Health and Benefits

Employer Challenges with Medicare-Eligible Employees

An increasing number of employers are facing Medicare-related health insurance issues, and these issues are expected to only become more prevalent in the coming years. Here is an overview of the issues from the underlying causes to how employers might navigate them.

Medicare-Related Health Insurance Challenges Are Increasing

Two trends are contributing to the overall increase in Medicare-related health insurance challenges for employers.

First, older Americans are simply working longer.  While this isn’t a new trend, the Bureau of Labor Statistics projects that this trend will continue, with about one-third of seniors age 65 to 74 expected to be working in 2029. Even among seniors age 75 and older, the BLS expects more than 10 percent of the demographic to be working at the end of the decade.

Second, the Social Security full retirement age can be higher than the eligibility age for Medicare.  While a person can retire and begin receiving reduced Social Security benefits at age 62, the earliest full retirement age is 66 and for people born after 1960, it is 67.  In addition, benefits increase if an employee works beyond their full retirement age, maxing out at age 70.  This means that there could be a two-year gap, where an employee becomes eligible for Medicare at age 65, but will not be fully eligible for Social Security until age 67. Many people may choose to work beyond their Medicare eligibility birthdate as a result.

The result is that Medicare-related health insurance challenges are not something that employers can afford to ignore. Many employers are already facing with these issues, and those that aren’t will probably face them soon.

Medicare is a Four-Part Health Insurance Plan for Seniors

Medicare is, of course, the nationally subsidized health insurance plan that is available to those 65 and older.  The program consists of four main parts:

  • Part A: Generally, covers stays in hospitals, skilled nursing facilities and certain at-home care. Most enrollees aren’t charged a premium.
  • Part B: This usually covers doctor’s visits, outpatient exams, and tests. Premiums are usually charged.
  • Part C: Medicare Advantage plans are offered as alternatives to “standard” Medicare plans, and they may have different rules and out-of-pocket expenses. These plans are offered by approved private insurers, which charge premiums.
  • Part D: This part covers prescription drugs. These plans are offered by private insurers, which charge premiums.

Because Medicare Part A is premium-free, many employees who have access to employer-sponsored plans may choose to enroll in this part of Medicare alone.  Instead, they may rely on their employer-sponsored plan to cover office visits, outpatient services, and diagnostic testing.

Medicare Eligibility Begins at Age 65

A person becomes eligible for Medicare at age 65 and can enroll during the three months before the month in which they turn 65, the month in which they turn 65 or the three months after they turn 65.  When a person enrolls after their 65th birthday, coverage may apply retroactively for up to six months.

A person who does not enroll (or prove equivalent coverage) when first eligible for Medicare may have to pay a penalty if they enroll later.

Working May Impact an Employee’s Decision to Enroll in Medicare

Working part- or full-time does not affect Medicare eligibility, but it may impact an employee’s decision whether to enroll in Medicare.  The decision to enroll depends on an employer’s size and an employee’s coverage needs.

An eligible person working for an employer with fewer than 20 employees is required to enroll in Medicare coverage or face higher premiums later. An eligible person working for an employer with 20 or more employees can forgo Medicare coverage, as long as they have equivalent or better coverage through their employer or through their spouse’s employer.

Whether an eligible employee chooses to enroll in Medicare is a personal decision that depends on personal health, family coverage needs, employer-sponsored plan features, income level, and other factors. Many employees may elect to, at least, enroll in the free Medicare Part A coverage.  However, some will delay Medicare enrollment altogether.

Medicare Can Overlap with Employer-Provided Health Insurance

When an employee is both enrolled in Medicare and covered by their employer’s plan, one will provide primary coverage and the other will be secondary. Whether Medicare is primary or secondary depends upon the size of the employer.

When an employer has fewer than 20 employees, Medicare pays first and the employer’s plan pays second.  When an employer has 20 or more employees, the employer’s plan pays first and Medicare pays second.

