I want to call your attention to what is becoming a significant issue for some of our NY employers with 19 or fewer employees. For this size group, Medicare is considered PRIMARY to the Group Health Plan (GHP). The issue arises in situations where an age 65 or older employee is on the group health plan and is eligible for Medicare Part B, but has not enrolled in Part B.
For example: a male employee age 66 is diagnosed with prostate cancer and is covered by the group health plan, but has not enrolled in Medicare Part B. Outpatient radiology and chemotherapy are prescribed and the claims total $125,000. Since Medicare is supposed to be PRIMARY, the group health plan refuses to pay because the employee is simply eligible for Medicare Part B, even though he chose not to enroll. Who pays the $125,000 claim now? Ultimately, the employee will end up having to pay.
Why take this risk? Over the past few years this was rarely a problem. However, our country is $19 trillion dollars in debt, so Medicare, Medicaid, the ACA and Social Security are looking for money to remain solvent and have stepped up their enforcement and coordination efforts to help curb losses incurred in these situations.
The solution is to make an employee enroll in Medicare Part B. If the employee enrolls in Part B, they will avoid this issue, but then why should they stay on the group health plan? Doesn’t it now make more sense to have the employee take out a Medicare Supplement and prescription drug plan? While the employer might agree to pay for the premiums for these plans, they are usually not eligible expenses for tax deductions. However, the overall savings to the employer in premium dollars, and the usual increase in benefits to the employee in lower out of pocket costs and no restrictive doctor network usually make this scenario a good option for both Employer and Employee. You should seek your own tax advice from your tax professional on this issue.
In summary, it is best to at least have age 65 or over employees understand that even though they are not required to have Medicare Part B, they are leaving themselves open to potential catastrophic medical bills if they don’t plan ahead. You might even insist they sign an acknowledgement to that affect.
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