers a range of benefits, but it’s important to compare it to employer-sponsored health plans. Medicare-eligible employees should weigh the costs, coverage, and out-of-pocket expenses of both options. Some employees may keep Medicare Part A while staying on their employer’s plan (although there may be HSA implications), while others might benefit from Medicare Advantage or Supplement (Medigap) plans. Providing clear information, or referring Medicare-eligible employees to an expert like RetireMed, helps employees get the information they need to make confident healthcare decisions.
What is the 20-employee rule for Medicare?
If a company has 20 or more employees, its group health plan must be the primary insurance for Medicare-eligible workers. If there are fewer than 20 employees, Medicare is primary instead. Employers must follow this rule to avoid penalties and ensure proper benefit coordination.
Medicare or employer plan: Which pays first?
It depends on the company size:
- 20 or more employees – The employer’s health plan pays first, and Medicare is secondary.
- Fewer than 20 employees – Medicare pays first, and the employer’s plan is secondary.
Understanding this helps ensure compliance and allows employees to maximize their benefits.
Are employers allowed to incentivize employees to go onto Medicare coverage?
No. Employers cannot offer incentives or encourage employees to leave the company’s health plan for Medicare. Medicare Secondary Payer (MSP) rules prohibit businesses from influencing employees’ health coverage decisions. Breaking these rules can lead to fines.
Can employers provide financial support to employees who are enrolled in Medicare and facing increasing Medicare premium costs?
Employers cannot directly reimburse employees for Medicare premiums, but they can contribute to a Health Reimbursement Arrangement (HRA) or Individual Coverage Health Reimbursement Arrangement (ICHRA). These options let employees use pre-tax dollars to cover eligible healthcare costs, including Medicare premiums.
Can employers offer a taxable cash-out option for when some employees are entitled to Medicare?
Yes, but it must be handled carefully. Some employers offer a taxable cash-out option for employees who decline the company’s health plan. However, the payment must be voluntary and not linked to Medicare enrollment to avoid breaking MSP rules.
Medicare Part B: Who must enroll and when?
Employees who keep their employer health coverage past age 65 can delay enrolling in Medicare Part B without penalty—as long as the employer has 20 or more employees. Once they leave the company or lose employer coverage, they must enroll in Medicare during a Special Enrollment Period to avoid late enrollment penalties.
Compliance Considerations for Employers
Employers must follow Medicare Secondary Payer (MSP) rules, treat Medicare-eligible employees fairly, and ensure their plans coordinate benefits correctly. Non-compliance can result in fines or legal issues. Staying updated on Medicare regulations and working with a benefits consultant can help keep everything on track.
Supporting Employees and Staying Compliant
HR teams play a key role in helping Medicare-eligible employees make informed decisions while keeping the company compliant with federal laws. By understanding Medicare rules and employer obligations, businesses can save on healthcare costs and help employees choose a plan that fits their needs. If you need support, consider consulting an expert in Medicare like RetireMed.
Don’t worry about Medicare. We’ll take it off your plate!
Your team doesn’t have to guide employees through the Medicare maze. RetireMed’s experts will work one-on-one with your Medicare-eligible employees to see if Medicare makes sense for them, and if so, help them find the right plan.
With RetireMed, you can:
- Reduce your company’s health insurance costs
- Ensure your Medicare-eligible employees and their dependents explore all their health insurance plan options