Medicare Isn’t Compatible with Health Savings Accounts

Employees who are covered by a high-deductible health plan (HDHP) can contribute to a health savings account (HSA).  However, an employee may not contribute to an HSA, if they are enrolled in Medicare.  As a result, an employee’s decision whether to enroll in Medicare may depend upon the value they attach to the ability to make future contributions to an HSA.

Navigating Medicare Issues and Self-Funded Plans

Whether a Medicare-eligible employee enrolls in Medicare or stays in their employer’s health plan is a difficult decision for an employee.  However, it is also a challenge for employers that want to mitigate increasing healthcare costs by adopting a self-funded health plan.  Whether a self-funded health plan option is viable for a particular employer may depend upon the mix of an employer’s employees.  There is not a one-size-fits-all solution. Instead, each situation must be taken on a case-by-case basis and should be navigated with expert guidance.

RMC can provide the expert guidance that an employer needs with a consultative risk management approach.  RMC’s Medicare consulting services provides businesses with a clear path to a successful self-funded health plan transition.

To speak with a knowledgeable consultant at RMC, contact us today. One of our representatives will be happy to assist you and your business.

Health and Benefits

Memo on COVID Relief Package for 2021

On December 27, 2020, the Consolidated Appropriations Act of 2021 (the “Act”), was signed by President Trump.  While the Act is mostly known for its $600 payment to most Americans making less than $75,000 per year and the expansion of unemployment benefits, it also impacts employers in a number of ways.  This article discusses a few of those provisions.

1. Flexible Spending Accounts

Many employers maintain what is known as a “Cafeteria Plan”, which enables their employees to prefund certain expenses on a tax-advantaged basis.  An employer’s Cafeteria Plan may include a flexible spending account (“FSA”) for healthcare expenses and an FSA for dependent care expenses.  The Act changes some of the rules that govern both healthcare and dependent care FSAs.

A. Changing Election

Generally, an employee is permitted to make an election regarding participation in an FSA only once per plan year, without a “change in status”.  In addition, the election is generally required to be made before the start of the plan year.  The Act provides that, for plan years ending in 2021, an employee may change the amount of his or her contributions to an FSA during the plan year, without a change in status, as long as the total of the contributions does not exceed the statutory maximum.  Any change in the employee’s election will be effective prospectively.

B. Carryover Amounts 

FSAs used to be subject to a “use it or lose it” rule.  However, the Internal Revenue Code now permits an employee to carry over unspent funds remaining in his or her healthcare FSA at the end of one plan year to the next plan year.  An added benefit is that the carryover amount does not count against the maximum reimbursement amount for the following plan year.  However, the amount that an employee may carry over is limited.  For plan year 2021, the maximum carryover amount was $550.  The Act suspends this limitation for plan years 2020 and 2021.  Under the Act, an employee may carry over the entire remaining balance in his or her healthcare FSA to the following plan year.  The Act also extends this carryover provision to dependent care FSAs.  Prior to the Act, the carryover provision covered only healthcare FSAs.

C. Extension of Grace Period

An employer’s Cafeteria Plan may include a “grace period”.  During the grace period, an employee may use funds remaining in his or her FSA at the end of a plan year to pay costs incurred in the following plan year.  There are no limits on the amount that may be used in the next plan year.  However, the grace period cannot extend more than two and one-half months into the next plan year. Both healthcare FSAs and dependent care FSAs may provide a grace period.  The Act changed the upper limit of the grace period for plan years ending in 2020 or 2021.  For plan years ending in 2020 or 2021, the grace period can extend up to twelve months.

A plan may not have both a grace period and a carryover provision.  What is the difference?  A grace period generally does not limit the amount of funds, which may be used in the next plan year but does limit the period during which such funds can be used.  A carryover provision limits the amount that may be carried over from one plan year to the next but does not limit the period during which the funds can be used.  However, since the Act changed the grace period to twelve months and eliminated the dollar limitation on carryover amounts, there does not seem to be much difference between a grace period and a carryover provision for 2021.

