Save money and protect retired/disabled employees
Updating your employees' work status should be a simple, standard practice. But you might be surprised how often it falls through the cracks and how much it impacts your bottom line.
When employers do not notify their health insurer of work status changes, it can become stressful and costly for the member and for you as the employer.
WEA Trust Compliance Specialist, Geralyn Hawkins, points to two unfortunately common scenarios that play out when the group health insurer isn't notified of a change in an employee's status:
Scenario 1: You pay a higher premium.
An employee retires, but the group health insurer does not receive timely notice of the change.
If the insurer isn't aware of the employee's retirement, and the former employee (or a covered dependent) is eligible for Medicare, the insurer will continue to act as the primary payer even though Medicare should be primary after a Medicare-eligible employee retires. When Medicare is the primary payer, it generally pays about 80% of covered expenses with the private insurer paying about 20%.
"The employer's premium is higher than it should be, because your group health plan is not aware of the employee's retirement and is still paying claims as the primary insurer. Also, you could be driving up your future rates with higher claims costs," Hawkins says. "These are completely avoidable expenses."
Typically, employees or dependents are eligible for Medicare at age 65, but some will qualify for Medicare prior to age 65 due to disability or end-stage renal disease, so it is important to provide status updates for all employees, not just those age 65 and older.
Scenario 2: Your retirees pay higher out-of-pocket costs.
A retiree reaches age 65 and doesn't enroll in Medicare Part B.
One unfortunate result of not informing your group health insurer of changes in employee status is that a Medicare primary individual may disenroll or fail to enroll in Medicare Part B because the employer plan continues to pay as primary on claims.
A standard group health contract, such as WEA Trust's, includes a provision that automatically makes Medicare the primary payer when a retiree becomes eligible for Medicare. When the insurer learns of the employee's retirement, the insurer switches from paying roughly 80% of covered medical expenses to roughly 20% - whether or not the retiree actually has enrolled in Medicare.
"Medicare generally doesn't allow people to enroll retroactively," Hawkins explains. "That can leave the retiree with substantial out-of-pocket expenses because the group health insurer, as the secondary payer, is generally paying 20% of covered expenses. It is not paying the portion of the charge that would have been covered under Medicare Part B."
Timely notice to the insurer of changes in employee status will help avoid or limit these problems.
Avoid confusion over Medicare vs. extended group health benefits
Sometimes retirees fail to enroll in Medicare due to the mistaken belief that their employer plan is primary as long as the employer is paying their group health plan premiums.
"Once the plan subscriber retires, or no longer works sufficient hours to meet the eligible class criteria, then Medicare is primary as of the first day of the following month," Hawkins says. "Who pays the premium is not a factor in determining if Medicare or the employer group health plan is primary."
To help avoid these problems, Hawkins recommends updating your group health insurer on changes in employee status on a regular and timely basis. "It's in your best interest, because you'll become the secondary payer for Medicare-eligible individuals and your premiums will reflect that."
The bottom line
Tell your group health insurer of work status changes as soon as you know an employee is no longer actively working, or no longer working sufficient hours to satisfy your health plan's eligible class criteria.