In this week’s blog, we are going to attempt to explain “who pays first” when a person has both Medicare AND group insurance.
Medicare (NOT Medicaid) is a national health system that provides benefits to individuals who are age 65 or over, younger people who qualify for Social Security disability benefits, and people with End Stage Renal Disease (ERSD) and ALS. The majority of people on Medicare are in the over 65 category, retired, and collecting Social Security retirement benefits. However, an individual could be on Medicare and a GROUP health insurance plan. This would happen if:
- He/she is over the age of 65 and still working enough hours to qualify for group insurance
- He/she meet one of the categories to qualify for Medicare noted above and is also covered by group insurance
In these circumstances it is very important to understand which plan will pay first when the individual receives services. It is equally important for employers to have a working knowledge of this so they do not run into payment problems with CMS which administers the Medicare program. The rules are very complex and we cannot cover all of the circumstances here but let’s talk about how they would apply to ACTIVE (not retirees) employees and their spouses.
When there’s more than one payer, “coordination of benefits (COB)” rules decide who pays first.
Here is a quick summary Medicare COB with group insurance for a few common situations:
- Employee is 65 or older, and the employer has 20 or more employees: the health plan pays first, and Medicare pays second.
- Employee is 65 or older, and the employer has less than 20 employees: Medicare pays first, and the health plan pays second.
- Employee is disabled (not by ERSD), under age 65, and the employer has 100 or more employees: the health plan pays first, and Medicare pays second.
- Employee is disabled (not by ERSD), under age 65, and the employer has less than 100 employees: Medicare pays first, and the group health plan pays second.
- Employee has ERSD: the group health plan pays first and Medicare is second for the first 30 months. After that, Medicare pays first, and the group health plan pays second
We have had two incidents recently which highlight the importance of understanding these COB issues.
The first involved a small business with about 30 employees. The spouse of one of the employees was disabled prior to age 65 and was on the waiting list for transplant surgery. Medicare was primary payer because the group insurance plan was sponsored by an employer with fewer than 100 employees. However, the spouse turned 65 last August which triggered a change from Medicare primary payer to group health as primary payer. This came to light when the spouse was at the transplant center the following January and the family was informed that Medicare was denying the claims. At that point we had to contact the health plan and verify via payroll records that the employer did employ 20 or more employees. It all worked out, but was certainly stressful for the family when they were already dealing with a difficult medical situation.
The second situation involved a disabled spouse under the age of 65, but in this case the employer had 100+ employees. Remember that the coverage moves from Medicare primary to group health plan primary when the employee count is 100+. The health plan initially denied the claims because it was looking at the ENROLLED employee count of 79 and processing claims as if there were fewer than 100 employees. We provided the health insurance company with proof that the employer had more than 100 TOTAL employees for 50% or more of its regular business days during the previous calendar year, and they agreed to pay the claims.
- There are many situations (Cobra, retirees, veterans, workers compensation, accidents, ALS, Medicaid, etc) that are subject to Medicare rules that we cannot address here.
- Always respond to surveys or questionnaires from your group health plan requesting verification of employee count. Accurate information will minimize incorrect claims payments.
- Notify your benefits advisor if you experience an increase or decrease in employees which would drop you below or above 20 employees for an extended period of time. Again, please note that this includes anyone who received payments that are subject to FICA taxes regardless of their status as full-time, part-time, leased, consultants or seasonal employees. And please be sure to note how many TOTAL employees you have when you submit your census to us.
- Contact your benefits advisor if you receive a demand letter from the Commercial Repayment Center of CMS/Medicare that you (the employer) are responsible for claims repayment for one of your current or past employees. The laws expressly authorize Medicare to recover its mistaken payments from the employer, insurer, TPA or another plan sponsor.
- Be cautious when counseling employees about whether they should enroll in Medicare. Although we frequently find that there are employees or their dependents who are unnecessarily paying for Parts B or D of Medicare, it is always best to be sure that the group plan is primary payer before they enroll in or drop Medicare.
Thanks for taking the time to read our blog! If you have questions about this topic or others related to employee benefits, call us at (866) 724-0008 or click the link below.