For years, insurance agents have advised their Medicare-eligible clients who are still working and coveredunder their employer’s group health plan to decline Medicare PartB. There is a monthly premium for Part B coverage, and since thegroup plan is primary for companies with 20 or more employees,enrolling in Part B is unlikely to provide much additionalprotection.

These employees, their brokers explain, can simply enroll inPart B when they retire with no penalty and no waiting period sincethey are coming off of a group insurance plan. Part A, though, is adifferent story. By the time they reach age 65, most people havepaid into the Medicare system for long enough to receive Part A atno charge — why not take it if it’s free?

The reason, of course, is that enrollment in either Part A orPart B of Medicare makes an individual who’s covered by anHSA-qualified high deductible health plan ineligible to contributeto a health savings account. As a result, some brokers are nowrecommending that, in addition to Part B, their clients alsopostpone enrollment in Medicare Part A.

Unfortunately, due to a recent court decision, this may be verybad advice. On March 21, 2011, Federal District Court JudgeRosemary Collyer dismissed a two-and-a-half year lawsuit thatsought to allow people receiving Social Security benefits to optout of Medicare Part A.

Under the current rule, any retiree who opts out of Part A alsoforfeits all past and future Social Security retirement benefits.This means that seniors would stop receiving a Social Securitycheck and would be required to repay any benefits received prior todisenrolling from Part A. The lawsuit, known as Hall v. Sebelius,was originally filed Oct. 9, 2008 and alleges that three provisionsin the Social Security Administration’s Program Operations ManualSystem, an SSA handbook designed for internal use by SSA employeesin processing claims, are illegal.

These rules tie a person’s Social Security benefits to theirenrollment in Part A, but the plaintiffs argue that the twogovernment programs are voluntary and that the application for eachof these programs is not dependent on the application for theother. In dismissing the case, Judge Collyer said that “requiring amechanism for plaintiffs and others in their situation to‘disenroll’ would be contrary to congressional intent, which was toprovide ‘mandatory’ benefits under Medicare Part A for thosereceiving Social Security retirement benefits.”

She concluded that the “plaintiffs are trapped in a governmentprogram intended for their benefit. They disagree and wish toescape. The court can find no loophole or requirement that thesecretary provide such a pathway.” The judge appears to be correctabout congressional intent, as the Senate had an opportunity tomodify this requirement during the last session but chose not to doso.

Senate Bill 3094, “a bill to allow individuals to elect to optout of the Medicare part A benefits,” was introduced by U.S. Sen.Jim Bunning, R-Ky., on March 9, 2010, just two weeks before thehealth reform legislation was signed into law. The bill was readtwice and referred to the Committee on Finance but never went anyfurther. “This is something that Congress really needs to fix,”says Susan Murray, owner of JME Insurance in Dallas.

“We’ve been watching the bill and the lawsuit closely, hopingone of the two would provide our clients with the option to delayMedicare Part A the same way they can Part B.” In the meantime,Murray has advised her Medicare-eligible clients not to postponePart A enrollment. “The HSA tax deduction is nice, but it’s notworth jeopardizing your Social Security benefits,” she says.

The text of Senate Bill 3094 was short and to the point:“Notwithstanding any other provision of law, in the case of anindividual who elects to opt out of benefits under part A of titleXVIII of the Social Security Act, such individual shall not berequired to opt out of benefits under title II of such act as acondition for making such election; and repay any amount paid undersuch Part A for items and services furnished prior to making suchelection.”

Jim Bunning is now retired, replaced by U.S. Sen. Rand Paul.There’s no word on whether Paul or another senator will reintroducethe bill. As for the lawsuit, the plaintiffs in Hall v. Sebeliushave promised to appeal the decision, but it’s sure to be a lengthyprocess. One other possible solution lies in a bill that U.S. Sen.Orrin Hatch, R-Utah, plans to introduce that will, in the words ofRoy Ramthun, President of HSA Consulting Services and former seniorhealth policy advisor to President George W. Bush, “help take HSAsto another level.”

The bill, among other things, would allow an individual enrolledin Medicare Part A but not Part B to contribute to a health savingsaccount. In a recent article, “Hatching a Bill to Take HSAs to aNew Level,” Ramthun explains, “Once a person turns 65, they usuallyno longer contribute to their HSA because of automatic enrollmentin Medicare Part A. However, the current deductible for hospitalcoverage under Medicare Part A is very high, almost $1,200 peradmission, nearly equal to the minimum deductible required forHSA-qualified plans.

The hatch bill would allow Medicare beneficiaries enrolled onlyin Part A to continue to contribute to their HSA accounts.” If passed, this will be a welcomed change for the growingnumber of Medicare beneficiaries who continue working past 65. AsHSAs grow in popularity, more and more seniors find that they canparticipate in their employer’s High Deductible Health Plan butcannot make contributions to a health savings account nor acceptHSA contributions from the employer. As for delaying Medicare PartB, proceed with caution here as well. For groups with fewer than 20employees, Medicare is primary.

If a worker at a smaller firm postpones Medicare Part B, he mayfind that his group plan doesn’t cover everything he expected itto. According to Medicare’s Coordination of Benefits Office, if anemployee is eligible for Part B, the group health plan can pay asif the employee had Medicare even though he’s not signed up. Thismeans that the group plan may only be responsible for 20 percent ofthe cost of Part B covered services whether Medicare is paying itsshare or not — something many employees don’t figure out until theyhave a big claim.

Eric Johnson is the vice president of sales development forFirst Horizon Msaver, one of the nation’s leading HSAadministrators. He can be reached at 817-366-7536 or [email protected].You can also find Eric on LinkedIn at www.linkedin.com/in/ericjohnson262.