D. Extension Period for Reimbursements

A participant is generally permitted to obtain reimbursements from an FSA only while actively covered by the employer’s Cafeteria Plan.  Under the Act, an employee may continue to receive reimbursements from a plan for the balance of the plan year, including any grace period, during which his or her participation in the plan ceases.  This provision applies only to healthcare FSAs and not dependent care FSAs.

E. Plan Amendment 

The foregoing plan provisions are permissible, not mandatory.  This means that an employer may offer a Cafeteria Plan but is not required to.  In addition, an employer’s plan may contain a carryover provision or a grace period but also may contain neither.  In order to add or change a carryover or grace period provision, an employer must adopt an amendment to its plan.  Generally, amendments must be adopted prospectively.  For 2020 and 2021, the Act permits an employer to amend its plan retroactively.  The amendment must be adopted by the last day of the first plan year after the plan year for which the amendment is to be effective.  That means that, for a 2020 calendar year plan, the amendment must be adopted by December 31, 2021.  For a 2021 calendar year plan, the amendment must be adopted by December 31, 2022.

2. Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security Act (“the “CARES Act”), which was signed into law on March 27, 2020, created the Paycheck Protection Program (“PPP”).  The purpose of the PPP was to support small businesses in retaining and paying employees.  In addition to adding new money to the existing PPP program, the Act made other changes to the PPP program.

A. Second Draw

The Act creates what is known as a “second draw”.  This enables employers that received a PPP loan during the first phase of the program to apply for a second PPP loan.  In order to be eligible for a second draw, an employer must have:

i. no more than 300 employees;

ii. used or will use the full amount of the first PPP loan; and

iii. experienced a reduction in revenue of at least 25% for a 2020 quarter compared to the same 2019 quarter.

Like the original PPP program, the second draw is administered by lenders authorized by the Small Business Administration. A business that desires to apply for a PPP loan, whether a so-called “first draw” under the CARES Act or a “second draw” under the Act, should contact their lender.

B. Eligible Expenses

The intent of the PPP program is for loan proceeds to be used for payroll expenses.  However, both the original PPP program under the CARES Act and the revised PPP program under the Act permit loan proceeds to be used for expenses other than salary.  The Act expands the percentage of loan proceeds that may be used for expenses other than salary from 25% to 40%.

C. Deductibility

There was some uncertainty under the CARES Act whether an employer whose loan was forgiven could also deduct the business expenses paid for with the loan proceeds.  The IRS took the position that an employer could not receive both loan forgiveness and deductions.  The IRS characterized this as double-dipping.  The Act makes clear the intention of Congress that a business may receive loan forgiveness under the PPP and deduct the business expenses paid for with the loan proceeds.

3. Employee Retention Credit

The CARES Act created an Employee Retention Credit (“ERC”), which provided a credit for eligible employers for payroll taxes paid by the employer.  To the extent that the employer’s payroll taxes exceeded qualified wages, the credit resulted in a refund to the employer.  The Act amends the ERC in a number of ways.

A. Extension

The Act extends the term of the ERC to June 30, 2021.  Previously, the Act was set to expire on December 31, 2020.  So, employers can now take advantage of the ERC through the first six months of 2021.

B. Eligibility

The Act expands the number of employers eligible for the ERC.  Under the CARES Act, the ERC was available to employers with fewer than 100 employees.  The Act extends the ERC to employers with fewer than 500 employees.  In addition, in order to be eligible for the ERC in 2021, an employer must be prohibited from fully or partially engaging in a trade or business as a result of a governmental order or its revenue during one of the first two quarters of 2021 must be 80% less than its revenue during a comparable quarter in 2019.  The CARES Act required a reduction in revenue of 50% or more.

C. Amount of Credit

The amount of the ERC is 70% of an employee’s “qualified wages” paid from January 1, 2021, through June 30, 2021.  The maximum amount of an employee’s qualified wages is $10,000 per quarter.  So, the maximum ERC per employee per quarter is $7,000.  The amount of the ERC under the CARES Act was 50% of an employee’s annual wages.

