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Employer provided group health insurance and Medicare


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Guest Law Firm Business Manager

An employment law forum referred me here as my question involves the interaction between employer provided group health insurance and Medicare, and may also be impacted by changes either now in effect or coming into effect from implementation of PPACA.

The question originates from the HR department; they haven't had this issue previously and want to get it right. I don't want to rely on info from insurance broker and there's no internal ERISA/Medicare or tax expertise to ask.

Fact: Employer pays 100% of employee group health premium cost. (I know, this not a common employer practice these days.)

Query: Employee is eligible for Medicare (65+) and inquires if he voluntarily comes off employer group health plan and elects Medicare as primary insurance, is there anything preventing the employer from paying both his Part B Premiums and Supplemental Insurance in lieu of firm paid group health insurance? (Doing so would cost the employer less than the group plan.) Would this still be a tax free benefit or additional taxable income? Is there anything in ERISA, Medicare or tax law/rules (or state law, although I suspect Federal controls this issue) that addresses this? Impact, in any, of PPACA?

Your thoughts/comments are appreciated. (As I'm dealing with lawyers, any cites or websites with authoritative info would be helpful.)

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The magic question is how many employees does the company have... if 20+ then can't do anything to induce employees to switch to Medicare. The 2nd link below says it originated w/ TEFRA.

http://benefitslink.com/boards/index.php?showtopic=43465

http://benefitslink.com/boards/index.php?showtopic=40951

https://www.cms.gov/medicaresecondpayerandyou/ "Group Health Plans (GHP) An employer cannot offer, subsidize, or be involved in the arrangement of a Medicare supplement policy where the law makes Medicare the secondary payer. Even if the employer does not contribute to the premium, but merely collects it and forwards it to the appropriate individual's insurance company, the GHP policy is the primary payer to Medicare."

http://www.cms.gov/EmployerServices/05_sma...erexception.asp "If an employer, having fewer than 20 full and/or part-time employees, sponsors or contributes to a single-employer GHP, the MSP rules applicable to individuals entitled to Medicare on the basis of age do not apply to such individuals."

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The magic question is how many employees does the company have... if 20+ then can't do anything to induce employees to switch to Medicare. The 2nd link below says it originated w/ TEFRA.

http://benefitslink.com/boards/index.php?showtopic=43465

http://benefitslink.com/boards/index.php?showtopic=40951

https://www.cms.gov/medicaresecondpayerandyou/ "Group Health Plans (GHP) An employer cannot offer, subsidize, or be involved in the arrangement of a Medicare supplement policy where the law makes Medicare the secondary payer. Even if the employer does not contribute to the premium, but merely collects it and forwards it to the appropriate individual's insurance company, the GHP policy is the primary payer to Medicare."

http://www.cms.gov/EmployerServices/05_sma...erexception.asp "If an employer, having fewer than 20 full and/or part-time employees, sponsors or contributes to a single-employer GHP, the MSP rules applicable to individuals entitled to Medicare on the basis of age do not apply to such individuals."

I would like to add to Masteff's excellent response that there is nothing in PPACA that I am aware of that would change this. The purpose of the TEFRA rule was to push the cost of medical coverage for actively employed individuals over 65 back onto their employers. I doubt that anything in PPACA would undo that.

I too was a law firm business manager. Many of the partners, who had to pay the entire cost of their medical coverage, would opt out of the group coverage and purchase a Medigap policy on their own.

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