Welcome to: Medicare and Social Security 101 Presented by:

1. Welcome to: Medicare and Social Security 101 Presented by: WGA’s Retiree Solutions Team and WGA’s Compliance Practice

2. Introducing the webcast presenters:

3. Alyssa Martin, SpeakerVice PresidentMember of WGA’s Retiree Solutions Team

4. Kathleen McSherry, SpeakerSenior Vice President Member of WGA’s Compliance Practice

5. Medicare Basics

6. Outline of TopicsCovered: Medicare • Medicare’s initial purpose • Eligibility for Medicare • Medicare Part A details and cost • Medicare Part B details and cost • Medicare Part C (Medicare Advantage), Medicare Supplement and MedigapPlans • Medicare Part D details • Medicare and Employer Group Health Plans • Medicare and COBRA • Medicare and ESRD • Medicare and Health Savings Accounts • Employer Considerations with Medicare

7. Why do we have Medicare? • Medicare was created in 1965 to provide health insurance protection for the elderly and disabled • Medicare began with only Part A and Part B to help defray the costs of medical care after retirement • Medicare has expanded over the years to include Part C, gap coverage provided by private vendors, and Part D, most recently added to help cover the ever-growing prescription costs for the aged population

8. Who is eligible for Medicare? • Individuals who have reached age 65- most common • Individuals with End Stage Renal Disease (ESRD) • Individuals who have been Social Security disabled for more than 24 months • Social Security disabled has a much higher threshold than insured disabled

9. What are the 4 basic parts to Medicare? • Part A: Hospital Insurance • No cost to individuals who have worked 10 years or more • Provided by government • Part B: Medical Insurance • Monthly cost paid to Medicare based on income • Provided by government • Part C: Medicare Advantage Plans • Covers gaps in Medicare Parts A & B coverage • Monthly premiums paid to private vendor • OR • Medicare Supplement Plans • Covers gaps in Medicare Parts A & B coverage • Monthly premiums paid to private vendor • Part D: Prescription Drug Coverage • Plan designs set by government • Monthly premiums paid to private vendor

10. What is Medicare Part A? • Medicare Part A: Hospital Insurance • Hospital Insurance pays for inpatient hospital, skilled nursing and some home health care

11. Medicare Part A: How to Obtain and What is the Cost? • Most individuals are eligible for Medicare Part A on their 65th birthday • If someone retires prior to age 65, they need to wait until their 65th birthday to obtain Medicare Part A coverage • An individual is automatically enrolled in Medicare Part A when they begin collecting Social Security benefits at age 65 or older • $0 cost to Medicare eligible individuals with 40 or more quarters (10 years) of Medicare-covered employment; this is why most individuals immediately enroll on their 65th birthday • If an individual is not retired by age 65, they can wait until retirement to obtain Medicare Part A coverage as long as primary,creditable group coverage is in place- this is called a Special Enrollment Period (SEP)

12. What is Medicare Part B? • Medicare Part B: Medical Insurance • Medical Insurance covers Medicare eligible physician services, outpatient hospital services, certain home health services, diabetic supplies and durable medical equipment • Medicare eligible physician services include doctor visits, labs, X-rays, emergency room, ambulance, physical therapy, speech therapy, and occupational therapy • 2015 out-of-pocket costs for Part B: • $147.00 deductible per year plus 20% of the Medicare-approved amount for services after $147.00

13. Monthly Costs of Medicare Part B for 2015

14. What if an individual’s income goes down? • If income has gone down due to any of the following circumstances and the change will make a difference in the income level, they would contact Social Security to request a new decision about their Medicare Part B premium: • Marriage • Divorce or marriage annulment • Becoming a widow/ widower • Reducing work hours or stopping work altogether • Losing income from income-producing property due to a disaster or other event beyond their control • Benefits from an insured pension plan stopped or were reduced.

