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Every business manager wants to find new ways to save money. The more savings the better, because every cost reduction is a direct increase to the bottom line.
Suppose you learned that you could save $500 or more, per month, on your health insurance costs for each employee aged 65 or over? You would probably be skeptical.
What if you also heard that those employees would then have better insurance? You might say that it sounds too easy.
But it is easy. Many companies have done just that. The federal government’s Medicare program works well with small businesses. This article will explain how to put Medicare and your existing group health plan together.
Move Workers To Medicare for Annual Savings
As we begin, keep in mind that $500 saved monthly is $6,000 saved yearly. That’s what you could potentially save for each employee for whom this works. So, the more seniors you have working for you, the greater your savings could be.
A Real-Life Story:
Sometimes it is easier to explain how insurance works by giving an example.
John was my new client, aged 67, who was still working full-time (as many seniors are). He was still on his employer’s group health insurance policy.
John’s contribution for his coverage was small. However, he had been paying several hundred dollars per month to have his spouse, also aged 67, on his group policy. That’s a common scenario.
Let’s say that John had been paying $350 per month to keep himself and his wife insured. John mentioned that his employer was paying over $800 monthly to insure him, and another $800 monthly to insure his spouse. Therefore, his employer was paying over $1,600 each month to include John and his spouse on the group policy.Seniors are expensive to insure without Medicare. Click To Tweet
The company’s group policy was pretty much standard. Each employee was responsible for a big annual deductible, maybe around $2,500. Then they had a copayment for each doctor visit, for each test, for each procedure, and for each hospital stay. Becoming chronically sick would have been very expensive for John or his spouse.
The Employer’s Savings:
Both John and his wife were eligible to sign up for Medicare benefits. Because of that, his employer agreed to pay these following expenses for them, each month:
- John’s Medicare Part B premium of $135
- His spouse’s Medicare Part B premium of $135
- John’s Medigap Plan G premium of about $140
- His spouse’s Medigap Plan G premium of about $140
- John’s Part D Rx plan premium of about $40
- His spouse’s Part D Rx plan premium of about $40
In total that is $630.
The employer removed my client and his spouse from the group health insurance plan, and then wrote a check to my client for $630, every month, to pay for those six Medicare items. Taken together, those 6 items make for deluxe Medicare coverage.
Compare that $630 payment to the $1,600 John’s employer had been paying to keep two people on his company’s group health insurance.
So, we see that John’s employer saved $970 each month. That’s almost $12,000 in annual savings on just those two people.
The Savings for the Employee and Their Spouse Are Great
- A typical senior saved $350 monthly by not having to pay a premium for health insurance. That’s like getting an immediate raise.
- A typical deductible of $2,500 was now reduced to only $183 yearly, per person. That’s the annual Part B deductible.
- All the copays for their doctor visits, tests, procedures and hospital stays were reduced to $0. Medigap Plan G has no copayments.
All told, it was a classic win-win situation. By relying on the federal government to pick up some health costs, both the employer and employee were better off.
How About The Medicare Employee Tax?
That’s no longer viewed as a bad thing because that tax is what made all this possible. Finally, you and your employee can put their endless Medicare taxes to use.
Do Employees Like Medicare More?
Seniors who move from private insurance to Medicare can access a greater number of doctors. They’re no longer limited to a network.
Any doctor who takes Medicare can accept their Medicare Supplement insurance. All Medicare Supplement is valid coast-to-coast, in all 50 states.
People with Medicare no longer have to worry about losing health insurance ever again. They no longer have to shop each year for health insurance. Medicare Supplement plans are also non-cancelable, for life. If the employee picks up the cost of low monthly premiums during retirement, which they will, then their Medicare coverage will remain in force. For life.
Employees with Medicare can celebrate better overall peace of mind. They no longer have to worry about the expense of a chronic illness or of a long hospital stay.
Minor Drawbacks Switching From Employer Coverage to Medicare
No plan is perfect, of course, and people who move to Medicare must gave up a few things.
Different Drug Coverage: Medicare prescription plans are sometimes not as good as the prescription coverage that some group plans offer. Plans vary, though, so that is just a generalization. It doesn’t affect most people.
But if a person has an extremely long list of medicines, and the list is heavy with brand-name drugs, that person could pay more for their prescriptions on Medicare than on private insurance. Is that by itself a reason to not go on Medicare? No, but to see which choice is better, it must be analyzed and decided on a case-by-case basis – just like John did.
On the same point, Medicare recipients can change their Medicare Part D prescription drug plans each October for the following year. It’s easy to compare, and then to switch plans to save money.
No Vision Coverage: Original Medicare and Medicare Supplement offer no routine vision coverage. They do not cover routine eye exams and glasses. They only cover eye illnesses and surgery, like cataract removal.
Is lack of routine eye exams a major concern? No, not when compared to the overall savings. For example, remember that a typical senior can begin saving $350 every month, starting with the very first month he was on Medicare. For that amount of savings, he was happy to pay for his annual eye exam and glasses. Employees will probably ask about this.
No Dental Care: Medicare does not cover routine dental care, annual cleanings, and x-rays. But for people who find that a concern, dental insurance plans are very affordable for seniors and widely available.
No Hearing Help: Employees will also be on their own for audio devices. Medicare does not pay for hearing aids.
Forced Moves Are Illegal: In no circumstances should you force employees to move to Medicare, or offer undue incentives, as this would constitute illegal age discrimination.
Change Is Hard: Fear of uncertainty is one of the most common issues in healthcare. Employees may say they don’t like change.
Few people like change. It’s unsettling. It takes most people some time to assimilate all the pros and cons of switching from group health insurance, which they’ve been familiar with all their working life, to Medicare, which is new to them.
But nobody likes to waste money, and everybody loves a good deal. Medicare is the most popular form of health insurance in America. After thinking about it for some time, the appeal of saving a lot of money wins over most reasonable folks.
Taking The Next Steps
Chances are that you already know something about how Medicare and employer health insurance work together. Now you know how Medicare can replace health insurance for seniors.
- If you are an employer that has a group health insurance plan, consider putting your senior employees on Medicare. It could be very advantageous for you and for them.
- If you are a working senior, consider asking your employer if they would consider paying for your Medicare, if you would then disenroll from their group health insurance. Give your employer this article.
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