Medicare-eligible employees? How to advise them during open enrollment

Many workers who are reaching the traditional retirement age are planning to work longer to keep their employer-sponsored healthcare coverage. According to a recent Allsup survey, 54% of Medicare-eligible workers report that maintaining their health care coverage is a primary or contributing factor to continue working. However, Medicare can be a viable and attractive alternative for seniors, even if they plan to delay their retirement. For some, switching to Medicare can even reduce their healthcare costs while preserving necessary benefits, making it a win-win for employees and their employers.

As older workers evaluate their options, it is a good idea for large employers to be equipped with the right information to guide their employees who are considering making healthcare changes – especially during the fast-approaching Medicare Annual Enrollment Period (AEP), which is from Oct. 15 – Dec. 7.

The survey from Allsup also found that one-third of those ages 62 to 64 who plan to keep working past 65 did not understand that they can sign up for Medicare coverage even while working, and over one-third reported interest in reading printed Medicare materials and speaking to a benefits manager at their current employer.

Efforts to learn more could be incredibly valuable for these workers. Those approaching retirement age can sign up for Medicare at affordable rates, and the feedback of current Medicare beneficiaries speaks volumes. About 76% of those enrolled in Medicare say that their monthly premium is less with Medicare than their employer’s insurance, and 79% say access to the quality of care is the same or better with Medicare as with their employer’s plan. Despite this, there is still some hesitancy surrounding Medicare sign-ups, with 28% thinking Medicare coverage will not be as good as their current insurance.

In truth, Medicare options could actually provide better coverage at a lower cost for your employees, but there are a few strategies to note when advising on plan selection. If Original Medicare is unaccompanied by a prescription plan or a Medigap supplement, it may not live up to their current level of coverage. That’s why most individuals who enroll in Medicare have other coverage: 9 in 10 Medicare beneficiaries receive some form of supplemental health insurance including Medigap, employer-sponsored insurance, or Medicaid; or opt for a Medicare Advantage plan (Part C) instead of Original Medicare.

Healthcare decisions when turning 65

When workers age into Medicare access at 65, they reach a turning point in their healthcare benefit priorities. While premium cost is usually king when shopping for health insurance plans, out-of-pocket costs may not be as big a factor in healthcare decision-making as workers get older. Premium cost falls in importance as workers approach Medicare eligibility. While 71% of workers aged 62 to 64 ranked this as the most important factor, this number drops down to 63% for workers aged 65 and older. At the same time, comprehensive coverage increases in importance, jumping from 47% (ages 62-64) to 57% (ages 65+). Benefits managers should be prepared to advise around this evolution in healthcare preferences depending on your employees’ care needs and financial goals.

If your employee opts for Medicare, it is highly recommended to advise pairing an Original Medicare plan with a Part D prescription drug plan and a Medigap plan. Each Medigap plan, from Plan A to Plan N, offers a different level of coverage. This means it will take careful consideration to identify the plan that best fits your employee’s health needs and financial situation. A Medigap plan costs an average of $163 per month depending on the policy and state in which a beneficiary resides. Medigap Plan G is considered the most comprehensive plan now in terms of both coverage and cost-effectiveness, with the Part B deductible being the only out-of-pocket expense after premium costs.

Aside from Original Medicare plus a Medigap plan, the beneficiary also has the option to elect a Medicare Advantage plan. Medicare Advantage might be the most appealing option if the beneficiary wants to consolidate their costs and coverage, as a private Medicare Advantage plan includes Part A and Part B Medicare benefits. For 2023, the estimated cost of a Medicare Advantage plan is projected to be $18 per month, and different plans offer dental, hearing, vision, and prescription drug coverage. Another 2.3 million beneficiaries signed up for Medicare Advantage during the 2022 coverage year, making up 45% of all Medicare enrollment.

In the long run, having this knowledge and providing guidance as your employees navigate this process can alleviate stress. It also may be the more financially advantageous option for you and your employee, regardless of their reasons for remaining in the workforce. There are many people aged 65 and older who have opted to work longer for reasons beyond financial security.  In fact, approximately 57% of Allsup’s respondents over the age of 65 expressed enthusiasm about remaining in the workforce.

Many who caught a glimpse of retirement during the pandemic lockdowns realized that it was not for them, and they want to stay in the game longer. Staying in the workforce allows seniors to continue to make an impact in their respective field and gives them a general sense of social connectedness. As they keep up their careers and look to bolster their retirement savings in the process, it is important to arm your employees with cost-effective health coverage guidance – whether they are trying to smoothly transition into retirement or intend to remain in the workforce for years to come.

Bethany Cissell is a health care insurance services specialist at Allsup.