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Welcome to:Medicare and Social Security 101
Presented by:WGA’s Retiree Solutions Team and WGA’s Compliance Practice
Introducing the webcast presenters:
Alyssa Martin, SpeakerVice PresidentMember of WGA’s Retiree Solutions Team
Kathleen McSherry, SpeakerSenior Vice PresidentMember of WGA’s Compliance Practice
Medicare Basics
Outline of Topics Covered: Medicare
• Medicare’s initial purpose
• Eligibility for Medicare
• Medicare Part A details and cost
• Medicare Part B details and cost
• Medicare Part C (Medicare Advantage), Medicare Supplement and
Medigap Plans
• Medicare Part D details
• Medicare and Employer Group Health Plans
• Medicare and COBRA
• Medicare and ESRD
• Medicare and Health Savings Accounts
• Employer Considerations with Medicare
Why do we have Medicare?
• Medicare was created in 1965 to provide health insurance
protection for the elderly and disabled
• Medicare began with only Part A and Part B to help defray the costs
of medical care after retirement
• Medicare has expanded over the years to include Part C, gap
coverage provided by private vendors, and Part D, most recently
added to help cover the ever-growing prescription costs for the aged
population
Who is eligible for Medicare?
• Individuals who have reached age 65- most common
• Individuals with End Stage Renal Disease (ESRD)
• Individuals who have been Social Security disabled for
more than 24 months Social Security disabled has a much higher threshold than
insured disabled
What are the 4 basic parts to Medicare?
• Part A: Hospital Insurance • No cost to individuals who have worked 10 years or more• Provided by government
• Part B: Medical Insurance • Monthly cost paid to Medicare based on income• Provided by government
• Part C: Medicare Advantage Plans • Covers gaps in Medicare Parts A & B coverage• Monthly premiums paid to private vendor
OR• Medicare Supplement Plans
• Covers gaps in Medicare Parts A & B coverage• Monthly premiums paid to private vendor
• Part D: Prescription Drug Coverage • Plan designs set by government• Monthly premiums paid to private vendor
What is Medicare Part A?
Medicare Part A: Hospital Insurance• Hospital Insurance pays for inpatient hospital, skilled nursing and some
home health care
PART A YOU PAY IN 2015
Inpatient Hospital Days 1-60 $1,260 deductible
Inpatient Hospital Days 61-90 $315 per day
Inpatient Hospital Days 91-150 $630 per day
Skilled Nursing Days 1-20 $0 per day
Skilled Nursing Days 21-100 $157.50 per day
Medicare Part A: How to Obtain and What is the Cost?
• Most individuals are eligible for Medicare Part A on their 65th birthday
• If someone retires prior to age 65, they need to wait until their 65th
birthday to obtain Medicare Part A coverage
• An individual is automatically enrolled in Medicare Part A when they begin
collecting Social Security benefits at age 65 or older
• $0 cost to Medicare eligible individuals with 40 or more quarters (10 years)
of Medicare-covered employment; this is why most individuals immediately
enroll on their 65th birthday
• If an individual is not retired by age 65, they can wait until retirement to
obtain Medicare Part A coverage as long as primary, creditable group
coverage is in place- this is called a Special Enrollment Period (SEP)
What is Medicare Part B?
Medicare Part B: Medical Insurance
• Medical Insurance covers Medicare eligible physician services, outpatient
hospital services, certain home health services, diabetic supplies and
durable medical equipment
• Medicare eligible physician services include doctor visits, labs, X-rays,
emergency room, ambulance, physical therapy, speech therapy, and
occupational therapy
• 2015 out-of-pocket costs for Part B:
• $147.00 deductible per year plus 20% of the Medicare-approved
amount for services after $147.00
Monthly Costs of Medicare Part B for 2015
YOU PAY IN 2014 IF YOUR YEARLY INCOME IN 2013 WAS
PART B SINGLE MARRIED COUPLE
$104.90 $85,000 or less $170,000 or less
$146.90 $85,001-$107,000 $170,001-$214,000
$209.80 $107,001-$160,000 $214,001-$320,000
$272.70 $160,001-$214,000 $320,001-$428,000
$335.70 Above $214,000 Above $428,000
What if an individual’s income goes down?