D. Coordination with PPP 

Under the CARES Act, an employer could not take advantage of both the PPP program and the ERC in 2020.  The employer had to choose one or the other.  The Act retroactively eliminates that restriction.  An employer that received a PPP loan in 2020 can retroactively claim the ERC for wages that were not paid with the PPP loan.  This is a huge benefit for employers that received a PPP loan in 2020; one that is not shared by employers who forsook a PPP loan in 2020 because the ERC provided a greater benefit.  They do not have the option of retroactively applying for a PPP loan for the same period for which they received an ERC.  A business that did receive a PPP loan in 2020 should consult its tax and legal advisors to determine whether it is also eligible to receive the ERC.

4. Health Plan Provisions

A. Surprise Billing

“Surprise billing” most often occurs in the context of emergency care.  When an employee requires emergency care, the employee is often unable to confirm whether the hospital or doctor is “in-network”.  As a result, the employee may be surprised when he or she gets a bill for the difference between the agreed-upon amount charged by the employee’s in-network provider and the amount charged by the out-of-network provider.

The Act addresses the problem of surprise billing by treating the care provided by the out-of-network provider as in-network for purposes of calculating the employee’s share of the cost of treatment.  As a result, an employee’s obligation is the same whether the treatment is received in-network or out-of-network.  However, this restriction does not cover all medical care and extends only to the point where the employee is stable and able to make informed decisions about his or her treatment.

The provisions of the Act regarding surprise billing go into effect on January 1, 2022.  However, regulations are supposed to be issued by July 1, 2021.

B. Reporting and Disclosure Requirements

The Act imposes a number of reporting and disclosure requirements on group health plans.  Beginning with plan years starting on or after January 1, 2022, group health plan identification cards must show in-network and out-of-network deductibles, out-of-pocket maximums, and a telephone number and website through which a participant can find certain information such as which hospitals and urgent care centers have relationships with the plan.  While an employer needs to be aware of this obligation, the delivery of identification cards is usually the responsibility of the plan’s TPA.

Also beginning with the first plan year after January 1, 2022, if an employer receives notice that an employee is scheduled to be treated by an out-of-network provider, the employer is required to notify the employee that the provider is not in-network.  In addition, the notice must provide the employee with a good faith estimate of the cost of the treatment, the plan’s financial responsibility for the treatment, the employee’s share of the cost and how much the employee has to pay before reaching the plan’s out-of-pocket maximum.  Again, while the employer needs to be aware of this obligation, it is generally the TPA that will provide the notice to the plan participant.

The Act also requires group health plans to submit certain information to the Departments of Health and Human Services, Labor and Treasury.  The first report is due December 27, 2021, and subsequent reports are due on each June1 thereafter.  The information required to be provided includes:

1. the dates of the plan year;

2. the number of participants and beneficiaries;

3. each state where the plan is offered;

4. the 50 most popular brand prescription drugs used by plan participants;

5. the 50 most expensive prescription drugs used by plan participants;

6. the 50 prescription drugs with the greatest increase during the plan year;

7. total spending on health care by the plan broken down by hospital costs, provider costs for primary care and specialty care and prescription drugs;

8. the average monthly premium paid the employer and the plan’s participants; and

9. rebates.

As with the other reporting requirements, the information will need to be gathered by the plan’s service providers.  It seems likely that regulations will be issued prior to December, 27, 2021, more clearly setting forth an employer’s obligations under the Act.

Technical Memorandum

FAQ for Guidance on COVID-19 Legislation

The Department of Labor, Health and Human Services, and Treasury Provide Further Guidance on COVID-19 Legislation 

Since the enactment of the Families First Coronavirus Response Act (FFCRA) on March 18, 2020, the Department of Labor, the Department of Health and Human Services and the Department of the Treasury have released a series of Frequently Asked Questions (FAQs) to guide employers in the implementation of the law’s provisions.  The most recent set of FAQs was released on June 23, 2020.

The June FAQ contains 18 questions on a variety of subjects. The following are some of the more relevant questions and answers.

Are Self-Funded Health Plans Required to Comply With the Provisions of the FFCRA?

