Medicare information for small businesses

As the “baby boom” generation ages, people are turning 65 each day — and your retirees or current employees may be among them. The different parts and enrollment requirements for Medicare can pose especially difficult questions for small businesses. A smooth transition to Medicare doesn’t just help the employees who have supported your business so well over the years — it can also protect your bottom line. To help you and your team stay informed and avoid administrative delays, check out these useful Medicare resources.

Q & A

Q: What exactly is Medicare?

A: Medicare consists of four parts, each with its own benefits and rules. Here’s a breakdown:

  • Medicare Part A provides coverage for inpatient care such as hospital stays, skilled nursing facilities, hospice, home health, and other related services. For most beneficiaries there are no premiums as long as they’ve had 40 quarters of Medicare-covered employment.
  • Medicare Part B provides coverage for outpatient care such as doctor visits, lab tests, X-rays, and more. Beneficiaries must choose whether to opt in, but those who delay more than three months past their 65th birthday may face financial penalties. There’s a monthly premium based on the beneficiary’s modified adjusted gross income as reported on their federal tax return two years prior to enrollment.
  • Medicare Part C (Medicare Advantage) allows health plans such as Kaiser Permanente to offer plans that cover Medicare Parts A and B and, if available, Part D. Kaiser Permanente Senior Advantage is an example of such a plan. Medicare Advantage plans can offer richer benefits and make the transition to Medicare smoother for plan members and administrators.
  • Medicare Part D provides outpatient prescription drug coverage. As with Part B, beneficiaries must choose whether to opt in, but those who delay more than three months past their 65th birthday may face financial penalties.

If you have further questions, you might find our Glossary of Medicare-related terms helpful (see section directly below).

Q: Does it affect my bottom line if my small business’s Medicare-eligible employees opt to enroll?

A: Yes. Many Medicare Advantage plans are less costly than small group health plans for Medicare-age employees. And if eligible employees enroll in a Medicare Advantage plan such as a Kaiser Permanente Senior Advantage individual plan, they can opt out of your group health plan and decrease your administrative burden.

Q: An employee is covered by both my company’s group health plan and Medicare. Who pays their medical costs?

A: If you have fewer than 20 employees, Medicare is generally the primary coverage and will pay first. If there are still outstanding costs, the group plan would be the secondary source of payment.

There are some exceptions: For instance, if you’ve joined with other employers and/or employee organizations (like unions) to sponsor a group health plan (called a multi-employer plan) and any of the other employers have 20 or more employees, Medicare would generally pay second. However, even in this case your particular plan might ask for an exception, so you’ll need to verify which coverage pays first.         

If you have 20 or more employees, your group plan generally pays first if:

  • the employee is 65 or older
  • you cover any of the same services as Medicare

If your group plan doesn’t pay the entire bill, the doctor or provider can submit the bill to Medicare, which will pay eligible remaining costs up to the Medicare-approved amounts. The member will have to pay the costs of any services that neither Medicare nor the group plan will cover.

To help clarify whether Medicare or your group plan is the primary payer in various circumstances, we’ve created a printable quick-reference guide .

Q: Is the Working Aged Risk Contract Option (WARCO) available to my employees over 65? Who’s eligible for WARCO and how does it work?

A: WARCO coverage is available to small businesses with 20 to 50 employees. Even when an employee is 65 or older, the employer continues to pay the under-age-65 rate, while the member may have no cost sharing. Kaiser Permanente moves eligible active members into WARCO when they and their covered spouses decide to enroll in Medicare Parts A and B along with a Medicare Advantage plan like the Kaiser Permanente Senior Advantage group plan.

Q: I offer Kaiser Permanente group coverage to the employees of my small business. When one of my employees with Kaiser Permanente coverage turns 65, are they required to enroll in Medicare? What are their options if they decide to keep working?

A: Medicare-age employees can choose to stay on your group coverage if you have 20 or more employees. Employer group health plans with 20 or more employees are required by law to offer workers and their spouses 65 or older the same health benefits provided to younger employees.

Your employee has several options. If they’re eligible for Medicare at age 65, they can decide to enroll in Part A and pay no premiums provided they have 40 quarters of Medicare-covered employment on record. At that point, the employee can:

  • Stay on the group plan and defer enrolling in Part B. They may visit their local Social Security office three months before their 65th birthday and tell Social Security that they don’t want to enroll in Part B until they decide to retire.
  • Enroll in Part B and pay the Part B premium in addition to their group premium. The member’s group coverage will be primary and Medicare will be secondary. They’ll have the flexibility to go to any doctor who accepts Medicare in addition to Kaiser Permanente doctors. But the member will have to pay for deductibles and coinsurance required by Medicare, and the claims filed by non–Kaiser Permanente doctors will go through the Medicare Secondary Payer claims process.
  • Enroll in Part B, pay the Part B premium in addition to their group premium, then assign their Medicare Parts A and B to Kaiser Permanente and move into WARCO coverage. With this option, your employee will face no cost sharing and can remain part of their group’s experience.
  • Enroll in Part B, pay the Part B premium, and opt out of their group plan. With their Medicare Parts A and B coverage, your employee can then enroll in a Kaiser Permanente Senior Advantage individual plan. Download the details of those benefits by county at kp.org .
    • Note: Under this option, your employee’s dependents will lose group coverage and will need to be on either COBRA or a separate individual direct pay plan.

