For years Plan Sponsors have dreamed how to transfer health care risk to the federal government. If Medicare eligible plan participants could be removed from a group’s health care plan legally, these higher risk members would no longer be a risk factor to contend with. How can one game the system?
Typically a plan member’s group health plan provides primary coverage. Secondary coverage may include Medicare in some cases. How can an employer structure their benefit plan for this risk be mitigated, or even reversed?
Can a plan sponsor establish a voluntary plan option for plan members who are Medicare eligible wherein coverage is limited with unpaid, uninsured eligible medical expenses then payable by Medicare as secondary payer?
A mid western TPA established such a scheme in 2008, saving employers millions of dollars. Was the scheme legal, and if so is it still legal?
Below is an excerpt from a 2008 Plan Document describing the “Maxi Plan” option for a mid-western public school district:
“If you have other coverage that is secondary to this Plan, you may elect the Maxi Plan. The Maxi Plan covers the same scope of eligible expenses as Major Medical Benefits without a deductible or co-insurance. All covered services are payable at 100% except that inpatient hospital billed charges are paid up to a maximum of $1500 per adminission. The Maxi Plan also pays in full for routine medical exams and the co-pays under any drug plan.”
The Maxi Plan is obviously designed to transfer risk to Medicare. The plan provides limited coverage for hospital care which accounts for about 40% of total plan spend, a significant cost driver for group health plans. Medicare secondary coverage steps in once the group benefit pays what it is going to pay.
We have found no reason why this strategy cannot be employed under ACA rules these days. Afterall, many plans today are offering MVP plans alongside MEC plans. The Maxi Plan coverage can exceed a typical MEC plan. In both cases, the plan is ACA compliant, right?
If you ask enough people you are bound to get the answer you want. That’s the one you hang your hat on.
If any of you have a different thought, please let us know. Write riskmanager@riskmanagers.us
From An Insurance Consultant
Woah!!!!! I have varied different ideas. Is this contract still in use today? I will call you tomorrow to discuss.
From An Attorney (#1)
- Just read through this. Will give you a bigger write-up after work today. But;
- If the employee is eligible for Medicare, why not just kick them out of your plan? They get Medicare and you get an older and probably higher cost employee out of your risk pool. What is the district trying to accomplish here?
- If the district is currently using these documents they are in violation of the ACA.
- More details will be necessary. Just what is Bill wanting to do and what state is it in? Also, the ACA does not apply to Medicare plans. It is explicitly meant for people who are not on Medicare.
Hope this helps.
From A TPA
I don’t see any reason why this couldn’t be employed as well because they are offering a Major Medical plan along side. The only thing that cathes my eye and brings up a red flag is that they say you can switch back to Major Medical at anytime, which seems like that would not fly in the world of insurance. Also, the way it’s written, you may cause an undesired effect…. Just like ACA. Buy the cheap Maxi plan and when I get sick switch back over to the Major Medical plan.
From A MGU
Bill; Under the major medical plan:
It looks like a $1MM lifetime max. How can that work? Not even grandfathered group plans can do this.
Limits physician payments to $2000? How is that substantial physician coverage? Wouldn’t be an MVP plan,.
Under the Maxi Plan:
Limits hospital coverage to $1500 per admission. Again, how is that substantial in patient coverage? Wouldn’t be an MVP plan.
We’ve not read many plan documents, but this may be the most poorly written Plan we’ve ever seen. It looks like it may have been written 3-15-08, well before the passage of the ACA.
FROM A TPA
Bill, I see no reason this cannot be used. Pretty interesting concept. I wonder how much of the membership in a group this might be able to affect?
FROM AN ATTORNEY (#1)
I have thought this over and done some research and my belief is that this is permissible under the ACA. The limitations would be that you do not want to be engaging in unduly discriminatory or punitive behavior to “encourage” people to switch. A gentle nudge through incentives or plan offerings is going to be ok, move beyond that and you could run into trouble.
Hope this helps.
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OH, OH, MORE CONTRARIANS……………..
FROM MGU
I am not sure I agree with your conclusion, As I mentioned in my other email, this may have been okay in 2008 but, in our post ACA world, you could be creating a non-ACA compliant plan.
FROM INSURANCE CONSULTANT
Bill, Please see below for discussion points when we talk.