• If income has gone down due to any of the following circumstances and the
change will make a difference in the income level, they would contact Social
Security to request a new decision about their Medicare Part B premium:
• Marriage
• Divorce or marriage annulment
• Becoming a widow/ widower
• Reducing work hours or stopping work altogether
• Losing income from income-producing property due to a disaster or
other event beyond their control
• Benefits from an insured pension plan stopped or were reduced.
Medicare Part B: How does an individual obtain coverage?
• If an individual retires retired prior to age 65, they need to wait until their 65th
birthday to obtain Medicare Part B coverage, unless they qualify for another eligibility
trigger
• If an individual is not retired by age 65, and they can wait until retirement to obtain
Medicare Part B coverage, as long as they are covered under a primary active group
health plan
Please note COBRA does not count as an active group health plan; if an individual is enrolled
in COBRA they have an eight month window to apply for Medicare without penalties
• Individuals wishing to enroll in Medicare Part B coverage will need to contact their
local Social Security office to fill out the proper paperwork up to 3 months prior to
their intended effective date of coverage
Medicare Part C: Medicare Advantage plans• Private vendors contract with Medicare to provide these plans to individuals
• Plans are offered on HMO and PPO platforms
• Advantages include: less expensive monthly premiums, routine care, one insurance card and prescription drug coverage
• Disadvantages include: small LOCAL networks that limit doctor choice
• Routine care includes: some dental, hearing and vision coverage; along with routine physician care
• Emergency worldwide coverage is included
• Monthly costs for these plans range from $0 to $200 depending on location and coverage levels
Medigap and Medicare Supplement plans
• Medigap and Medicare Supplement plans are considered “wrap around”
plans for Parts A and B to fill in gaps in coverage; provided through private
vendors
• Accepted NATIONWIDE with any doctor or facility that accepts Medicare
• Covers most international emergency medical claims
• Individuals show both Medicare and Medigap policy cards; Medicare pays
claims primary and Medigap pays secondary
• Prescription plans (Part D) must be purchased separately
• In MA, BCBS, HPHC and Tufts provide plans ranging in cost from $90 to $190
(without prescription coverage) per month
What is Medicare Part D?• Medicare Part D is the prescription coverage for Medicare eligible individuals; provided through
private vendors• Plan design is set by the government and includes Initial Coverage, The Donut Hole and
Catastrophic Coverage• Medicare Advantage plans include the Rx coverage in their premiums and a separate Medicare
Part D plan CANNOT be purchased• Medicare Supplement plans (i.e. Medex) do not include Rx coverage and require an additional
Medicare Part D plan to be purchased• Medicare prescription plans range in monthly cost from $15 to $100 depending on the chosen
copay and formulary levels• Medicare Part D premiums is also subject to an income “penalty”- these penalties are paid directly
to Medicare and NOT the carrier
You Pay in 2015 If Your Yearly Income is
Part D Single Married Couple
Your Plan Premium $85,000 or less $170,000 or less
$12.30 + Your Plan Premium $85,001-$107,000 $170,001-$214,000
$31.80 + Your Plan Premium $107,001-$160,000 $214,001-$320,000
$51.30 + Your Plan Premium $160,001-$214,000 $320,001-$428,000
$70.80 + Your Plan Premium Above $214,000 Above $428,000
What is Medicare Part D? (Continued)
* Please note that all prescriptions purchased in the donut hole will have a 55% discount at point of sale. The full cost of the prescription will go towards the donut hole tally of $4,700, but the member will only pay for 45% of the cost.
