Years ago, people turning 65 would retire and enroll in Medicare. But that has changed. Today, more people are working longer. Pew Research Center reported that 19% of those age 65 and older were employed in 2023. That’s almost double the number who were still working 35 years ago.
Medicare presents some challenges for these older workers. Here are two situations I heard about this year.
“I am turning 65 and my employer says I must enroll in Medicare.”
“My company turned off two coworkers’ insurance plans after their 65th birthdays so they had to sign up for Medicare.”
These callers wanted to know whether it was legal for their employers to force people off the employer plan and onto Medicare.
The Omnibus Budget Reconciliation Act of 1980 created the Medicare Secondary Payer (MSP) program. The goal of this program is to ensure that Medicare does not pay for items and services for which other health insurance is responsible. MSP rules determine whether an employer plan is the primary or secondary payer. The primary payer is the insurer that pays a healthcare bill first. A secondary payer covers any remaining costs, up to its limits, that the primary insurance does not pay. It is the number of employees in the company (total number, not just those on the employer plan) that determines whether a plan is primary or secondary.
1. A company with 20 or more employees (a large employer for purposes of this discussion) is the primary payer.
The MSP rules require large employers to offer the same primary coverage to their age 65-or-over employees and/or spouses as they do to younger employees and spouses. The employer cannot offer any financial or other benefits as incentives to entice workers to terminate enrollment in the group health plan and enroll in Medicare.
2. A company with fewer than 20 employees (a small employer) is the secondary payer.
The MSP rules make Medicare the primary payer and exclude small companies from having to offer the same coverage as that provided to younger employees. Because Medicare is primary, it is up to the small employer to decide whether those employees who are eligible for Medicare can continue with a group health plan.
Many believe that, if a small employer drops coverage for their older employees, it is violating the Age Discrimination in Employment Act (ADEA), which prohibits employment discrimination against persons 40 years of age or older. However, the ADEA “applies to private employers with 20 or more employees, state and local governments, employment agencies, labor organizations and the federal government.”
Take-away points
A company with more than 20 employees cannot change the rules. Medicare-eligible employees and spouses can continue with the employer plan and choose to ignore Medicare, if that is best. Or they can choose to drop the plan and enroll in Medicare.
Small employers are not subject to MSP rules or age discrimination rules for employment. These companies can choose to provide health insurance as the secondary payer for older workers or discontinue the employer coverage. No matter the company’s choice, those turning 65 should enroll in Part A and Part B.
When dealing with Medicare, sometimes you have to work your way through many different rules to find what applies to your situation. Don’t act based on what just one person tells you.
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