© 2012 Employee Benefits Corporation. 2 Medicare Entitlement: Impact on Employer Benefit Plans and...


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Medicare Entitlement:

Impact on Employer Benefit Plans and COBRA

Peter AntonieCompliance Communications

SpecialistEmployee Benefits CorporationThe material provided in this webinar is by Employee Benefits Corporation and is for general information purposes only. The information does not constitute legal advice and may not be relied upon by anyone as such. Nor may the information be disseminated in any form.


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Overview

• Medicare eligibility and Medicare entitlement are not the same

• Medicare entitlement has direct impact on an employer’s benefit plans

• Medicare entitlement has special meaning when applying COBRA

• Understanding the difference between Medicare eligibility and entitlement helps minimize compliance issues


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Our Agenda

• Three Es of Medicare• Medicare entitlement and the

employer’s group health plan Medical plan Health Reimbursement Arrangement

(HRA) Other plans (dental, vision, etc.)

• Medicare entitlement and the employer’s cafeteria plan

• Medicare entitlement and COBRA• Common compliance issues


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Three Es of Medicare

• Eligible for Medicare• Enrollment in Medicare• Entitled to Medicare• Rather than thinking about

Medicare, think of a 30 year old employee, Joe, who starts work with ABC Co. When is he eligible for coverage? What does he need to do to get

enrolled? What does he have that indicates he

is entitled to ABC’s benefits?


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Eligible for Medicare due to:• Age – 65 or older• Disability – as determined by the

Social Security Administration (SSA) Eligible 29 months after disability

date5 month waiting period for SSA

disability benefits + 24 months of benefit receipt

If ALS, eligible 1st month of SSA disability benefits

• End stage renal disease (ESRD) – kidney failure Eligible upon diagnosis of ESRD


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Enrollment in Medicare (There are many specific Medicare enrollment rules and circumstances beyond the scope of this webinar)

• Eligible individual can enroll in any or all Parts of Medicare Part A = Hospital expenses Part B = Outpatient services

(e.g., doctors, lab fees, durable medical equipment, etc.)

Part C = Medicare Advantage (private insurance that minimally provides Parts A & B coverage)

Part D = Outpatient drug coverage through private insurers


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Enrollment in Medicare• Common issue:

Bill is 66 and still working. Is he eligible for Medicare? Yes, he is of age

Is he entitled to Medicare? Only if he is enrolled in any of the Parts of Medicare


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Enrollment in Medicare (continued)

• Parts A & BIf over 65 and receiving SSA income

benefits, enrollment is automatic (only Part A in Puerto Rico) (can decline Part B)

If over 65 and not receiving SSA income benefits, can enroll online for A or B or both


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Three Es of MedicareEnrollment in Medicare

(continued)• Parts A & B (continued)

7-month initial enrollment period for those age 65 who are not in receipt of SSA income benefits

• Birth month plus 3 months prior and after

• Sign up prior to birth month for coverage effective 1st day of birth month (1st of prior month if birthday is on the 1st), otherwise coverage is delayed

• Can delay enrollment if covered though own or spouse’s active employment with no late enrollment penalty (8-month special enrollment period (SEP) applies when employment ends)


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Three Es of MedicareEnrollment in Medicare (continued)• Parts A & B (continued)

If disabled and have received 24 months of SSA disability benefits (1st month for ALS), enrollment is automatic (can decline Part B)

If ESRD can enroll online for A or B or both

Special Enrollment Period (SEP)– anytime while covered by active employment (own or family member’s) or during first 8-months after active employment coverage ends (does not apply to individuals with ESRD) Late enrollment penalties do not

apply if enrolling under SEP


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Three Es of MedicareEnrollment in Medicare

(continued)• Part C (generally not available to

those with ESRD)Must have Parts A & BCan enroll when first Medicare

eligible or during annual open enrollment period (10/15 – 12/7; coverage is effective 1/1 )

• Part DCan enroll online when first eligible,

during SEP or annual open enrollment (10/15 – 12/7; coverage is effective 1/1 )


