Under federal regulations, Medicare is a secondary payer for many individuals who have an employer group health plan available to them, either as an employee or the dependent spouse or child of the employee. Generally the Medicare Secondary Payer rules prohibit employers with more than 20 employees from in any way incentivizing an active employee age 65 or older to elect Medicare instead of the group health plan, which includes offering a financial incentive. Although premium payment arrangement rules under the Patient Protection and Affordable Care Act (PPACA) provide a limited circumstance for reimbursing Medicare premiums, this option is not feasible for employers with more than 20 employees due to Medicare Secondary Payer rules.
Q1. Who is affected by Medicare Secondary Payer rules?
A1. Medicare-eligible individuals age 65 or over whose employer group health plan is based on the current employment of the individual or spouse, by an employer that employs 20 or more employees, are protected by the Medicare Secondary Payer rules unless the active employee elects Medicare. Health insurance plans for retirees, or spouses of retirees, are not affected because retirement is not “current employment.” Individuals who are eligible for Medicare based on disability or end-stage renal disease (ESRD) are also affected.
Q2. What are employers with 20 or more employees required to offer their Medicare-eligible older employees?
A2. Employers are required to offer employees age 65 or over the same group health plan coverage offered to younger workers. Workers with Medicare-eligible spouses must be offered the same spousal benefits as employees with spouses that are not Medicare-eligible.
Q3. Are employees who are Medicare eligible required to elect their group health coverage or Medicare?
A3. Employees can elect, at their discretion, Medicare or the group health plan as their primary health insurer. Employees that elect their group health plan will then have secondary Medicare coverage if they enroll in Medicare. Their employer cannot induce them or provide incentives to select Medicare as their primary coverage.
Q4. If an employee elects Medicare as his or her primary insurer, may the employee enroll in a group health plan for secondary coverage?
A4. No, this is prohibited.
Q5. How does Medicare know if an individual has the option of enrolling in a group health plan through their employer?
A5. The Centers for Medicare and Medicaid (CMS) mails questionnaires to individuals before they become entitled to benefits under Medicare Part A or enroll in Medicare Part B to determine if they are eligible for primary coverage under another plan.