The Medicare Secondary Payer (MSP) provisions stipulate that Medicare is the secondary payer to certain types of insurance or health plans. This includes group health plans (GHPs) that are contributed to, sponsored by, or facilitated by a Medicare beneficiary’s employer, where the Medicare beneficiary has current employment status.
Medicare and Group Health Plan Coordination
MSP provisions apply to group health plans that employers or employee organizations sponsor for a group of employees, dependents, and retirees. For purposes of the MSP rules, group health plans include fully-insured and self-insured plans, plans of government entities (Federal, State, and local), and employee organization plans such as union plans, employee health and welfare funds, or other employee organization plans.
As the primary payer, GHPs must provide the same coverage to Medicare beneficiaries as to all other employees and their dependents. If the GHP does not pay in full for services (as per the coverage provisions) or denies payment for services it does not cover, Medicare may pay secondary for Medicare-covered services up to a Medicare-approved amount.
Over 65 Individual on Employer Group Health Plan AND: | Primary Coverage | Secondary Coverage |
Employer has <20 Employees | Medicare | Group Health Plan |
Employer has 20+ Employees | Group Health Plan | Medicare |
Employee on Retiree Plan | Medicare | Group Health Plan |
Employee on COBRA | Medicare | Group Health Plan |
Under 65 Disabled Individual on Employer GHP AND: | Primary Coverage | Secondary Coverage |
Employer has <100 Employees | Medicare | Group Health Plan |
Employer has 100+ Employees | Group Health Plan | Medicare |
Employee on COBRA | Medicare | Group Health Plan |
End-Stage Renal Disease Individ- ual on Employer GHP AND: | Primary Coverage | Secondary Coverage |
Employee in First 30 Months of Medicare Entitlement | Group Health Plan | Medicare |
Employee After 30 Months of Medicare Entitlement | Medicare | Group Health Plan |
Prohibition on Incentives
The Medicare Secondary Payer (MSP) rules prohibit employers or other entities from offering Medicare beneficiaries incentives to terminate enrollment or refrain from enrolling in a group health plan that would otherwise be primary to Medicare. Incentives can take many forms. Examples of common types of incentives that may violate the MSP rules:
• Offering other benefits/perks in exchange for foregoing GHP coverage;
• Opt-out/waiver payment to Medicare-entitled participants only;
• Limiting Medicare Supplement plans to those who do not enroll in the GHP;
• Paying employee’s Medicare premiums;
• Offering a Medicare Supplement plan on more favorable terms than the GHP, making the GHP undesirable; or
• Employer sponsoring, contributing to, or having any involvement with an individual Medigap or Medicare Supplement plan when the Medicare-eligible employee declines the group health plan.
If it is determined an employer is incentivizing Medicare-eligible employees to forego GHP coverage, a penalty of up to $5,000 per violation may apply.
Small Employer Exception
MSP rules do not apply to an employer with fewer than 20 employees. Employers meet the 20 employees or more requirement if it employed 20 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding year. Full-time and part-time employees count toward the 20 employee threshold and the 20 weeks do not have to be consecutive.
A GHP that is a multiple employer or multi-employer plan may request that the MSP rules do not apply to specifically identified employees (and their dependents) of a specifically identified employer that the GHP identifies as having fewer than 20 employees. For more information on how to apply for an exception, see: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/EmployerServices/Small-Employer- Exception.html.