Question: I’m approaching at 65 and my employer is strongly encouraging me to cancel my group coverage and elect Medicare coverage only. Can they do that?
Answer: Yes, your employer can “strongly encourage” you to take Medicare coverage when you become eligible. It’s important that you understand that your employer has been paying at least $500 a month to provide health insurance for you. Medicare will cost $100 per month. Perhaps you could negotiate a reimbursement for the Medicare Part B premium of $100 and an additional $130 - $150 per month for a Medicare Supplement - total cost to your employer is $250 per month and you get virtually 100% coverage. This advice applies only to group health plans with less than 20 employees where Medicare is the primary payor and the group health plan is secondary.
In larger groups, Medicare is the primary payor and there are rules that forbid employers from targeting Medicare-eligible employees by providing incentives (financial or otherwise) for them to drop employer coverage in favor of Medicare. As one of our readers, Chris Anderson of Sylmar, CA, pointed out: “The Centers for Medicare and Medicaid Services (CMS), formerly known as the Health Care Financing Administration (HCFA), has confirmed this prohibition many times, and employers should note that CMS may assess a penalty of up to $5,000 for each violation. 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.”