Initial Coverage:
First $2,960 in total Rx cost for
BOTH vendor and individual;
Covered at copay levels;
Copays vary by vendor & plan
Catastrophic Coverage:
After $4,700 in total Rx
cost for INDIVIDUAL
Generic: greater of
$2.65 or 5% cost
All others: greater of
$6.50 or 5% cost
The Donut Hole:
Individuals pay for
“100%” of the cost of
their prescriptions until
the total costs for the
INDIVIDUAL reach
$4,700*
Determining Employer Size for Medicare Purposes
20 Employee Threshold
• Twenty or more full-time and/or part-time employees during 20 or more weeks in the
current or previous calendar year. All active employees, including part-time or other
employees who may not be eligible for the employer’s group health insurance, must
be counted to determine if the employer is subject to the Working Aged MSP law.
100 Employee Threshold
• One hundred or more full-time or part-time employees on a typical business day
during the previous calendar year. All active employees, including part-time or other
employees who may not be eligible for the employer’s group health insurance, must
be counted to determine if the employer is subject to the Disability MSP law.
Medicare’s Interaction with Employer Group Health Plans (GHP)
Working Aged - (65 or older) and covered on GHP through current employment of their own or spouse’s
Less than 20 Employees More than 20 Employees
Group Health Plan Pays Secondary Pays Primary
Medicare Pays Primary Pays Secondary
Disabled - (65 or under) and covered on GHP through current employment of their own or spouse’s
Less than 100 Employees More than 100 Employees
Group Health Plan Pays Secondary Pays Primary
Medicare Pays Primary Pays Secondary
Medicare’s Interaction with COBRA
• If individual already has group health coverage under COBRA when you enroll in
Medicare, COBRA ends.
• If individual elects COBRA coverage after enrolled in Medicare, they can keep their
COBRA continuation coverage
• COBRA is not active employer coverage and individual has only 8 months (Special
Enrollment Period) to enroll in Medicare without facing penalty premiums on Parts B
and D
On COBRA & Medicare aged 65 (or Older) or Disabled
COBRA Pays Secondary
Medicare Pays Primary
Medicare’s Interaction with End Stage Renal Disease (ESRD)
First 30 Months of Medicare Entitlement of Enrollment Thereafter
GHP/COBRA Pays Primary Pays Secondary
Medicare Pays Secondary Pays Primary
Rules for Medicare and Health Savings Accounts
• An employee cannot open a Health Savings Account (HSA) to complement
their HSA eligible health plan if they are enrolled in Medicare
• Spouse’s enrollment in Medicare DOES NOT effect an employee’s eligibility
to open an HSA.
• An employee may be eligible to drop Medicare coverage
• Medicare Part B can be dropped at any time
• Medicare Part A can be dropped if the employee is NOT collecting Social
Security- if an employee had claims paid out by Medicare Part A, they will have
to pay those claims back to drop Part A coverage
Employer Medicare Considerations
• Medicare Part D Creditable Coverage Notice
• Online CMS Disclosure
• CMS Reporting to carriers – Social Security numbers of dependents
• TEFRA-Tax Equity and Fiscal Responsibility Act of 1982
• Group Retiree Plans – Pre and Post 65
• Medicare Secondary Payer Demand Letters
• Additional Medicare Tax (0.9%) – ($125,000/$250,000)
• Employer sign off for employees’ Special Enrollment Period (SEP) for Medicare
Social Security Basics
Social Security
Retirement:
• This program provides a lifetime monthly income for qualified workers once they have reached their full retirement age. Depending on when they were born, that age ranges from 65 to 67. The amount of retirement benefits they get depends on their income while they were working. Workers also have the option of receiving a lower monthly income if they begin collecting at age 62.
Social Security
Survivors:
• This program provides a monthly lifetime income to the surviving spouse of a deceased worker once he or she reaches retirement age. The amount that he or she receives depends on both spouses income while they were working. The survivors program also pays benefits to children under the age of 18 and a surviving spouse caring for them. These benefits end (in most cases) when the surviving children reach age 18.
