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Medicare and the State
Farm
Group Medical Plan
by Gabriel A. Nazziola, CLU,
LUTCF
Inasmuch as this article has
limited application, let me save you some of your
valuable time, by suggesting that if you and/or your
spouse are NOT approaching age 65 and near eligibility
for Medicare, you need not read any further.
Approximately three months
before you are to attain age 65 you will receive a form
letter from the State Farm ‘Associate Services Center’
in Bloomington. There is some very important information
in the letter regarding the ‘identity’ of the
State Farm Group Medical Plan that you should bring with
you when you make your appointment to see a Social
Security Administration representative at your local
service office. More specifically, that State Farm
agents and their dependents are not
covered under a “Large Employee Group Health
Plan”. State Farm agents are independent
contractors, covered under a “Multi-Employer Health
Plan”. THIS DISTINCTION IS IMPORTANT! And, while we
know there are other ways to apply for your Social
Security Benefits, (internet, telephone, etc.) we do
recommend a personal visit where you can engage in the
simplicity of give and take in ‘good old conversation’
with a live human being.
The important issue here is
that prior to January 1, 2005, at age 65
Medicare, became your primary health coverage
provider. Your State Farm Group Medical Plan, became
(for you) a secondary provider, or
supplemental coverage. The Group Medical Plan would
still be the primary health provider for your
spouse, and dependents.
The consequence of that
change of Medicare becoming your primary health
provider was that there would be a significant reduction
in your State Farm Group Medical Plan monthly premiums.
For example, an agent prior
to January 1, 2005, before attaining age 65, who had
Medical - Option B would be paying a monthly premium of
$103.66. An agent plus one dependent, with Medical –
Option B would be paying $217.70 monthly.
Upon attaining age 65, when
Medicare became the primary provider (ONLY FOR
THE AGENT), the agent’s monthly premium was reduced
to $68.26; about a 35% reduction, in recognition of the
risk that was to be assumed by Medicare.
Likewise, when the
dependent attained age 65, and Medicare then became
the primary provider for BOTH THE AGENT AND DEPENDENT,
there should have been a commensurate reduction in the
monthly premium for the dependent at that time, to
reflect the obvious reduction in risk to the State Farm
Group Medical Plan. But, oddly enough, State Farm said
there would be only one reduction in the premium.
Meanwhile, what actually
happened was that the dependent’s monthly
premium, which was $114.04 ($217.70 less $103.66) before
the agent attained age 65, also got reduced from $114.04
to $75.08; also about a 35% reduction. While this is
puzzling because there had been no reduction in risk
assumption on the dependent, since the State Farm
Group Medical Plan was still the primary provider for
the dependent’s coverage, their explanation was that “we
only make one reduction of the premium and it takes
place when the agent attains age 65”.
This all changed as of
January 1, 2005 because Medicare has redefined when
they become the “primary” health provider.
Essentially, they are saying that if the agent is still
an active agent when he or she attains age 65,
the State Farm Group Medical Plan remains your “primary”
health provider. According to a State Farm advisory,
this rule also applies to spouses of active agents who
are 65 or older, regardless of the age of the member.
State Farm has, however,
further indicated that the premiums to be paid for
calendar year 2005 by an age 65 active agent, will
remain as though Medicare remained your primary health
carrier for the Option selected (no increase or
decrease). Your premiums for 2006, however, will reflect
that Medicare IS NOT your primary carrier (meaning an
increase from the past year premiums).
As always, we are not
attorneys or accountants, we’re State Farm agents just
like you, so we recommend that you run this information
by your accountant, your attorney or your tax advisor
BEFORE taking any action or making any election
regarding your health insurance coverage. |