Q: One of my employees has a dependent spouse who’s a Kaiser Permanente member and is reaching Medicare age. What are the spouse’s options while my employee is still working?

A: Your employee’s spouse has two options.

  • Enroll in Medicare Parts A and B, then opt out of their group coverage and enroll in a Kaiser Permanente Senior Advantage individual plan.
  • Stay on the group plan as a dependent, defer enrolling in Part B, and continue to pay the age-band rate.

If you have fewer than 20 employees, then Medicare is the primary payer — otherwise, the group plan will pay first. If the spouse chooses not to enroll in Medicare Parts A and B during the period from three months before up to three months after their 65th birthday, they may face a 10 percent penalty for late enrollment in Part B.

Q: A member is already collecting Social Security benefits and will turn 65 soon. Should they enroll in Medicare?

A: People collecting Social Security benefits before 65 will automatically be enrolled in Medicare Parts A and B at 65. If the member continues to work for a small business with 20 or more employees, the member can return their Medicare card and indicate that they’re deferring enrollment in Part B until they decide to retire. If the member continues to work for a business with fewer than 20 employees, they can keep their enrollment in Medicare Parts A and B for primary coverage. Your costs and administrative burden may be reduced if they enroll in a Medicare Advantage plan such as a Kaiser Permanente Senior Advantage individual plan.

Q:  My employees are getting calls from Kaiser Permanente telling them they “have to” enroll in Medicare. Why?

A: We mail valuable information to our members starting at age 64, educating them on Medicare and Kaiser Permanente Senior Advantage. We also call these members to help them transition to Medicare and Kaiser Permanente Senior Advantage. The intention isn’t to force members into Medicare, but to help them understand that they may face significant financial penalties if they delay Medicare enrollment more than three months after their 65th birthday.

Q: Where can I get a Summary of Benefits for Kaiser Permanente Senior Advantage individual plans?

A: Go to kp.org and follow these steps:

  • Go to Shop Our Plans.
  • Choose Medicare Plans.
  • Under Explore Our Medicare Health Plans, choose Find Plans and Rates.
  • Select your region.
  • Select the county where the member lives.

There you’ll find a printer-friendly version of the summary. You can also download the full Summary of Benefits and Coverage from the bottom of the page.

Q: Where can my employees aging in to Medicare get more help understanding the difference between their current group benefits and Kaiser Permanente Senior Advantage individual plan benefits?

A: Your employees turning 65 can call 800-747-2189 to speak to our Conversion Team, who’ll be able to help them compare the benefits.

Glossary

Your guide to terms concerning Medicare and Kaiser Permanente Medicare plans

Whether you need a definition of an unfamiliar term or more information about the elements of Medicare, this glossary can provide quick answers.

Annual election period: The period each year during which an employee or retiree can switch Medicare plans or enroll in a Medicare Advantage individual plan with Part D or a stand-alone prescription drug plan without a triggering event.

Centers for Medicare & Medicaid Services (CMS): The branch of the Department of Health and Human Services that administers Medicare.

Consolidated Omnibus Budget Reconciliation Act ( COBRA): A federal law that provides continuing coverage of group health benefits to employees and their families under qualifying circumstances in which coverage would otherwise be terminated.

Data Match Project: Helps CMS identify the primary and secondary payers for medical services provided to a Medicare beneficiary.

“Donut hole”: See Medicare coverage gap.

Employer Identification Number (EIN): A unique number that identifies an organization to the Internal Revenue Service.

End-stage renal disease (ESRD): Permanent kidney failure that requires a transplant or dialysis — one of the conditions that makes someone eligible for Medicare coverage.

Formulary : A health plan’s list of covered prescription drugs.

General enrollment period: The period between January 1 and March 31 of every year when individuals can enroll in Medicare Part B for the first time. Provided it’s after their seven-month initial enrollment period (see definition below), members who enroll during the general enrollment period will be covered starting July 1 of that year.

Health insurance claim number (HICN): The number assigned by the Social Security Administration to identify an individual as a Medicare beneficiary.

Health reimbursement arrangement (HRA): A reimbursement arrangement allowing employees to use funds contributed by their employer to pay for qualified medical expenses on a tax-free basis.*

Individual direct pay plan: Health coverage purchased directly by an individual rather than through an employer or association.

Initial enrollment period (IEP): The seven-month period when an employee or retiree first can enroll in Medicare (the three months before they turn 65, the month of their 65th birthday, and the three months afterward).