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Three Es of MedicareEnrollment in Medicare (continued)• Late enrollment premium penalty applies

to individuals not covered by group health plan due to their own or spouse’s active employment when first eligible for MedicarePart A = 10% for twice the number of

years could have been enrolled (e.g., delay for 2 yrs, pay penalty for 4 yrs)

Part B = 10% for each 12-month period not timely enrolled (e.g., enroll 2 years late, pay 20% penalty for life)

Part D = 1% for each month not timely enrolled and more than 63-day gap without creditable drug coverage (e.g., enroll 15 months late, pay 15% penalty for life)


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Enrollment in Medicare (continued)

• Part A & B annual late enrollment period is 1/1 – 3/31 for July 1 coverage

• Part D annual late enrollment period is 4/1 – 6/30 for July 1 coverage


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Entitled to Medicare• Eligible individual is Enrolled in

any Part of Medicare• Traditional Medicare, Medicare

Advantage Plan or Part D insurer will provide reimbursement of eligible expenses for the Part(s) of Medicare the individual is enrolled inMedicare Advantage Plan provides

coverage for Parts A & B and may provide additional coverage (e.g., eye exams, glasses, drugs, etc.)


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Medicare Entitlement and the Employer’s Group Health Plan• Medical plan• Health Reimbursement

Arrangement (HRA)• Other group health plans

(e.g., dental, vision, etc)


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Medicare Entitlement and the Employer’s Group Health PlanEmployer’s group medical plan• Medicare Secondary Payer (MSP)

rules apply• Employer’s medical plan is

primary to Medicare for active employee coverage when:20 or more employees and employee

or spouse is entitled to Medicare due to age

100 or more employees and employee or family member is entitled to Medicare due to disability

Employer of any size after initial 30-month coverage period for any covered individual entitled to Medicare due to ESRD


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Medicare Entitlement and the Employer’s Group Health PlanEmployer’s medical plan

(continued)• Must provide quarterly reporting

to the Centers for Medicare and Medicaid Services (CMS)Responsible Reporting Entity (RRE) is

the insurer or self-funded plan TPA

• Purpose of reporting is to identify individuals entitled to Medicare who have active employment coverage that is primaryTo save Medicare from paying for

services as primary payer


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(continued)MSP rules:• Plan cannot take into account employee

or family member’s Medicare entitlement while coverage is due to active employmentEmployer’s plan is primary payerPlan benefits and reimbursement

must be the same as other active employees

• Employer cannot provide any incentives for Medicare entitled individual to drop coverage while covered due to active employment


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(continued)• Many group medical plans are

written to coordinate benefits with Medicare for individuals who are eligible for Medicare and not covered through active employmentRegardless of whether individual

enrolls in Medicare, or not Employer’s plan only pays what

Medicare did not or would not have paid

• MSP rules do not apply to coverage due to inactive status, including COBRA coverage


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(continued)• If medical plan is a high

deductible health plan (HDHP), employee who is entitled to Medicare cannot make or receive health savings account (HSA) contributionsMedicare coverage is not HDHP plan

– is disqualifying coverage


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Medicare Entitlement and the Employer’s Group Health PlanEmployer’s HRA• MSP rules apply• Employer’s HRA is primary to

Medicare for active employee coverage when:20 or more employees and employee

or spouse is entitled to Medicare due to age

100 or more employees and employee or family member is entitled to Medicare due to disability

Employers of any size after initial 30-month coverage period for any covered individual that has ESRD


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Medicare Entitlement and the Employer’s Group Health PlanEmployer’s HRA (continued)• Must provide quarterly reporting to the

Centers for Medicare and Medicaid Services (CMS) Responsible Reporting Entity (RRE) is the

employer or HRA TPA HRA that provides less than $5,000 in annual

benefit, including any roll over, not subject to reporting

• Purpose is to identify individuals entitled to Medicare who have HRA coverage that should be primary to Medicare If HRA is not subject to reporting, Medicare

will reimburse expenses after group health plan pays its share. Medicare entitled participant should wait to submit HRA claim until Medicare pays its share of expense


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Medicare Entitlement and the Employer’s Group Health PlanEmployer’s HRA (continued)MSP rules• HRA cannot take into account employee

or family member’s Medicare entitlement while coverage is due to active employmentEmployer’s HRA is primary payer,

unless not subject to reportingHRA benefits and reimbursement

must be the same as other active employees

• Employer cannot provide any incentives for Medicare entitled individual to drop HRA coverage while covered due to active employment


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Medicare Entitlement and the Employer’s Group Health PlanEmployer’s other group health

plans (e.g., dental, vision, etc.)