Can Over-65 Employees Decline the Group Plan For Medicare Coverage?
“Medicare beneficiaries are free to reject employer plan coverage, in which case they retain Medicare as their primary coverage. When Medicare is primary payer, employers cannot offer such employees or their spouse’s secondary coverage for items and services covered by Medicare. Employers may not sponsor or contribute to individual Medigap or Medicare supplement policies for beneficiaries who have or whose spouse has current employment status.” Excerpt from CMS Medicare Secondary Payer Manual, Chapter 1, (Rev 34, 09-07-05).
In the August 31, 1995 CMS final regulations (§411.108(a)(9)), CMS prohibits a group health plan from providing misleading or incomplete information that would have the effect of inducing a Medicare entitled individual to reject the employer plan. An example of misleading information would be informing a Medicare beneficiary of the right to accept or reject the employer plan but failing to inform the individual that, if he or she rejects the plan, the plan will not be permitted to provide or pay for secondary benefits.
If an employer offers a Medicare beneficiary an incentive, financial or otherwise, not to enroll in the plan, the group health plan is subject to a civil money penalty of up to $5,000 for each violation. In addition, an excise tax could be applied that would equal 25% of the plan’s expenses incurred during the calendar year.
Key Points
For active employees , if a group health plan provides the option to Medicare eligible individuals to decline coverage, keep these points in mind.
- Employers (with 20 or more employees) may not offer any incentives, financial or otherwise, to discourage Medicare beneficiaries from enrolling in the group health plan.
- Employers (with 20 or more employees) may not offer any incentives, financial or otherwise, to encourage Medicare beneficiaries to terminate enrollment in a group health plan.
- Employers should not contribute to individual Medigap or Medicare supplement policies for Medicare beneficiaries, whether the employee or the spouse.
- The plan document should explain that the group health plan will not provide or pay secondary benefits to Medicare in the event that the individual declines the group health plan.
- Verbal communications to Medicare eligible individuals should explain that the group health plan will not provide or pay secondary benefits to Medicare in the event that the individual declines the group health plan.
If an employer/plan sponsor abides by the above key points, the employer/plan sponsor may raise the issue of declining the group health plan with an employee. In most cases, the only employees who will consider this as an option are employees who have a major stake in the success of the company and are willing to take a reduction in benefits. However, with increasing cost sharing, other employees with a lower stake in the organization may decide that the cost of the employer group health plan is too high.
Medicare-covered employees who reject the employer group health plan and take Medicare as their primary payer are likely candidates to appear on a CMS Data Match recovery request. Under the Data Match program, CMS sends recovery letters to employer/plan sponsors that CMS believes should have paid primary, instead of Medicare. An employee who receives a W-2 Form and receives Medicare benefits is a likely suspect for review. So, employers who have employees who voluntarily decline the group health plan, your need to be watching for a Data Match form.
While the Medicare Secondary Payer rules do not require a written election from individuals who choose Medicare as the primary payer, it is a good idea to have something in writing showing that the employee voluntarily declined the group health plan.
Basic Medicare Secondary Payer Rules for Older Workers
65 and Over Employees – A group health plan of an employer with at least 20 employees may not take into account the age-based Medicare entitlement of currently employed individuals age 65 or older and must provide coverage to such individuals on the same conditions as to younger employees. Medicare Secondary Payer (MSP) final regulations §411.102(b)(2).
Spouses Age 65 and Older – Spouses age 65 and older of employees of any age must be covered by the group health plan under the same conditions as spouses under age 65. MSP Final Regulations §411.102(b)(1).
Incentive Prohibition – An employer is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in, or to terminate enrollment in, a group health plan that is, or would be, primary to Medicare. MSP final regulations §411.103(a).
ADEA Considerations
The Age Discrimination in Employment Act of 1967 (ADEA), as amended, prohibits discrimination by an employer against employees age 40 or older in hiring and firing, in compensation, and in the terms, conditions, and privileges of employment. Employers cannot reduce or eliminate coverage for employees earlier than age 65 (Medicare entitlement age) and avoid the MSP rules. For example, one Plan recently suggested that the plan terminate coverage for all spouses of employees once they reach age 60. This would be a problem under ADEA.