The answer is yes.  The FAQ says that:

The statute and FAQs make clear that the requirements apply to both insured and self-insured group health plans.

While we don’t really think that this was ever in doubt, the Departments felt the need to clarify the application of the FFCRA.

What COVID-19 Tests Must Be Required?

The FFCRA and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) mandate that group health plans must cover the cost of testing for Covid-19.  Apparently, the Departments felt that there was some confusion about which tests must be covered.  The FAQs clarify that the following tests are covered:

  • A test approved, cleared or authorized under the Federal Food, Drug, and Cosmetic Act;
  • A test for which the developer has requested or intends to request emergency use authorization (EAU) from the FDA;
  • A test that is developed in and authorized by a State that has notified the Secretary of HHS of its intention to review the test; or
  • Any test that the Secretary of HHS determines to be appropriate.

The FAQs go on to say that no test has yet been approved under the Federal Food, Drug, and Cosmetic Act.  The tests, which are authorized, because the developer has sought an EAU are listed on the FDA’s website.  In addition, any tests, which have been authorized by a state, are also shown on the FDA’s website.  Finally, the FAQ says that no other test has been approved by the Secretary of HHS.

In a previous FAQ, the Departments said that a Covid-19 test must be covered “when medically appropriate for the individual, as determined by the individual’s attending health care provider”.  Apparently, the Departments thought there was some confusion about the term “individual’s attending health care provider”.  The June FAQs make clear that the term is not limited to the health care provider “directly” responsible for providing care to the patient.  It includes any provider who “makes an individualized clinical assessment to determine whether the test is medically appropriate for the individual in accordance with current accepted standards of medical practice”.  This means that an individual, who goes to the emergency room or an urgent care center with symptoms and sees somebody other than his primary care physician, can still be given a Covid-19 test that must be paid for by the individual’s group health plan.

Finally, the FAQs clarify that the FFCRA and the CARES Act also cover tests that can take place at home.  In addition, if an individual receives multiple tests, the FAQs confirms that each test must be covered by the individual’s group health plan.

What Tests are Not Covered?

With the country beginning to reopen and people going back to work, this may be the most important part of the FAQs.  The Departments address the question whether tests for “surveillance or employment purposes” must be covered.  In other words, if an employer requires an employee to show a negative test before returning to work, do those tests have to be covered?

The answer is no.

In the FAQ, the Departments say that:

Clinical decisions about testing are made by the individual’s attending health care provider and may include testing of individuals with signs or symptoms compatible with Covid-19, as well as asymptomatic individuals with known or suspected recent exposure to SARS-CoV-2 . . . However, testing conducted to screen for general workplace health and safety (such as employee “return to work” programs), for public health surveillance for SARS-CoV-2, or for any other purpose not primarily intended for individualized diagnosis or treatment of COVID-19 or another condition is beyond the scope of . . . the FFCRA.

Do the FFCRA and the CARES Act Protect a Patient From Balance Billing?

The answer is maybe.

The FAQs state that the FFCRA, as amended by the CARES Act, provides that an in-network health care provider can only charge an employee the amount negotiated by the provider and the plan.  An employee cannot be charged any additional amount.  In addition, an out-of-network provider can only charge the amount shown on its public website or a lesser amount negotiated by the plan with the provider.  Again, an employee cannot be charged any additional amount.

The question that neither the FFCRA, nor the CARES Act, answers is what if an out-of-network provider does not have a published rate or has not negotiated a lesser amount with the plan.  Can the employee be balanced bill for any amount?  The FAQs do not really answer this question; although they do say that “the Departments interpret the provisions of section 3202 of the CARES Act as specifying a rate that generally protects participants, beneficiaries, and enrollees from balance billing for a COVID-19 test”.  However, instead of providing a real solution, they simply note that a provider that fails to comply with the provisions of the CARES Act, regarding the publication of its cash price for a test, is subject to a monetary penalty.  The assumption is that all providers will either publish the cash price on their website or will negotiate a price with the employee’s plan in order to avoid a civil penalty.  As a result, this situation will never arise.