• MSP rules do not apply• Medicare entitlement has no

bearing on dental, vision, etc., coverage


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Medicare Entitlement and the Employer’s Cafeteria Plan• Medicare entitled employee cannot

make or receive pre-tax HSA contributions

• Medicare entitlement of the employee, spouse, dependent or eligible child is a Permitted Election Change Event (Treasury Regulation 1.125-4(e))

• Medicare entitlement allows participant to reduce or revoke prior pre-tax electionsDrop medical plan coverage for the

entitled individual (is not a COBRA event)If the employee drops coverage

which then causes family members to lose coverage, family members are not offered COBRA

Revoke or reduce Health Care FSA election


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Medicare Entitlement and COBRACOBRA is offered due to a triggering event

that causes loss of group health plan coverage

Triggering events*• (1) The death of a covered employee; • (2) The termination (other than by

reason of the employee's gross misconduct), or reduction of hours, of a covered employee's employment;

• (3) The divorce or legal separation of a covered employee from the employee's spouse;

* Treasury Regulation §54.4980B-4, Q/A – 1(a)


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Medicare Entitlement and COBRATriggering events - continued• (4) A covered employee's becoming entitled to

Medicare benefits under Title XVIII of the Social Security Act ( 42 U.S.C. 1395-1395ggg);

• (5) A dependent child's ceasing to be a dependent child of a covered employee under the generally applicable requirements of the plan; or

• (6) A proceeding in bankruptcy under Title 11 of the United States Code with respect to an employer from whose employment a covered employee retired at any time.


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Medicare Entitlement and COBRAMedicare Entitlement of employee• COBRA recognizes this as a triggering event, if employee

loses coverage due to Medicare entitlement. If so, spouse and dependents offered COBRA for 36 months. BUT DOES NOT OCCUR!!

• Medicare Secondary Payer (MSP) rules cause employer’s group health plan to remain primary ( 42 U.S.C. §§1395y(b)(1)(A)(i)(I))

• Employee does not lose group health plan coverage due to Medicare entitlement

• Therefore, Medicare entitlement of the employee does not create a qualifying event for the family or employee (no loss due to Medicare entitlement)

• Eventual triggering event occurs at retirement or if hours are reduced prior to retirement

• Employee who voluntarily drops group health plan due to Medicare entitlement does not create COBRA event for employee or family members Voluntarily dropping coverage is not a triggering event

https://checkpoint.riag.com/app/main/docLinkNew?usid=21a3f5ba870&DocID=iNTCODE:14305.1&SrcDocId=T0COBRA:4115.4-1&feature=ttoc&lastCpReqId=121572&pinpnt=NTCODE:14331.4&d=d


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Medicare Entitlement and COBRA

Four scenarios:1. Qualified beneficiary (QB)

becomes entitled to Medicare after electing COBRA

2. QB was entitled to Medicare prior to event or prior to electing COBRA

3. QB is deemed disabled prior to event or within first 60 days of COBRA coverage

4. Employer provides paid benefits for retirees


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Medicare Entitlement and COBRA1. Qualified beneficiary (QB) becomes

entitled to Medicare after electing COBRA

• COBRA continuation ends early for the QB (coverage under Medicare is considered another group health plan) (Treas. Reg. §54.4980B-7, Q/A-3(a).)

