Many seniors who remain working past 65 are still on their employer’s health plan instead of government-run Medicare.
However, a new update to Medicare coverage under the Inflation Reduction Act means seniors who delay joining Medicare could face additional hurdles when it comes to drug coverage.
Who Does It Affect?
Currently, seniors are able to avoid late penalties for Medicare Part D as long as their company’s plan pays on average just as much as the traditional Medicare prescription drug plan. These numbers are scheduled to change drastically in 2025.
Starting January 1, most employer plans will no longer be accepted as a way out of the late penalties because they will no longer pay as much as the new and improved Part D coverage. January 1 is when out-of-pocket maximums will be set at $2,000, and most, close to all of the previously accepted creditable employer plans will no longer meet the qualifying threshold.
“The primary concern is that most employer group plans have combined health and prescription max out-of-pocket benefits which are generally far higher than $2,000. Consequently, it would make the employer plan with max out of pockets higher than $2,000 unqualified as credible coverage and subject the Medicare eligible employee to the late enrollment penalty.”
What It Means
Essentially, all the private company-offered plans that do not cap policyholders’ out-of-pocket costs at $2,000 or less would no longer be eligible for seniors. That means seniors who stay on those plans could face the late enrollment penalty. Effectively, they will need to enroll on a Medicare Part D plan even if they have employer coverage in order to remain compliant.
The late enrollment penalty goes into effect every month you are enrolled in Medicare if, after the initial enrollment period, you had 63 or more days without Medicare drug coverage or an employer-provided creditable drug coverage plan. The exact penalty is calculated by multiplying 1 percent of the national base beneficiary premium, which was $34.70 for 2024, times the number of how many months you went without Part D or otherwise creditable coverage. The monthly penalty is then permanently put on your monthly Part D premium.
The penalty is per month, is a lifetime penalty, and will occur when they eventually come off the employer plan to enroll into a Medicare plan covering prescriptions.
What Seniors Must Do
Regulations stipulate that employers and insurers must notify their Medicare-eligible customers if their prescription drug coverage is considered creditable or not, seniors should act now to avoid any confusion around the late penalty. Experts recommend calling ahead of time to make sure your Part D insurance replacement remains creditable.
Many seniors are continuing to work well past the traditional age of retirement, the rule change is one those who fall into that group need to pay attention to carefully, If you continue to work, and your employer provides you with health insurance, that plan must be up to the same level of coverage that Medicare part D provides.
For many seniors, the coverage from part D plans will be much better than employer plans can provide. Seniors are already facing high costs and so should be “wary” of the changes to avoid any penalties. With healthcare costs already high, you don’t want to find yourself paying a penalty that could have been easily avoided.
The experts at Total Benefit Solutions, Inc are prepared to help you stay compliant and avoid unnecessary costs. Contact us today at (215)355-2121 or find us on the web at www.totalbenefits.net