Businesses help older workers confront Medicare dilemma

Benefits are becoming more appealing and competing with employer plans

August 24, 2009

Linda Stuart has been doling out benefits advice to employers for roughly 35 years—ever since the Employee Retirement Income Security Act ushered in sweeping oversight of the plans they offer.

As vice president of Indianapolis-based Benefit Consultants Inc., Stuart counsels companies on consumer-driven medical coverage and wellness programs, among more standard fare, as clients attempt to contain escalating health care costs.

Now, Stuart is beginning to see another trend—lending guidance to employers whose older workers are eligible to receive Medicare benefits. At age 65, the workers must decide whether to forgo their company policy for Medicare benefits that are becoming increasingly attractive as the cost of traditional insurance escalates.

Companies aren’t seeking to save money by kicking their senior workers off their plans; that’s against the law. Rather, they’re helping them navigate Medicare’s complex array of offerings, as well as find supplemental policies to fill in the gaps.

It’s simply a sign of the times. People are living longer and working later in life, even more so now as scores of seniors look to replenish retirement savings lost during the stock market meltdown. And with the first wave of baby boomers approaching Medicare eligibility, even more companies will confront the issue.

“I absolutely do [think it will be a growing part of our work],” Stuart said. “It’s not our main source of business, but you never know with what’s going on with health care.”

Indeed, millions of working Americans are paying more in health insurance premiums while coverage declines. The costly turnabout has made Medicare more appealing, which would have been unthinkable just three years ago.

That’s when the prescription drug benefit, known as Part D, went into effect. The cost is roughly $35 a month. Add on $96 for Part B, which pays outpatient costs and physician fees, and decent supplemental coverage that could run $150, and a working senior could pay roughly $281 a month for an adequate health plan. Medicare’s Part A that covers hospital stays is free.

“You compare that with what your employer is offering,” Stuart said, “and you can see how Medicare is really a competitive plan now.”

Kara Hensley, human resources director at Indianapolis-based Cripe Architects + Engineers, has offered assistance to a handful of employees. But she expects the number to rise as several more become Medicare-eligible in the next 10 years.

Mindful that Cripe cannot “coerce” its employees to drop company-provided insurance, Hensley and her staff meet with workers about six months before they become eligible to discuss their options. If questions remain, employers are encouraged to contact the company’s benefits broker.

Cripe has 58 employees and is the city’s fourth-largest architectural firm, based on its 2007 local architectural billings of $9.8 million. One of its objectives, Hensley said, is to retain employees by not only providing good benefits but also by helping workers understand them.

“We don’t just give them a 1-800 number to call,” she said. “We try to help them as much as we’re allowed.”

Benefits experts say it’s important to ask employees approaching Medicare eligibility whether they insure a spouse or dependent younger than 65 years old, and if their employer plan provides decent drug coverage. If the answer is “yes” to both, it’s probably wise to remain on the employer plan.

However, workers who stick with their company plan can purchase the Plan D drug supplement if they wish. Employers are not allowed to purchase supplemental coverage for their workers as an incentive to get them off the company plan.

“If an employee says they’re all set and they don’t need any help, we don’t bother with it,” she said. “But most people are a little confused.”

Part of the confusion stems from the fact seniors no longer are automatically enrolled in Medicare when they turn 65. Instead, they’re provided information explaining how to opt in.

And the decision between Medicare and an employer’s insurance plan could become even more bewildering for retired seniors re-entering the work force, said Indianapolis insurance broker David Resley.

Resley said he informs companies of the need to educate older workers about the choices. But most experts agree that the issue is not on the top of their to-do lists.

The aging work force could change that, said John Gause, president of Indianapolis-based Apex Benefits Group Inc.

“The one dynamic that has changed in the course of the last 18 months is that employees are working longer,” Gause said. “That’s creating a challenge for employers and group health plans.”•


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