When an employee is enrolled in both Medicare and an employer’s group health plan, the question of which plan pays first, and whether the employee can stay on the group plan at all, can be confusing. The answer hinges largely on the size of the employer. This is a general overview; because the rules are nuanced and the stakes are high, employers should confirm their specific obligations with legal counsel.
A Quick Medicare Refresher
Medicare is the federal health insurance program for people 65 and older, along with certain younger people with disabilities or specific conditions. It comes in parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage), and Part D (prescription drug coverage). Group health plans, by contrast, are employer-sponsored coverage for employees, spouses, and dependents. How the two coordinate depends on the employer’s size.
Small Employers (Fewer Than 20 Employees)
For groups with fewer than 20 employees, Medicare generally pays as the primary payer for an actively employed person who is enrolled in Medicare. In practice that means Medicare pays its share of covered services first, and the group health plan pays secondary, covering remaining costs up to the plan’s limits without duplicating what Medicare already paid. An actively employed Medicare enrollee may continue in the group with the same benefits, but the group coverage will not duplicate Medicare’s.
Because the group plan and Medicare can have different coverage rules, some services covered by one may not be covered by the other, so employees should understand both. They should also inform both Medicare and the group plan of their dual coverage to ensure proper coordination, and confirm that their providers accept Medicare to avoid billing problems.
Larger Employers (20 or More Employees, TEFRA-Eligible)
Employers with 20 or more employees are generally subject to TEFRA and the Medicare Secondary Payer rules. These employers must offer active employees age 65 and older, and the age-65-and-older dependents of active employees, the same group health benefits offered to everyone else. For these employees, the group health plan is primary to Medicare when they qualify for Medicare based on age. A group is typically TEFRA-eligible if it employed 20 or more full-time or part-time employees during each of 20 calendar weeks in the current or preceding year.
Important Protections and Cautions
A few points cut across employer size. Employers generally must not offer financial or other incentives to encourage employees or spouses to drop the group plan in favor of Medicare. Guidance also indicates that employers generally cannot force Medicare-eligible employees off the group plan simply because they are Medicare-eligible, and the Age Discrimination in Employment Act prohibits discriminating based on age, including excluding someone from coverage solely because they are a Medicare beneficiary (subject to the “equal benefit or equal cost” standard). Employees retain the right to choose whether to enroll in Medicare and keep their employer coverage, or to decline the employer plan and use Medicare.
There is some genuine nuance and even conflicting commentary about exactly what a very small employer may or may not do regarding Medicare-eligible employees, which is precisely why this is not a do-it-yourself area. Employers should provide accurate coordination-of-benefits information to employees and consult legal counsel to ensure compliance with TEFRA, the MSP rules, the ADEA, and any applicable state requirements before making decisions about Medicare-eligible workers.