As America’s workforce ages, employers are seeking ways to retain valuable, experienced workers without breaking their benefits budget. In this piece, we will explore the legality and advisability of the creative ways in which employers are trying to address this issue.
ABC Company has 40 employees. Employees working 30 or more hours per week receive company medical benefits and there is no differentiation of benefits based on eligibility for Medicare.
ABC company presented the following set of questions in an effort to formulate a benefits policy for retention of older employees who may want to work a reduced work schedule.
This line of questions addresses the root of (and the very reason for) the Medicare Secondary Payor (MSP) rules. All of these questions are good ones, and the intention to try to retain experienced employees is both honorable and smart. However, the short answer is that they can't do any of the proposed actions given that they are over the threshold for MSP (20 employees).
As a quick overview, following is a summary of the key rules that govern the MSP requirements:
So, in short, the MSP rules very tightly prohibit essentially every possible “workaround” where an employee would opt off of a group plan and the employer could subsidize Medicare premiums and/or Medicare supplemental coverage.
There is one possible way to get around this for some employers, but there are some pretty significant restrictions which make it very difficult for smaller MSP subject employers. Following is a summary of the key provisions for the potential partial solution, an ICHRA:
As you can see, the class and size restrictions for ICHRAs make the viability of their use as a means to circumvent the MSP rules for smaller-but-MSP-subject employers very difficult.
It is reasonable and even responsible to work toward a goal to reduce healthcare costs. However, the door to an option that would allow employers subject to MSP rules to offer alternate, less expensive coverage for Medicare-eligible employees is solidly closed. The expressed purpose of the MSP rules is, in fact, to redirect the cost of coverage for age 65+ working employees away from Medicare and toward employers. (The exception for small employers with fewer than 20 employees is intended to shield such small employers from this cost burden.)
For years, the MSP rules existed, but the implementation was lax. However, in this age of extreme cost escalation, both CMS and insurers have tightened up compliance to the letter of the law, which leaves essentially no options for employers in the search for “creative ways” to lower premium costs for Medicare-eligible employees.