There has been a long-standing rule that employers are prohibited from offering an incentive of any kind to an individual who is Medicare-eligible to enroll in Medicare in lieu of the employer’s group health plan. Encouraging your older employees to leave your plan and financially incenting them to do so can cost you – big time.
While there are fines that can be assessed for encouraging or enticing the employee to take Medicare ($5,000 per situation), the bigger “hit” is the bill for claims that Medicare paid as primary versus what they should have paid as secondary. This claim can typically be for a scary big amount; representing what the carrier (if fully-insured) or employer (if self-funded) must repay Medicare for the discovered individuals.
The IRS and CMS, in a joint data-matching program, are mailing out demand for payment letters. “Nearly every employer who has received one of these letters is usually in shock at the amount demanded that they (or the carrier) repay. Often your client is pointing the finger at you for suggesting that Bob (who turned 65 last year and is one of the reasons their renewal was so high) go on Medicare and encouraged them to pay for his Med Supp and Part D plan premium (which you probably handled for Bob, too).”