According to the U.S. Census Bureau's recent population reports (December 2005), 35 million people in the United States today are age 65 plus; in 2030, the bureau projects the older population will double to 72 million. Out of that population, those who choose to continue to work past the age of 65 create unique health care plan obstacles for both the employer and employee. As an agent, if you have small group clients with fewer than 20 employees, and some of the employees are seniors, you have the opportunity to present new strategies to reduce their group health plan costs.
Senior employees on small group health plans tend to disproportionately increase the overall morbidity risk and subsequently may generate higher premium rates for the whole group in states where small group medical underwriting and modified community rating is permitted. Thousands of small employer groups are experiencing this rating action and are searching for effective solutions to reduce the high cost of their health insurance premiums with minimal impact on benefits.
Employees who opt to work past age 65 are often the owners of the business, or family members of the founders. Proprietors frequently decline the idea of drastically reducing benefits since they, and their dependents, may be negatively affected. Reducing benefits company-wide and/or shifting costs to all employees are not the only practical cost saving solutions. Fortunately, for many small employers, the federal government allows qualified "working aged" employees (age 65 and older) to receive Medicare-provided health benefits.
Group insurance brokers who understand the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), and how it affects small businesses with employees over age 65 can be real heroes.
In brief, TEFRA and subsequent legislation established regulations regarding who pays claims first, Medicare or the employer group health plan. If an employer has 20 or more full and/or part time employees on its payroll for 20 weeks in the current or preceding calendar year (the weeks do not need to be consecutive), then the group health plan pays first and Medicare pays second. Additionally, Medicare pays second if an aged employee is covered by a group health plan of a working spouse of any age who has current employment status with an employer of 20 or more employees. The regulations also established that only employers with 20 or more employees are required to offer the same group health benefits to actively working employees age 65 and over, as well as their spouses age 65 and over, under the same conditions, as provided to younger employees who are not Medicare-eligible.
Medicare pays first and the group health plan pays second for working aged employees (and certain dependents) when an employer has 19 or fewer full and/or part time employees on its payroll (i.e. such an employer is known as "TEFRA exempt").
Furthermore, employers with 19 or fewer employees are not required to offer working aged employees the same exact group health benefits as those under age 65.
The Centers for Medicare and Medicaid Services official publication, "Medicare and Other Health Benefits: Your Guide to Who Pays First," illustrates many case examples and provides additional guidance about who pays first. The booklet is available online and free of charge (http://www.medicare.gov/publications/pubs/pdf/02179.pdf).
Understanding these provisions provides group health agents and consultants an opportunity to be proactive problem solvers. Producers can save their TEFRA exempt clients substantial premium costs by shifting claim liabilities to the Original Medicare Plan.
Even though Medicare has expanded its benefits package since its rollout in 1965, the Original Medicare Plan doesn't cover all medical services, doesn't generally cover medical care received outside of the United States, and uses cost sharing components. Individual Medicare supplements were created to fill these gaps.
Guarantee Trust Life Insurance Company (GTL), for example, has taken this "supplement" concept and created small group, senior health insurance plans for Multiple Employer Trusts (METs). These fully insured, employer-sponsored plans are specially designed for the small group market. These MET plans are available to groups on a contributory or noncontributory basis, cover pre-existing conditions, and are guaranteed issue. Participants enjoy the freedom to choose providers and hospitals throughout the United States since there are no network restrictions.
Employers participating in an employer sponsored trust program soon realize administration is minimal and rates are more stable due to the pooling of hundreds of small groups nationwide. Multiple billing options are offered to accommodate various employer cost sharing strategies. Seniors enjoy the program because when they retire, they can keep the same coverage -- the plans are portable and likely provide more comprehensive benefits than standardized individual Medicare supplements available in the market.
The savings generated by moving working aged employees to a MET can be substantial. Several months ago, an independent agent in Michigan attended a benefits seminar hosted by Merchants Benefit Administration (MBA), a national distributor of senior group insurance plans. After the seminar, the agent approached the presenter and mentioned that he had a prospective client with 13 total lives, including one worker over the age of 65 on the active group plan. The agent went back to the employer with the new strategy and quoted a MET plan for that one senior employee. The overall savings generated immediately to the employer was $996 a month. The agent solved their high premium problem and subsequently was able to secure this account as a new client.
Most MET plans allow the agents to customize plan designs to meet their client's specific needs. Extended hospital and skilled nursing care, expanded at home recovery benefits, private duty nursing, and increased foreign travel emergency care benefits are all enhanced options available to employer groups beyond standardized individual Medicare supplements. Fully-insured Medicare Part D group prescription drug plans that provide coverage through the "donut hole" are also available through many METs.
Medicare and individual Medicare supplements cover some preventive care services, and many MET plans add in benefits to provide comprehensive coverage similar to an active group health plan. Some companies, such as GTL, cover services and supplies not traditionally covered by Medicare, such as increasingly popular complementary and alternative medicine therapies, routine physicals, acupuncture, prescription vitamins, hearing/dental/vision exams, along with eyewear, orthopedic shoes, and immunizations for overseas travel.
A program called Best Doctors(R) was recently added to GTL's small group MET program to provide insureds access to the highest quality health care when they are diagnosed with a qualifying critical illness. Participants receive detailed insight and information about their diagnosis, empowering them to make informed decisions. Through their worldwide database of 50,000 top medical specialists in more than 400 subspecialties, seniors also have access to an expert diagnostic assessment team to help ensure they get the right diagnosis and the right treatment. Best Doctors(R) also offers expert support navigating the health care system to find the most appropriate doctors for their condition.
Small group employers who were once challenged to find comprehensive group programs are now finding that insurance carriers specializing in the senior group health market have created flexible, fully-insured MET plans designed to provide a wide range of coverage options. Furthermore, since the creation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the proliferation of government-subsidized Medicare Part D group prescription drug plans implemented in 2006 have virtually eliminated the concern about inadequate prescription options available in the market. Thousands of working aged employees who remained on active group health plans specifically for the comprehensive benefits have successfully enrolled into similar, but lower-cost, medical and prescription plans specially designed for seniors.
Using an employer-sponsored trust is one more approach to consider as you discuss managing health benefit costs with your small group clients. Knowledgeable agents can educate employers about TEFRA and assist them with evaluating the options available, thereby providing effective retiree solutions for today, tomorrow, and into the future.
Michael Naumann is the national sales director, group division, for Guarantee Trust Life Insurance Company. He has more than seven years of experience distributing group retiree medical and prescription drug options to brokers and consultants. Mr. Naumann is also an active member of the Inter Company Marketing Group (ICMG), National Association of Health Underwriters (NAHU), and International Foundation of Employee Benefit Plans (IFEBP). He graduated summa cum laude from Marquette University with a bachelor's degree in organization and leadership.