First Baby Boomer applies for Social Security: Employers Beware

On October 16, 2007, Kathleen Casey-Kirschling, a former teacher from New Jersey, applied for benefits over the Internet becoming the nation’s first baby boomer to make a claim for Social Security. The Chicago Sun-Times reports that Casey-Kirschling was born one second after midnight on January 1, 1946, making her the first baby boomer — a generation of nearly 80 million born from 1946 to 1964.

The social, economic, and political implications of this “demographic tsunami” will have dramatic impact on employers through worker shortages and increased government spending. Tony Allison has a great summary of these issues in his article The Boomer are Coming, The Boomers are Coming- Demographic Tsunami is at the Gate, where he comments on impact of government spending and Medicare costs.

From a legal perspective, the greatest impact on employers of baby boomer retirements may be on employee benefit plans. I would expect that government efforts to cover the sky rocketing expenses of the Medicare Program and Social Security will result in increased cost shifting to already strained employer health and retirement plans.

Cost shifting mechanisms already exist from Medicare to employer sponsored health plans in the form of Medicare’s Secondary Payer Rules (MSP). MSP rules act as coordination of benefit provisions shift first payer status to medical plans, auto insurance policies and worker’s compensation insurance coverage. It is likely that these types of coordination of benefit approaches may increase. For example, H.R. 2549 would extend Medicare Secondary Payer to recover Medicare payments from workers’ compensation settlements.

The Medicare Secondary Payer Rules apply when an employee or an employee’s spouse is covered by or entitled to Medicare and the group health plans of employers with 20 or more employees as more fully described in extensive regulations. However, there is an excellent booklet entitled Medicare and Other Health Benefits: Your Guide to Who Pays First which describes the various scenarios that can arise. The biggest issues for employers arise from two areas. First, an employer/insurer may not discriminate in terms of coverage or charge more for individuals who are covered or entitled to coverage under Medicare. Second, Employers and insurers are prohibited from offering a financial incentive not to enroll or to terminate enrollment in a group health plan so as to make Medicare a primary payer.

Employers will need to be increasingly cautious in plan design to anticipate the impact of future government efforts to shift the cost of medical and retirement benefits to private employers.