15. Medicare Part B: How does an individual obtain coverage? • If an individual retires retired prior to age 65, they need to wait until their 65th birthday to obtain Medicare Part B coverage, unless they qualify for another eligibility trigger • If an individual is not retired by age 65, and they can wait until retirement to obtain Medicare Part B coverage, as long as they are covered under a primary active group health plan • Please note COBRA does not count as an active group health plan; if an individual is enrolled in COBRA they have an eight month window to apply for Medicare without penalties • Individuals wishing to enroll in Medicare Part B coverage will need to contact their local Social Security office to fill out the proper paperwork up to 3 months prior to their intended effective date of coverage

16. Medicare Part C: Medicare Advantage plans • Private vendors contract with Medicare to provide these plans to individuals • Plans are offered on HMO and PPO platforms • Advantages include: less expensive monthly premiums, routine care, one insurance card and prescription drug coverage • Disadvantages include: small LOCAL networks that limit doctor choice • Routine care includes: some dental, hearing and vision coverage; along with routine physician care • Emergency worldwide coverage is included • Monthly costs for these plans range from $0 to $200 depending on location and coverage levels

17. Medigap and Medicare Supplement plans • Medigap and Medicare Supplement plans are considered “wrap around” plans for Parts A and B to fill in gaps in coverage; provided through private vendors • Accepted NATIONWIDE with any doctor or facility that accepts Medicare • Covers most international emergency medical claims • Individuals show both Medicare and Medigap policy cards; Medicare pays claims primary and Medigap pays secondary • Prescription plans (Part D) must be purchased separately • In MA, BCBS, HPHC and Tufts provide plans ranging in cost from $90 to $190 (without prescription coverage) per month

18. What is Medicare Part D? • Medicare Part D is the prescription coverage for Medicare eligible individuals; provided through private vendors • Plan design is set by the government and includes Initial Coverage, The Donut Hole and Catastrophic Coverage • Medicare Advantage plans include the Rx coverage in their premiums and a separate Medicare Part D plan CANNOT be purchased • Medicare Supplement plans (i.e. Medex) do not include Rx coverage and require an additional Medicare Part D plan to be purchased • Medicare prescription plans range in monthly cost from $15 to $100 depending on the chosen copay and formulary levels • Medicare Part D premiums is also subject to an income “penalty”- these penalties are paid directly to Medicare and NOT the carrier

19. What is Medicare Part D? (Continued) The Donut Hole: Individuals pay for “100%” of the cost of their prescriptions until the total costs for the INDIVIDUAL reach $4,700* Catastrophic Coverage:After$4,700in total Rx cost for INDIVIDUAL Generic: greater of $2.65 or 5% cost All others: greater of $6.50 or 5% cost Initial Coverage:First$2,960in total Rx cost for BOTH vendor and individual; Covered at copay levels; Copays vary by vendor & plan * Please note that all prescriptions purchased in the donut hole will have a 55% discount at point of sale. The full cost of the prescription will go towards the donut hole tally of $4,700, but the member will only pay for 45% of the cost.

20. Determining Employer Size for Medicare Purposes • 20 Employee Threshold • Twenty or more full-time and/or part-time employees during 20 or more weeks in the current or previous calendar year. All active employees, including part-time or other employees who may not be eligible for the employer’s group health insurance, must be counted to determine if the employer is subject to the Working Aged MSP law. • 100 Employee Threshold • One hundred or more full-time or part-time employees on a typical business day during the previous calendar year. All active employees, including part-time or other employees who may not be eligible for the employer’s group health insurance, must be counted to determine if the employer is subject to the Disability MSP law.

21. Medicare’s Interaction with Employer Group Health Plans (GHP) Working Aged - (65 or older) and covered on GHP through current employment of their own or spouse’s Disabled - (65 or under) and covered on GHP through current employment of their own or spouse’s

22. Medicare’s Interaction with COBRA • If individual already has group health coverage under COBRA when you enroll in Medicare, COBRA ends. • If individual elects COBRA coverage after enrolled in Medicare, they can keep their COBRA continuation coverage • COBRA is not active employer coverage and individual has only 8 months (Special Enrollment Period) to enroll in Medicare without facing penalty premiums on Parts B and D

23. Medicare’s Interaction with End Stage Renal Disease (ESRD)

24. Rules for Medicare and Health Savings Accounts • An employee cannot open a Health Savings Account (HSA) to complement their HSA eligible health plan if they are enrolled in Medicare • Spouse’s enrollment in Medicare DOES NOT effect an employee’s eligibility to open an HSA. • An employee may be eligible to drop Medicare coverage • Medicare Part B can be dropped at any time • Medicare Part A can be dropped if the employee is NOT collecting Social Security- if an employee had claims paid out by Medicare Part A, they will have to pay those claims back to drop Part A coverage

25. Employer Medicare Considerations • Medicare Part D Creditable Coverage Notice • Online CMS Disclosure • CMS Reporting to carriers – Social Security numbers of dependents • TEFRA-Tax Equity and Fiscal Responsibility Act of 1982 • Group Retiree Plans – Pre and Post 65 • Medicare Secondary Payer Demand Letters • Additional Medicare Tax (0.9%) – ($125,000/$250,000) • Employer sign off for employees’ Special Enrollment Period (SEP) for Medicare

26. Social Security Basics

27. Social Security • Retirement: • This program provides a lifetime monthly income for qualified workers once they have reached their full retirement age. Depending on when they were born, that age ranges from 65 to 67. The amount of retirement benefits they get depends on their income while they were working. Workers also have the option of receiving a lower monthly income if they begin collecting at age 62.

