Working with your employees as they plan for retirement means supporting them through the Medicare process. From helping them understand the benefits of their Medicare parts coverage to its anticipated costs, you play an important role in setting your employees up for a smooth transition from employer coverage to Medicare.
While there are many details, rules, and exceptions to Medicare, there are a few basics your employees should know about what Medicare actually covers and how much they can expect to pay each month.
The Four Parts of Medicare
Medicare divides its health care services into four categories: Parts A, B, C, and D. Depending on an employee’s situation, they may enroll in Medicare through one part, a combination, or all four parts.
Since each combination comes with its own costs, coverage, and benefits, we’re breaking each part down to the basics.
Medicare Part A
Medicare Part A is considered inpatient/hospital insurance. As such, Part A covers:
- Hospital care
- Skilled nursing facility care
- Nursing home care (not including custodial care)
- Home health services
Cost of Medicare Part A
Most people qualify for Medicare Part A for free, or “premium-free.” However, some people do have to pay a monthly premium.
Employees eligible for “premium-free” Part A are those who paid Medicare taxes (or whose spouse paid Medicare taxes) while working for at least 10 years. Otherwise, the monthly premium can range from $274 to $499.
Employees can also expect additional fees to be tacked on for various types of care (i.e. skilled nursing). For hospital inpatient deductibles and coinsurance, your employee would pay according to the number of days surrounding treatment:
- $1,556 deductible for each benefit period
- Days 1-60: $0 coinsurance for each benefit period
- Days 61-90: $389 coinsurance per day of each benefit period
- Days 91 and beyond: $778 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
- Beyond lifetime reserve days: all costs
Medicare Part B
Medicare Part B generally covers two types of medical services: medically-necessary and preventative care. Part B covers:
- Clinical research
- Annual exams and preventative screenings
- Ambulance services
- Durable medical equipment
- Mental health care
- Partial hospitalization
- Getting a second opinion before surgery
- Limited outpatient prescription drugs
Together, Medicare parts A and B makeup what’s called “Original Medicare.”
Cost of Medicare Part B
The 2022 Medicare Part B standard annual deductible is $233, with a monthly premium of $170.10.
Once the deductible is met, beneficiaries typically pay 20 percent of the cost of services, then Medicare covers the rest.
Note: When budgeting for Part B expenses, your employees should know there is no cap on the 20 percent they will be responsible for paying. This can differ from the cost model that they might be used to paying with employer health insurance.
Medicare Part C
Medicare Part C, also called Medicare Advantage, is offered by private insurance companies and combines Medicare Part A, Part B, and typically Part D into one plan.
Once your employees or retirees enroll in Medicare, they can then choose to purchase a Part C plan.
The perk? Some of the carriers that offer employer group coverage also offer Medicare options, so some people are able to remain with the same carrier as they head into retirement.
Medicare Advantages plans are required to provide the same basic coverage as Medicare Parts A and B, but these plans can offer extra benefits, like vision, dental, and hearing. Some Medicare Advantage plans also include prescription coverage, giving them the name of Medicare Advantage Prescription Drug plans.
Medicare Advantage is particularly appealing because it consolidates all benefits into a single package, as well as offers an out-of-pocket maximum to cap the amount of money beneficiaries pay each year.
Cost of a Medicare Advantage Plan
The price for a Medicare Advantage plan is dependent on the chosen plan and its features. Plan costs can include monthly premiums, copays or coinsurance payments, annual deductibles, in addition to out-of-pocket maximums. Your employee will want to understand and evaluate all of their options to build a customized plan that aligns with their health needs, budget, and lifestyle.
With Medicare Advantage plans, costs and benefits are subject to change, as insurance companies are allowed to make annual updates to their coverage plans.
Medicare Supplement Plans
Similarly to Medicare Advantage, Medicare Supplement plans are also sold by private insurance companies. Commonly referred to as Medigap, Supplement plans “fill the gaps” that Medicare Part A and Part B do not cover, such as copays, coinsurance, and deductibles to cover doctor, hospital, or facility fees.
When someone purchases a Supplement plan, it works in tandem with Original Medicare (Parts A and B). For example, Medicare covers its portion of approved coverage for health care costs then sends the remaining balance to the Supplement insurance company.
Part D benefits are not included in Supplement plans, so they do need to also enroll in a stand-alone prescription drug plan (or be covered by other creditable drug coverage).
Medicare Supplements do require your employee to be enrolled in Part A, Part, B, and Part D coverage in order to actually supplement other benefits. Otherwise, they could face financial penalties.
Cost of Medicare Supplements?
Since Medicare Supplements can be purchased from multiple health insurance companies, each plan will have its own cost and coverage benefits that can change annually.
Most people enrolled in Supplement will not receive bills for their health care expenses, but some do pay a monthly premium.
Medicare Part D
Medicare Part D is prescription drug coverage available to anyone enrolled in Medicare Part A and/or Part B. Like Part C, Part D plans are available through private insurance companies.
If your employee chooses to not enroll in Part D, they are required to have another form of creditable drug coverage. Acceptable drug coverage must be equal or greater than Medicare’s minimum standards coverage.
Employer-sponsored insurance plans can include creditable drug covers, so your employee may be eligible to keep those benefits even after enrolling in Medicare.
Cost of Medicare Part D
Most Part D plans and medications are priced with:
- A monthly premium
- An annual deductible
- An out-of-pocket maximum
- A prescription drug formulary
- Coverage phases: initial coverage phase, coverage gap, and catastrophic coverage phase
Individual costs vary depending on the specific plan selected as well as the types of medications prescribed. Prices and coverage benefits are also subject to change at the discretion of the insurer.
Note: A Part D surcharge will be applied in addition to the monthly premium for individuals above a certain income level.
Dive Into the Details of Medicare Parts Coverage with an Expert
Questions about what Medicare will mean for your employees who plan to continue working after 65? Want in-depth information about one or more of the plans described above?
We’re here to help! Our knowledge, resources, and experience can guide you and your employees through the transition from employer-coverage to Medicare. Connect with us to get the conversation started today.