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TEFRA/Federal Law as it Pertains to Health InsuranceCity of Kalispell Charles A. Harball Office of City Attorney City Attorney 312 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 MEMORANDUM TO: Mayor Pamela B. Kennedy and Kalispell City Council FROM: Charles Harball, City Attorney Chris Kukulski, City Manager Tel 406.758.7708 Fax 406.758.7771 charball@kalispell.com SUBJECT: Effects of Federal Law on Medical Insurance MEETING DATE: Monday, July 21, 2003 Workshop BACKGROUND: Duane Larson brought this issue to my attention after he was advised that he would not be eligible to receive Medicare Supplemental coverage through the City's Blue Cross medical insurance package. Apparently the TEFRA- OBRA federal law places certain restrictions on employer groups that forces primary coverage over to the employer's insurance rather than Medicare. This has an effect on Duane because he is 1) by virtue of his paid position as a Council member, an employee of the City and 2) he is at least 65 years of age. This limits his insurance options to the much more expensive package offered to retirees of the City. Essentially, even after receiving his otherwise generous compensation package from the City, Duane must pay for the opportunity to serve the City. Council should be aware that although this would appear to only apply to Duane, it is not unusual for retirees of the City to wish to become involved in the elective positions of the City and that this situation seems to provide a considerable disincentive to such involvement. RECOMMENDATION: Council may wish to discuss the issue and determine if it is desirable to inquire about a resolution to the problem. Respectfully submitted, Charles Har , City Attorney Chris Kukulski, City Manager Note: If you are eligible for benefits under Medicare A and B, benefits will be paid as if you were enrolled in both Medicare A and B. Unless otherwise required by federal law, benefits payable under Medicare will be determined before benefits payable under this plan. 2.2.1 Group Primary As required by federal law, benefits payable under a group will be determined before benefits payable under Medicare in the following situations: a. For employer groups with 20 or more full- or part-time employees who work 50 percent or more of the typical business days during a calendar year, the group will pay before Medicare for the following covered persons: 1. Those employees who continue to work after age 65; and 2. The dependent spouse age 65 and over of a non -retired active employee. Each individual in 1 and 2 above has the option of elective Medicare as the primary coverage. However, if such an election is made, coverage under this plan must terminate. Such an election must be made in writing. b. For employer groups with 100 or more full - or part-time employees who work 50 percent or more of the typical business days during a calendar year, the group will pay before Medicare for the following covered persons: 1. Employees who become totally and permanently disabled; and 2. Totally and permanently disabled spouses and/or dependents of an active employee. For (a) and (b) above, the employee count (as defined in (a) and (b) above) of one calendar year determines whether these laws apply during the following calendar year, even if the count drops below 20 or 100 that following year. If an employer does not have 20 or 100 employees as defined above, but attains that number, these laws apply immediately. 2.2.2 Group Secondary Federal Law requiring that group plan benefits be determined before Medicare benefit does not apply iOthe following cases: a. Rntro�n' � ' b. Spouses of retirees; c. Employers with fewer than 20 employees, as defined above under Group Primary (a)|and d. For Medicare disability cases, employers with fewer than IOO as defined above under Group Primary (b). 2.2.3 End -Stage Renal Disease Special nu|nS apply when a person iSentitled to Medicare benefits solely onthe basis of enU'sta8erana| disease. Medicare benefits are secondary tobenefits payable under anemployer plan for services furnished an ESRD(end'3tDgarenal disease) beneficiary asspecified below. Medicare will bethe secondary payer for upt0 30 months even if the ESRD beneficiary becomes disabled oraged (age 65) before the coordination period is over. In additiVO, a new coordination period will start for working aged Or disabled beneficiaries as ESRD provisions begin to apply. The combined payments bvMedicare and the group plan will be no more than the charge for the covered services the employee receives. Large Group Manual