Financial Advice, Planning and Guidance.

The best time to plant an oak tree was thirty years ago.
The second best time is today.

Reaching Your Financial Goals

Our Consultative Approach is a time-proven method that focuses on your needs, your goals and your priorities. Isn’t that a better idea?
Learn More

Financial Advice and Strategies

Active money management is more than just a good idea: it is a responsibility. Are we the right partner for your retirement goals?Learn More

Planning. It's Really Not So Complicated

When you finally do figure out what to do with the rest of your life…you’ll probably want the rest of your life to start immediately. How about today?Learn More

Guidance: In Every Client Relationship.

At Denk Strategic Wealth Partners, our insight offers the ‘How’ and the ‘Where’…but only after your vision tells us the ‘Why’.Learn More

Weekly eLetter 12/2/2022 — Healthcare Insurance: Who Pays First?

Choosing a health insurance provider can be a tremendously complicated adventure. But that can seem like a walk in the park when it comes to actually USING the insurance once you have it. Our friends at horsesmouth,LLC have put together a summary of how things are supposed to work. They also include a few tips on avoiding some danger areas. With their permission, we reproduce it below. It is a bit long but worth the read if you have questions about your own medical / health insurance situation. Remember the words of Einstein; “Things should be explained as simple as possibly, but no simpler.”

Under the classic, fee-for-service health insurance model, a person goes to the doctor and the bill gets sent to the insurance company for payment. If any part of the bill is not fully paid by the insurance company, the remaining amount is billed to a second insurance company, if there is one, or to the patient.

While people are working, health insurance is usually straightforward in that there’s just one insurance company. Whatever isn’t paid by insurance is generally paid by the employee under the plan’s deductible and/or copayment/coinsurance arrangements.

Medicare enrollment usually adds a second insurer. Because Original Medicare leaves too many gaps, it is necessary to have supplemental insurance. The gap insurer could be a company such as Aetna or United Healthcare that issues supplemental policies on the open market. Or it could be an insurer that offers group plans to employers. Whether that group insurance is for retirees or current employees, it, along with Medicare, would be responsible for paying the bulk of the client’s medical bills.

The question is, who pays first? And does it matter to the client?

When a client goes to the doctor, they are asked for their insurance cards. If they have Medicare and a supplemental policy (whether purchased on the open market or issued through a group insurer), the bill will be sent to both insurers. (The client may be asked for a copayment up front.) If the client is still working and the employer has 20 or more employees, the group insurer will pay first; Medicare will pay second. If the client is retired, or if still working and the employer has fewer than 20 employees, Medicare will pay first; the group plan will pay second. These rules are set forth in Medicare’s Secondary Payer Rules.

Note that the Medicare Secondary Payer Rules only come into play if the client is enrolled in Medicare. Because clients turning 65 often wonder if they need to enroll in Medicare in the first place, you’ll need to be prepared to walk them through the rules and help them understand how their doctor bills get paid. This will help them decide if they can, should, or must enroll in Medicare.

Let’s take the most common situation: Client turns 65, is still working and covered by an employer plan. Will he be penalized if he doesn’t enroll in Medicare at 65? No. The fact that he is still working and covered by a group plan—regardless of the number of employees covered—means he is entitled to a Special Enrollment Period that allows him to enroll in Part B after age 65 without penalty.

But what about his medical bills? Will his group insurer keep paying them after he turns 65? The answer depends on how many employees there are. If 20 or more, the group plan will keep paying the same as before. The client does not need to enroll in Medicare, but if he does, Medicare now serves as the “gap” insurer to the group health plan. Medicare could cover the deductible and other amounts the employee would normally be responsible for. So even though a 65-year-old client is not required to enroll in Medicare, they may want to in order to have additional coverage (but not if the plan is an HSA and they want to keep making contributions to it). The main question is how much the client would pay for the additional coverage: if income is high enough to trigger the IRMAA, it may be too expensive and not worth it. So the question for an over-65 client who is working for an over-20 employer is whether he wants additional health care coverage and is willing to pay for it.

The question for an over-65 client who works for an under-20 employer is different. In fact, it’s not a question at all: this client must enroll in Medicare in order to get their bills paid. At least that’s according to the Medicare Secondary Payer Rules. If a group plan covers fewer than 20, the insurer pays secondary to Medicare. So before paying, it would look to be sure that Medicare has paid its share before stepping in to cover the gaps. If Medicare hasn’t paid—because the client never enrolled in Medicare—the group plan won’t pay either. The assumption is that anyone age 65 or older will have enrolled in Medicare. Problems can arise when clients turn 65 and fail to enroll in Medicare because no one told them they had to. They assume their employer insurance works the same as always not realizing that the Medicare Secondary Payer Rules kicked in the month they turned 65 and now their insurance won’t pay until Medicare has paid its share.

There may be one exception: sometimes group insurers volunteer to pay in the absence of Medicare. If so, this will be stated in the plan’s evidence of coverage booklet. This is why you’ll sometimes see over-65 clients who work for small companies continue with their employer plan the same as before: they go to the doctor, the bill gets sent to the insurance company, and the insurer pays first, even though it doesn’t have to. The risk here is that the insurer could decide not to pay, claiming lack of responsibility under Medicare’s Secondary Payer Rules and the fact that the client should have enrolled in Medicare at age 65.

Note that retiree insurance and COBRA both pay secondary to Medicare. A client with either of these plans must enroll in Medicare in order to get their bills paid. Clients can go ahead and keep their retiree insurance: it may provide better benefits than a Medigap policy purchased on the open market. But no client over 65 should have COBRA without also having Medicare. And since COBRA is expensive, there’s really no point in having it.

Medicare Advantage plans work very differently. These plans work under a managed care model rather than a fee-for-service model. Here, the insurance company actually provides the care rather than just paying for it. Medicare pays the insurer an amount approximately equal to what it would cost to insure each person under Original Medicare, then the insurer is responsible for delivering care through providers it has contracted with. The only “bills” a client needs to worry about are the copayments due at the time of each visit, plus any extra charges that may be incurred if the client sees a provider who is out of the plan’s network. (Article courtesy of Horsesmouth)

…read more