• Any other QBs on the plan continue for the remainder of the original continuation period

• Example: Bob retired and elected COBRA for himself and his wife Mary. 4 months later, Bob becomes entitled to Medicare. Bob’s COBRA ends, but Mary can continue for the remainder of the original 18-month COBRA period (Bob’s Medicare entitlement does not cause Mary to lose her COBRA coverage) Note: This is not a 36-month multiple event (second

qualifying event) for Mary ( Rev. Rul. 2004-22 )

https://checkpoint.riag.com/app/main/docLinkNew?usid=21a3f524bb69&DocID=i28ffe490096c11dc8063c7f8ee2eaa77&SrcDocId=T0COBRA:2678.4-1&feature=ttoc&lastCpReqId=190837&pinpnt=TREGS:56000.14&d=d

https://checkpoint.riag.com/app/main/docLinkNew?DocID=i70eb320832ad11dd877bc7f8ee2eaa77&SrcDocId=T0COBRA:4089.4-1&feature=ttoc&lastCpReqId=193958


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Medicare Entitlement and COBRA2. QB was entitled to Medicare prior to

event or prior to electing COBRA• If a QB becomes entitled to Medicare

before electing COBRA, the QB is provided the maximum coverage period arising from the event ( 42 U.S.C. §1395) Example: Bob became entitled to Medicare 6

months before retiring. Bob is offered 18-months of COBRA at retirement.

Example: Mary’s husband became entitled to Medicare prior to Mary’s retirement. Mary and her husband are both offered COBRA for 18-months when Mary retires.

Example: Bill retires June 30 and will turn age 65 in August. Bill enrolls in Medicare in July and becomes entitled to Medicare August 1. Bill was offered COBRA effective July 1 and elects COBRA August 10 (within his 60-day election period). Bill is eligible for 18-months of COBRA coverage, counted from July 1.

https://checkpoint.riag.com/app/main/docLinkNew?DocID=iNTCODE:27225.1&SrcDocId=T0COBRA:4089.4-1&feature=ttoc&lastCpReqId=193958


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Medicare Entitlement and COBRA2. QB was entitled to Medicare

prior to event or prior to electing COBRA (continued)

• Spouse/family member QBs of an employee who became entitled to Medicare prior to termination (retirement) or reduction of hours are offered COBRA for: 18-months from event date; or, 36-months from Medicare

entitlement date, whichever produces greater period of continuation after event


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Employee’s Medicare entitlement prior to retirement

Treated as a multiple event (from EBIA COBRA Compliance Manual)


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Medicare Entitlement and COBRA2. QB was entitled to Medicare

prior to event or prior to electing COBRA (continued)

• Example: Mary became entitled to Medicare one month before retiring. Mary is offered COBRA for an 18-month period. Mary’s husband, Harry, is offered COBRA for a 35-month period (go back one month to Mary’s Medicare entitlement date and count 36 months) because this produces a greater continuation period for Harry


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Medicare Entitlement and COBRA3. QB is deemed disabled, by SSA,

prior to event or within first 60 days of COBRA coverage

• Qualifying event must be termination of employment or reduction in hours of the employee

• Disabled QB need not be the former covered employee

• Disabled QB and any family member QBs are eligible for 11-month COBRA extension added to original 18-month period (29-month total)

• If disabled QB was entitled to Medicare prior to electing COBRA, disabled QB’s Medicare entitlement has no bearing on continuation period – still eligible for 11-month extension

• If disabled QB becomes entitled to Medicare during 18-month period or 11-month extension, disabled QB’s COBRA ends early Remaining family member QBs eligible to

continue on COBRA up to end of 11-month extension


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Medicare Entitlement and COBRA3. QB is deemed disabled, by SSA,

prior to event or within first 60 days of COBRA coverage (continued)

• Example – Mary resigns to take care of her disabled husband, Joe. Joe was deemed disabled by SSA 4 months before Mary retired. Mary and Joe are offered COBRA for 18 months and are both eligible for the 11-month disability extension (total of 29 months). Joe will become entitled to Medicare

25 months after Mary’s retirementJoe’s COBRA ends after 25 monthsMary’s COBRA continues to the end

of the 29-month period


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Medicare Entitlement and COBRA4. Employer provides paid benefits

for retirees – 3 options1. Postpone loss to end of employer

payment No COBRA if payment ceases more

than 18 months after retirement2. Offer COBRA at time of retirement

Employer payment contingent on electing COBRA and paid benefit is concurrent with COBRA

3. Offer COBRA at retirement, at retiree expense, or alternative employer paid coverage

Employer’s payment offered for alternative retiree coverage (can be the same plan at same premium or different benefits or premiums) if COBRA is waived


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Option 1 - Postponed loss• Retirement is termination of

employment• Loss of coverage must occur within

18-months of retirement for COBRA to be offered when loss occurs (could be loss of paid benefit or family member loss such as divorce, dependent status, etc.)

