Medicare Supplement Insurance (Medigap) policy
You may want to get coverage that helps with copayments, coinsurance, and deductibles that essentially fill gaps in Original Medicare. You can choose to buy a Medigap policy from a private company approved by Medicare. Note: If you join a Medicare Advantage Plan, you cannot use Medicare Supplement Insurance to pay for out-of-pocket costs you have in a Medicare Advantage Plan. A Medigap policy only supplements Original Medicare benefits, whereas Medicare Advantage plans provide an avenue to get Medicare benefits. If you have an Advantage Plan, you cannot be sold a Medigap policy unless you disenroll and return to Original Medicare. Medigap policies can no longer be sold with prescription drug coverage, but if you have prescription drug coverage under a current plan, you can keep it.
8 things to know about Medigap policies
- You must have Medicare Part A and Part B
- If you have a Medicare Advantage Plan, you can apply for a Medigap policy, but make sure you can leave the Medicare Advantage plan before your Medigap policy begins.
- You pay the private insurance company a monthly premium for your Medigap policy in addition to the monthly Part B premium that you pay to Medicare.
- A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you will each have to buy separate policies.
- You can buy a Medigap policy from any insurance company that’s licensed in your state to sell one.
- Any standardized Medigap policy is guaranteed renewable even if you have health problems. This means the insurance company cannot cancel your Medigap policy as long as you pay the premium.
- Some Medigap policies sold in the past cover prescription drugs, but Medigap policies sold after January 1, 2006 are not allowed to include prescription drug coverage. If you want prescription drug coverage, you can join a Medicare Prescription Drug Plan (Part D).
- It’s illegal for anyone to sell you Medigap policy if you have a Medicare Medical Savings (MSA) Plan.
Medigap policies generally do not cover long-term care, vision or dental, hearing aids, eyeglasses, or private-duty nursing.
The Department of Labor recently released their inflation-adjusted penalties for ERISA, the Family Medical Leave Act, and the Genetic Information Nondiscrimination Act.
The chart below shows some of the more common penalties assessed from DOL audits.
|Failure to provide a summary of benefits and coverage||$1,105 per employee|
|Failure to inform employees of CHIP coverage opportunities||$112 per employee per day|
|Failure to comply with FMLA notice requirements||$166 per employee per day|
|Failure to comply with certain GINA requirements||$112 per employee per day|
|Failure to provide an SPD or plan document||$110 per employee per day|
|Failure to provide documents to the DOL upon request||$149 per day, not to exceed $1,496 per request|
|Failure to file an annual 5500 form||$2,097 per day|
The new ERISA penalties serve as important reminders to employers who sponsor benefit plans. Many employers either think they are too small to be audited (not true), or that the medical carriers adhere to all the rules and furnish employees with what is required (not true). It is for this reason that we have taken on the responsibility to protect our clients by providing them with the proper notices and instructions to maintain compliance.
With healthcare premiums continuously increasing year over year, many employers are searching for options to help reduce their benefit costs. A seemingly quick fix would be to eliminate dependent coverage, but you may want to consider eliminating dependent contribution rather than not offering coverage at all.
First and foremost, the circumstances are different for Small Groups in comparison to Applicable Large Employers. If you are considered an ALE, with 51 or more full time equivalent employees, then you are required to offer dependent coverage by law, or you may face an employer shared responsibility penalty. Please note that the definition for Small Group plans has been expanded to include up to 100 employees, so it is possible to be an Applicable Large Employer and still offer Small Group plans (51-100 employee size). Per the Affordable Care Act, and the ‘pay or play’ provision, the definition of ‘dependent’ only applies to children under the age of 26. Spouses are not considered dependents, nor are step children or foster children.
There are two types of penalties you may face if you do not offer proper coverage as an ALE.
- If you DO NOT offer minimum essential coverage to at least 95% of your full time equivalent employees and their dependents then you may face a penalty if at least one of your employees obtains premium assistance from the public marketplace (Covered CA). If just one of your employees receives premium assistance, then you are liable for a $2,000 penalty for each employee, after the first 30 employees. [Total employees – 30, multiplied by $2,000]
- If you DO offer minimum essential coverage to at least 95% of your full time equivalent employees and their dependents, then you may still be imposed a penalty if any employee receives premium assistance from the marketplace. If coverage is offered, but turns out to be unaffordable (more than 9.66% of household income), the employee has the option to purchase coverage and receive premium assistance. The employer in this instance will be penalized $3,000 for each employee that receives the premium tax credit.
If you are considered a Small Employer with 50 or less full time equivalent employees, then it is not a requirement for you to offer dependent coverage. If you elect to eliminate dependent coverage at renewal altogether, then you do not need to offer COBRA since terminating or amending the group health plan does not constitute a listed triggering event.
Dependents are only offered COBRA if:
- Employment is terminated
- Employee hours are reduced
- Employee passes away, divorces, or legally separates
- Employee obtains Medicare
- Loss of dependent child status
The Employee Retirement Income Security Act (ERISA) oversees group benefit plans, and with the onset of the Affordable Care Act, the ERISA Summary Plan Description (SPD) requirements are in the spotlight. More often than not, a plan administrator assumes that a Certificate of Insurance qualifies as an SPD, and that either the insurance company or their broker is responsible for preparing and delivering SPD’s. In this instance, the employer (plan administrator) is solely responsible for ERISA compliance.
An employer must have a written SPD, which serves as the main vehicle for communicating plan rights and obligations to participants and beneficiaries. An SPD that includes the plan’s terms and conditions, such as a Certificate of Coverage, and includes (or ‘wraps’) it with the specific ERISA disclosure language is considered a ‘Wrap SPD.’ One step further would be to produce a mega-wrap document which would encompass all benefit lines into one document, which is HIPAA compliant as long as none of the benefits are self-funded.
ERISA requires that a SPD be distributed to enrolled participants within 90 days of coverage, or 120 days of a new plan being established. If an SPD has not changed, an employer is required to furnish another copy to all participants every five years.
An example of some of the information required in an SPD:
- Plan name
- Employer’s name and address
- Employer’s EIN
- Plan Administrator’s name, address, and phone number
- Type of plan and description of benefits
- Effective and End Dates of the plan
- Eligibility terms
- How refunds are allocated to plan participants
- Claims procedures
- ERISA legal disclosure of participants’ rights
- Sources of plan contributions
- Details descriptions of plan provisions and exclusions
- Information regarding COBRA, HIPAA, and other federal mandates
- Summary of Benefits (SBC)
While it may be a bit overwhelming if your group is not currently in compliance – we are here to help. We offer all of our clients a Wrap SPD that is co-developed and maintained by a major ERISA law firm, and has successfully passed DOL audits.
Feel free to contact us to ensure your group is in compliance.