ISSUED 01/25/2021
Very often we speak with working, Medicare-eligible, or Medicare-entitled, employees who are trying to decide whether
or not they should enroll in both their employers’ group health plan and Medicare Part B. The answer is . . . it depends. It’s necessary to explore two key facts to make that determination: the size of the employer, and the employer group health plan’s coordination rules.
Step 1: Determine the employer size
Regardless of whether an individual is entitled to Medicare, employees and spouses age 65 or older, including divorced or common-law spouses of employees of any age, are entitled to the same plan benefits under the same conditions as employees and spouses under age 65. Medicare-entitled employees of certain size employers, or those with end-stage renal disease, can enroll in both the employer’s plan and Medicare if they so choose.
Employer size determines which plan, the group health plan or Medicare, will pay first for active employees. Medicare is always the primary payer for retiree health plans. Specific rules, called Medicare Secondary Payer rules, clearly define which plan has the primary payment responsibility.
To ensure uniformity, these rules state that the employer group health plan is primary when:
• The employer employs at least 20 or more employees for each working day in each of 20 or more calendar weeks in the current calendar year or the preceding calendar year;
• The first 30 months that an employee is eligible for or entitled to Medicare due to end-stage renal disease (ESRD), regardless of age;
• The employee is under 65, on Social Security disability, and the employer employs 100 or more employees.
Step 2: Payment Rules
Once the order of payment is established, coordination of benefits (COB) provisions will determine how charges are to be paid. The rules implemented by each plan, Medicare and the group health plan, will clarify the actions necessary to maximize benefit payment.
Group health plan is primary - Medicare will calculate payment as if there is no other coverage and then deduct anything the primary plan paid. In other words, the total combined payment of the group health plan and Medicare cannot exceed what Medicare would normally pay.
Medicare is primary – Many group health plans stipulate that the calculation of secondary payment will be based on the balance remaining after Medicare Parts A and B have paid. They clarify that if the insured does not enroll in Medicare Part B, the plan will estimate what Part B would have paid and then calculate their payment on the remaining balance. In this instance, a failure to enroll in Medicare Part B will result in significant out-of-pocket costs. For those with ongoing medical expenses, the premium costs of Medicare Part B may be less than the increased out-of-pocket costs. Therefore, careful consideration should be made when deciding whether to enroll in Medicare Part B.