Social Security
Disability:
• Social Security pays lifetime monthly income to workers who are disabled and sometimes to their spouses and children under the age of 18. These benefits depend on the worker’s earning history.
• Employers should be aware that threshold for disability on a long term disability plan may be lower than Social Security
• Gaining a Social Security disability benefit can affect the level of payout from an employer’s long term disability plan
Qualifying for Social Security Benefits
• Must have worked and paid at least a minimum level of Social Security taxes no less than 40 quarters (10 years).
• Disabled for at least one year. Disabled means unable to perform any substantial gainful work due to severe physical or mental impairment.
• No requirement that an individual must be an U.S. Citizen to qualify for Social Security.
Full Retirement Age (FRA)
YEAR OF BIRTH FULL RETIREMENT AGE
1937 or earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67
How much will benefits be?
• Request a statement from Social Security
• Use Social Security website for an estimate: www.socialsecurity.gov
• Benefits are based on lifetime earnings
• Based on the 35 years of work in which person earned the most
• Formula is applied to arrive at Primary Insurance Amount (PIA) –what would be received at full retirement age
• Cost-of-living increases beginning at age 62
Social Security Early / Delayed Collecting
Early Collecting
• May start as early as age 62 – benefit reduced by about 25%
• Benefits are reduced permanently (currently about one-half of one percent for each month started before full retirement age)
Delayed Collecting
• If delayed, benefits will increase by a certain percentage depending on the year of birth (from 5.5% - 8% annually)
• Only increases until collecting begins or reach age 70, whichever comes first
Working While on Social Security
• Working while on Social Security could reduce benefit amount only until full retirement age is reached.
• For 2014, any income earned above $15,480 is subject to a deduction of $1 deduction of benefit amount for every $2 earned
• In the year full retirement age is reached, SS deducts $1 in benefits for every $3 earned above a different limit ($41,400 in 2014), but only count earnings before the month full retirement age is reached
Working While on Social Security
• Starting with the month full retirement age is reached, full benefits are paid with no limit on earnings.
• People should contact SS at the beginning of the year they will reach full retirement age. Even if still working, individuals may be able to receive some or all of their benefits for the months before reaching full retirement age.
2014 Average Monthly Social Security Benefits National Statistics
RETIRED WORKER $1,295
RETIRED COUPLE $2,111
DISABLED WORKER $1,148
MAXIMUM MONTHLY BENEFIT $2,642
Taxes on Social SecurityAbout one third of beneficiaries currently pay taxes on their benefits
• Taxes must be paid if:• Filing as an individual and “combined income” is
• between $25,000 and $34,000, individual may have to pay income tax on up to 50 percent of their benefits.
• more than $34,000, up to 85 percent of their benefits may be taxable.
• Filing a joint return, and individual and spouse have a “combined income” that is
• between $32,000 and $44,000, individual may have to pay income tax on up to 50 percent of their benefits
• more than $44,000, up to 85 percent of their benefits may be taxable.
Combined Income:Individual’s adjusted gross income
+ Nontaxable interest+ ½ of individual’s Social Security benefits
= "combined income"
Applying for Benefits
What is needed to apply?• Social Security number• Birth certificate(s) – individual, possibly dependents• Proof of US citizenship or lawful Immigration status• Marriage certificate• Military discharge papers• Most recent W-2 or tax return
(if self employed)• Possibly other material
How?• www.ssa.gov• 1-800-772-1213 (automated services available 24 hours, but live staff from
7am to 7pm, M-F)• Local Social Security Office
Questions?
For more information: Refer to WGA’s Retiree Solutions page:WGAins.com/practices/employee-benefits/retiree-solutions/
E-mail: [email protected] Website: WGAins.comBlog: blog.wgains.comPhone: 888.261.8884