28. Social Security • Survivors: • This program provides a monthly lifetime income to the surviving spouse of a deceased worker once he or she reaches retirement age. The amount that he or she receives depends on both spouses income while they were working. The survivors program also pays benefits to children under the age of 18 and a surviving spouse caring for them. These benefits end (in most cases) when the surviving children reach age 18.

29. Social Security • Disability: • Social Security pays lifetime monthly income to workers who are disabled and sometimes to their spouses and children under the age of 18. These benefits depend on the worker’s earning history. • Employers should be aware that threshold for disability on a long term disability plan may be lower than Social Security • Gaining a Social Security disability benefit can affect the level of payout from an employer’s long term disability plan

30. Qualifying for Social Security Benefits • Must have worked and paid at least a minimum level of Social Security taxes no less than 40 quarters (10 years). • Disabled for at least one year. Disabled means unable to perform any substantial gainful work due to severe physical or mental impairment. • No requirement that an individual must be an U.S. Citizen to qualify for Social Security.

31. Full Retirement Age (FRA)

32. How much will benefits be? • Request a statement from Social Security • Use Social Security website for an estimate: www.socialsecurity.gov • Benefits are based on lifetime earnings • Based on the 35 years of work in which person earned the most • Formula is applied to arrive at Primary Insurance Amount (PIA) –what would be received at full retirement age • Cost-of-living increases beginning at age 62

33. Social Security Early / Delayed Collecting • Early Collecting • May start as early as age 62 – benefit reduced by about 25% • Benefits are reduced permanently (currently about one-half of one percent for each month started before full retirement age) • Delayed Collecting • If delayed, benefits will increase by a certain percentage depending on the year of birth (from 5.5% - 8% annually) • Only increases until collecting begins or reach age 70, whichever comes first

34. Working While on Social Security • Working while on Social Security could reduce benefit amount only until full retirement age is reached. • For 2014, any income earned above $15,480 is subject to a deduction of $1 deduction of benefit amount for every $2 earned • In the year full retirement age is reached, SS deducts $1 in benefits for every $3 earned above a different limit ($41,400 in 2014), but only count earnings before the month full retirement age is reached

35. Working While on Social Security • Starting with the month full retirement age is reached, full benefits are paid with no limit on earnings. • People should contact SS at the beginning of the year they will reach full retirement age. Even if still working, individuals may be able to receive some or all of their benefits for the months before reaching full retirement age.

36. 2014 Average Monthly Social Security Benefits National Statistics

37. Taxes on Social Security • About one third of beneficiaries currently pay taxes on their benefits • Taxes must be paid if: • Filing as an individual and “combined income” is • between $25,000 and $34,000, individual may have to pay income tax on up to 50 percent of their benefits. • more than $34,000, up to 85 percent of their benefits may be taxable. • Filing a joint return, and individual and spouse have a “combined income” that is • between $32,000 and $44,000, individual may have to pay income tax on up to 50 percent of their benefits • more than $44,000, up to 85 percent of their benefits may be taxable. Combined Income: Individual’s adjusted gross income + Nontaxable interest + ½ of individual’s Social Security benefits = "combined income"

38. Applying for Benefits • What is needed to apply? • Social Security number • Birth certificate(s) – individual, possibly dependents • Proof of US citizenship or lawful Immigration status • Marriage certificate • Military discharge papers • Most recent W-2 or tax return (if self employed) • Possibly other material • How? • www.ssa.gov • 1-800-772-1213 (automated services available 24 hours, but live staff from 7am to 7pm, M-F) • Local Social Security Office

39. Questions?

40. For more information: Refer to WGA’s Retiree Solutions page:WGAins.com/practices/employee-benefits/retiree-solutions/ E-mail: info@WGAins.comWebsite: WGAins.com Blog: blog.wgains.comPhone: 888.261.8884