• If retiree becomes entitled to Medicare within 18-months of retirement, COBRA is offered for 18-month period to retiree and family member QBs if paid benefit ceases (counted from loss of coverage date, not retirement date) Triggering event was retirement,

not Medicare entitlement• If loss occurs more than 18-months

after retirement, there is no COBRA to offer


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Option 1 - Postponed loss exampleABC Corp provides 3 years of paid health insurance or to age 65, whichever occurs first, for employees that retiree at or after age 57• Assume Bill retired at age 64. One year

later ABC’s payment ceases due to Bill turning age 65 (Medicare entitlement). Bill and his wife lose employer paid coverage and are offered COBRA for 18 months counted from his loss of employer payment dateABC postponed Bill’s loss due to his

termination and that loss occurred one year later. The COBRA period is offered for termination of employment, which is an 18-month period


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Option 2 - Offer COBRA to run concurrent with paid benefit• COBRA period for retiree is 18

months• Employer payment can be for any

period of time and is contingent on retiree electing COBRA

• If employer payment ceases prior to end of 18-month period due to Medicare entitlement of the retiree, any family member QBs stay on COBRA for remainder of 18-month period Employer can continue to pay for

family member QBs or QBs can pay full premium


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Option 2 - Concurrent COBRA exampleABC Corp provides 3 years of paid health insurance or to age 65, whichever occurs first, for employees that retiree at or after age 57 and elect COBRA• Assume Bill retired at age 64. One year

later ABC’s payment ceases due to Bill’s Medicare entitlement. Bill’s COBRA ends. His wife can continue COBRA for remainder of original 18 months at her expense if Bill’s employer doesn’t continue to pay for her


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Option 3 - Provide alternative paid retiree coverage• Retiree is offered choice of COBRA, at

retiree expense, or employer paid alternative coverage for the specified period

• Employer payment of alternative coverage contingent on retiree waiving COBRA for active employee plan

• Employer paid alternative coverage can be same plan that active employees have or separate plan

• When paid benefit ends, retiree is not offered COBRA – waived earlier

• Family member QBs that lose the alternative coverage due to Medicare entitlement of the retiree are offered COBRA for 36-months from Medicare entitlement date


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Option 3 - Alternative coverage exampleABC Corporation provides alternative retiree coverage of 3 years of paid health insurance or to age 65, whichever occurs first, for employees that retiree at or after age 57 and waive COBRA• Assume Beth retired at age 64. One year

later ABC’s alternative coverage ceases due to Beth turning age 65 and becoming entitled to Medicare. Beth’s spouse is offered 36 months COBRA, from Beth’s Medicare entitlement date, if he loses the alternative coverage due to Beth’s Medicare entitlementIf ABC continues to pay for his

alternative coverage, there is no COBRA offer


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Common Compliance Issues• Misinterpreting Medicare

eligibility versus Medicare entitlement

• Not complying with MSP rules• Not providing proper reporting to

CMS for plan coverage status• Not performing due diligence for

pre-tax HSA contributions and Medicare entitled employee

• Improperly applying COBRA when Medicare entitlement is involved


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Summary

• Medicare eligibility and Medicare entitlement are not the same

• Medicare entitlement has direct impact on an employer’s medical plan, HRA and cafeteria plan

• Medicare entitlement has special meaning when applying COBRA – both the offer of COBRA and the COBRA continuation coverage period


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Questions?

• Any questions can be addressed by e-mail or phone at your convenience

Compliance Department800 346 [email protected]

• Thanks for Attending!!

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© 2012 Employee Benefits Corporation. 2 Medicare Entitlement: Impact on Employer Benefit Plans and...

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Transcript of © 2012 Employee Benefits Corporation. 2 Medicare Entitlement: Impact on Employer Benefit Plans and...