For questions about the June FAQs, the FFCRA, the CARES Act or your group health in general, please contact RMC Group.

Health and Benefits

How Layoffs Impact Employee Benefits Plans During Coronavirus COVID19

While the Coronavirus pandemic is a public health crisis, it’s also having a significant negative impact on business.

With many states under “shelter-in-place” orders, businesses deemed “non-essential” are unable to operate at full scale.

As an employer, how will you react to the disruption of your normal business operations?

One option may be to consider reducing hours of employees or laying them off. But, such actions have consequences, specifically for your employee benefit plan.

Here are some of the issues.

If an employee is laid off or has his hours reduced, what impact does that have on health insurance?

If you offer health coverage then you most likely require contributions from your employees. In many cases, those contributions are made through payroll deductions and often through a cafeteria plan.

You have to decide whether you will pick up the entire cost of the plan during a temporary furlough or reduction in hours and, if not, how will you collect the employee’s portion of the cost if there is no payroll to withhold?

You must review your plan document and any insurance policy issued to the plan, whether it’s a fully-insured or self-funded plan with stop-loss insurance.

The plan document will determine whether a furloughed employee, or one whose hours have been reduced, is still eligible for coverage.

You may have to amend your plan.

In addition, review any insurance policy issued to the plan to determine whether a furloughed employee or one whose hours have been cut is still covered. You may have to ask your insurance company to amend the policy.

What about employees who are terminated?

A termination of employment is a qualifying event under the Consolidated Omnibus Budget Reconciliation Act (COBRA). A reduction in hours may also be a qualifying event, depending upon the scope of the reduction.

If the action taken constitutes a qualifying event under COBRA, then you must provide the required notice and opportunity to elect coverage under COBRA.

How is paid leave handled?

Any action you take may implicate the employee’s right to paid or unpaid leave.

Check your sick leave or PTO policy.

A furloughed employee may be able to take advantage of paid leave during a furlough. In addition, the Families First Coronavirus Relief Act expanded an employee’s right to Family and Medical Leave.

You will have to check whether a furloughed employee will be entitled to claim the right to payment under that legislation.

What about highly compensated employees?

Any action you take cannot be discriminatory by job function. This means that more generous benefits cannot be offered to highly-compensated employees.


It’s clear that the Coronavirus pandemic will have consequences well beyond the health of your employees.

If your business is considering furloughing or laying off employees, it’s important to first get clear about how your existing policies, procedures, and employee benefit plan documents will respond.

This will dictate how benefits are extended to those employees for a period of time afterward.

Is your businesses planning on reducing your staff as a result of COVID-19?

Drop a comment below or contact us with any questions regarding your health plan and any insurance policy issued to the plan.

Health and Benefits

Healthcare Costs are on the Rise

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Think about that number for a moment…

It represents almost 1/5 but almost 1/5 of what?

This number should shock every CPA and business owner for one reason.

17.9% is the percent of the U.S. GDP that is spent on healthcare and it’s unsustainable.

Now here’s how that number impacts your business clients.

Small businesses tend to face more challenges with their health insurance than their larger counterparts.

If you’ve been asking your clients how much money they spend on health care, then you already know that they’re seeing double-digit increases every year.

This creates a real problem for businesses that are trying to balance their budgets.

They’re faced with the prospect of offering less or minimum coverage, and passing more cost to their employees or they might decide not to offer health insurance at all.

Health insurance is an important part of a compensation package, so not providing it can hurt a business ability to attract and keep talented employees.

Good employees are hard to find, so don’t drive the good ones away or at least give them an excuse to begin looking elsewhere because they will.

So what are you recommending to your clients as a CPA.

Your clients expect you to have answers, whether they tell you or not you can bring a solution to this problem and provide more value to your clients with an alternative option that can potentially lower health costs without losing the existing coverages.

To find out if any of your clients could benefit from this, drop me a comment below or give me a call.

Help your client keep more of that pie.

17.9% is a big number!