It’s not uncommon these days for individuals over the age of 65 who are still working full-time and taking advantage of the employer group coverage for either themselves or for themselves and their families. In the past, after a careful evaluation of the plan benefits and costs, I would sometimes recommend that they forgo enrolling into Medicare and stay on their employer plan as long as they were still working full-time and receiving benefits. This was especially true if they were covering their family members who were not 65 and older.
Due to recent changes in Medicare Part D for 2025, that equation has dramatically changed! Starting January 2025, anyone in the above category would have to be sure that their employer group plan’s drug coverage is as good as if not better than Medicare’s drug coverage.
In simple terms, the overall cost of that employee’s total drug cost for the year cannot exceed $2000.00 for the employee’s out-of-pocket costs! Immediately, that means ALL Bronze or HSA plans will not qualify. In most cases, silver plans also will not qualify.
What does this mean for the employee that stays on the employer plan? It means that Part D penalties will start to accrue on January 1, 2025 and will continue to accrue monthly until such time as the employee is enrolled into a qualified group plan or disenrolls from the employer plan and enrolls into a Medicare plan.
Penalties are calculated as 1% of the average cost of a Part D plan which is $46.50 a month for 2025. Roughly .46 cents a month. Which is roughly $5.58 a year. In other words, if the employee stays on a non-qualified plan for 5 years, that will result in a penalty of at least $27.90 a month they will have to pay for the rest of their lives. Once penalties start to accrue, they will never go away. In other words, the employee even when they enroll into a Medicare plan will keep these penalties for the rest of their lives!
Since this is typically open enrollment season for most employers, it is extremely important for the employee to check with their employer to ensure that the plan they are enrolled in is a “qualified plan!”
For more information on this, you can contact me or any qualified insurance broker.