Many people over the age of 65 remain in the workforce. Hawaii is among the leaders in the percentage of 55-and-up adults who are in the workforce, which means there are many seniors in Hawaii who are eligible for Medicare who may still be on group health plans. Because of the Hawaii Prepaid Health Care Law, most employees in Hawaii who work at least 20 hours per week and earn at least 86.67 times the hourly minimum wage each month must be offered health insurance by their employer. Providing health insurance is an investment so it makes sense that employers may wonder if they can offer a less expensive health plan for Medicare-eligible employees.
MSP rules for Medicare-eligible employees
Medicare Secondary Payer (MSP) rules stipulate that all employers in the private and public sector, including nonprofit organizations, with 20 or more employees are required to offer the same health plan to Medicare-eligible employees as they do to other employees who are employed under the same conditions. Employers are also prohibited from “taking into account” that an employee or their spouse is eligible for Medicare to offer fewer benefits.
In recent years, both CMS and insurers have tightened up compliance on these rules, which means it’s almost impossible for employers to use “creative methods” to lower premium costs for Medicare-eligible employees.
Here are some other important rules that govern MSP requirements:
- Offering incentives is prohibited
The MSP statute prohibits employers from discouraging employees from enrolling in their group health plans or offering any “financial or other incentive” for an individual entitled to Medicare not to enroll in or to terminate their enrollment in the group plan that would otherwise be their primary health plan. For example, an employer is prohibited from offering an alternative to the employer’s primary plan to encourage Medicare-eligible employees to switch to a less expensive plan. - Employees are entitled to opt-out voluntarily
Employees who are eligible for Medicare are allowed to voluntarily drop employer coverage because they prefer Medicare. According to CMS, in this scenario only, an employer can offer the employee a plan that will pay for services Medicare does not cover, such as vision and dental care. - Civil penalties for violating Medicare law
Every time an employer violates the Medicare law by offering an alternative plan or financial incentives to terminate enrollment in the group health plan for Medicare eligible employees – either orally or in writing – they are risking a civil penalty of up to $5,000. - Small Employer Exception
The Small Employer Exception says that employers with fewer than 20 employees are not subject to the MSP rules for employees (or covered spouses) who are eligible for Medicare because of their age (this is referred to as the “working aged.”)
What Hawaii employers need to know:
In practical terms this means that Hawaii employers (with some exceptions) will still need to provide a health plan to any employee who works over 20 hours per week and earns at least 86.67 times the hourly minimum wage each month, but they may be able to offer a less expensive plan to Medicare-eligible employees if they employ fewer than 20 people.
Group health insurance through a PEO
If you’re a small business owner in Hawaii looking to provide a more affordable group health insurance option to your employees, partnering with a PEO may be a great fit. PEOs offer higher-quality, more cost-effective health insurance options for small businesses because they are accessing plans available to a larger pool of workers. Ask us about our health benefits.
Partnering with Makai HR
We are proud to be named to Hawaii Business Magazine’s 2023 Best Places to Work and Pacific Business News’ 2023 Hawaii’s Best Workplaces list. If you’re looking for comprehensive HR solutions for your business, we’ve got you covered through HR outsourcing.
When you partner with Makai HR you can get on with the business you are trying to grow while we take care of your employee needs from payroll to taxes, health insurance/benefits and worker’s compensation. You also gain peace of mind that you are compliant with all of Hawaii’s employer laws (if you’ve ever looked you know that the list is very long and changes happen). When choosing a PEO to partner with, there are many things to consider including cost, services, and technology solutions.
With the cost of doing business in Hawaii at record highs, we know how important it is to keep labor costs in line with revenue. Our plans are priced competitively and include value-added services like time-in/time-out systems. Our customized PEO solutions are tailored to the size of your business and specific needs. We offer a 100% paperless solution which means that your employees can manage their needs through a computer, tablet, or phone. We can truly improve your employees’ work benefits while freeing you up to operate your business.
What are you waiting for? Companies that partner with a PEO benefit from 7-9% faster growth, 10-14% lower employee turnover; and they are 50% less likely to go out of business. Contact us today to get started!