Kaiser Permanente Senior Advantage: A Medicare Advantage (Part C) plan.

Medicaid : A joint federal and state program, separate from Medicare, that helps pay medical costs for people with low incomes, limited assets, and disabilities.

Medi-Cal : The Medicaid program in California.

Medicare: A federally funded health insurance program. Eligible beneficiaries include individuals:

  • 65 or older if they or their spouses are eligible for Social Security
  • under age 65 who have certain disabilities
  • of any age with end-stage renal (kidney) disease or Lou Gehrig’s disease (ALS)

Medicare Advantage: See Medicare Part C.

Medicare Cost plan: A type of Medicare health plan available in some Kaiser Permanente regions. In a Medicare Cost plan, if a member gets services outside of the plan’s network without a referral, the Medicare-covered services will be paid for under Original Medicare (the Cost plan pays for emergency services or urgently needed services).

Medicare Part D coverage gap (the “donut hole”): A coverage gap in Medicare Part D prescription drug coverage. In 2015, Medicare won’t pay any portion of a beneficiary’s medication costs after the first $2,960 and until costs reach $4,700 spent. These amounts will be adjusted every year until 2020, when the coverage gap is scheduled to close entirely.

Medicare Part A: Coverage that helps pay for hospital stays, skilled nursing care, some home health services, and hospice care.

Medicare Part B : Coverage that helps pay for physicians’ services, outpatient care, and other medical services not covered by Part A. Parts A and B together are known as Original Medicare.

Medicare Part C (Medicare Advantage): Coverage offered by a private organization as an alternative to Medicare Parts A and B (Original Medicare). Part C and Cost plans may offer more benefits than Original Medicare and may include Part D coverage. Kaiser Permanente Senior Advantage is a Medicare Advantage plan.

Medicare Part D: Prescription drug coverage available as a stand-alone plan or as part of a Medicare Advantage or Cost plan.

Medicare Secondary Payer (MSP): The term used when another payer must pay for services provided to a Medicare beneficiary before Medicare pays.

Medicare supplemental insurance : Plans sold by private companies to supplement Original Medicare coverage. Also known as Medigap plans, they are different from Medicare Advantage (Part C) or Cost plans.

Multi-employer plan: A group health plan sponsored by multiple employers and/or employee organizations.

Original Medicare (Medicare Parts A and B): Also known as traditional Medicare. The federal health insurance program, created in 1965, under which the government pays providers directly for each service a member receives (on a fee-for-service basis). The majority of people with Medicare are enrolled in Original Medicare rather than a Medicare Part C plan.

Prescription drug plan (PDP): A health plan delivering only Medicare Part D benefits.

Special enrollment period (SEP):A time other than the initial enrollment period or annual election period when beneficiaries may join, change, or drop a Medicare plan. An SEP can be triggered by certain qualifying events such as a change in residence.

The Tax Equity and Fiscal Responsibility Act of 1982 ( TEFRA): Among other provisions, this act defines whether Medicare or a group health plan is the primary or secondary payer for medical services provided to a Medicare beneficiary when both kinds of coverage exist.

Working Aged Risk Contract Option (WARCO): A Kaiser Permanente coverage option available to employees 65 or older working for small businesses with 20 to 50 employees. The employer continues to pay the under-age-65 rate, while the member may not be required to share costs. Kaiser Permanente moves eligible members into WARCO when they and their covered spouses enroll in Medicare Parts A and B along with a Senior Advantage group plan.

* The tax references above relate to federal income tax only. Consult with your financial or tax advisor for more information about state income tax laws.

Information may have changed since publication.

©2015 Kaiser Foundation Health Plan, Inc.

Medicare creditable coverage Q&A

Use this information and our tools to help your Medicare-eligible employees determine what plans are considered “creditable”.

What is Medicare creditable coverage?
A health plan with prescription drug coverage that's as good as Medicare Part D is considered “creditable.” If you offer prescription drug coverage to Medicare-eligible individuals, you need to notify your beneficiaries unless they're enrolled in a Part D plan. You also need to notify the Centers for Medicare & Medicaid Services (CMS) whether or not your coverage is creditable.

Learn more about Part D Creditable Coverage today.

How do I know if my coverage is creditable?
To find out if your Kaiser plan is creditable, download the 2019 flyer, 2020 flyer, or 2021 flyer.

How do I report my status to CMS?
Please complete and submit this form online and use the Federal ID number: 94-1340523.

One page reference guide

Use this reference guide to determine who pays first: Medicare or your group health plan.

CMS questionnaire guide

To help you complete your Centers for Medicare & Medicaid Services (CMS) questionnaire, also called the Group Health Plan Report for the IRS/SSA/CMS Data Match, check out this helpful guide. It provides important regional information you'll need to report about Kaiser Permanente. Remember, you only have 30 days to submit your report after receiving it.

Forms

Download the forms that you use most, including enrollment forms, and more.