Federal regulations under the Patient Protection and Affordable Care Act (PPACA) affect how employers and other small businesses receive group healthcare coverage. Of course, there are many factors and guidelines that govern how employees can use Medicare as a secondary payer. For example, these guidelines prohibit companies larger than 20 employees from incentivizing older employees (age 65 or older) to elect Medicare instead of a group health plan.
As we review the basics of Medicare secondary payer rules, there are many questions that arise over the specific provisions of the law. This guide is designed to answer some of the most frequently asked questions related to employers’ use of Medicare as a secondary payer.
- Who is affected by changes in the Medicare Secondary Payer rules?
The biggest group affected by these changes are currently employed individuals or spouses who are at least 65 years of age and use a group health plan through an employer with at least 20 employees. This does not apply to eligible employees who instead elect to use Medicare, nor does it apply to individuals who use retiree group health plans.
- Are employers with 20+ employees required to offer health coverage to older, Medicare-eligible employees?
Yes, small and medium-sized employers are required to offer the same health coverage options that are offered to younger employees. This also means that Medicare-eligible families also receive the same spousal benefits that their non-eligible counterparts do.
- Can Medicare-eligible employees elect either group health coverage or Medicare?
Older employees that are eligible for Medicare have the option to, but are not required to, use Medicare coverage. At no point is an employer allowed to induce these individuals to opt out of group healthcare coverage. If these employees elect the group health plan, they can also use secondary Medicare coverage after enrollment.
- If an eligible employee elects Medicare as their primary insurance provider, can the employee use the group health plan for secondary coverage?
No, this is prohibited. On the other hand, this works in the opposite direction, where employees can use Medicare as their secondary insurer.
- Does Medicare know if an employee has the option of using a group health plan through their current employer?
Yes, The Centers for Medicare and Medicaid (CMS) generally use questionnaires and other forms of verification to see if an employee can seek primary coverage through another plan. Individuals usually cannot receive entitlements from Medicare Part A or Medicare Part B until this information is complete.
- Are there any reporting requirements regarding this secondary payer system?
A responsible reporting entity (RRE) is required to collect data from group health sponsors and participants, and then send this information to CMS quarterly. An RRE can be an insurer, third-party administrator, or plan administrator depending on the nature of the group health plan. This information is contained in Medicare Section 111.
- Are part-time employees included in the 20-employee baseline for Medicare Secondary Payer coverage? How do employers know when they have reached the mark?
Each part-time employee is counted as one full employee. In other words, employers with 20 part-time employees must still meet these Medicare guidelines. This also means that employees that are not included in the group health plan are also part of the 20-employee benchmark. At the same time, self-employed individuals in the group health plan are not included in this number.
The basic requirement is that if there are 20 or more employees (both full or part-time) employed by the company for each day of a 20-week period, then these Medicare guidelines fall into place.
- What happens when an employer exceeds 20 employees in a 20-week calendar period?
No matter how many employees worked in the previous year, once an employer has at least 20 registered employees for each day of a 20-week period, they must offer primary insurance coverage. Even if that number later drops to below 20, then this standard still applies.
- Can a business with fewer than 20 employees reimburse employees for Medicare Part B or Medicare Part D premiums?
For businesses that have fewer than 20 employees, the Medicare Secondary Payer rules are much different. The Patient Protection and Affordable Care Act (PPACA) places strict limits on an employer’s ability to reimburse individual premiums, so unless the employer’s reimbursements is specifically outlined as part of a group health plan, then these payments are viewed as non-compliant and subject to monetary penalties of $100 per day per employee.
- How can a Medicare reimbursement plan be integrated into a group health plan?
In order for an employer to integrate a Medicare reimbursement plan into their group health coverage plan, they need to meet the following criteria:
- The group health plan must be offered to all employees, regardless of age or Medicare eligibility status;
- Any employee who receives premium reimbursement payments must be enrolled in Medicare Part A, and either Part B or Part D;
- Premium reimbursement programs can only be used for Medicare Part B or Medicare Part D premiums, in addition to excepted benefits from Medigap premiums.
- If a small business (with less than 50 employees) has been using a system that reimburses employees for Medicare premiums, are they at-risk for a $100 per day penalty?
Yes. This change took effect June 30, 2015 and all employer Medicare reimbursement plans after this date that do not meet the qualifications of the PPACA will be subject to fines and monetary penalties.
- What are the penalties that the CMS will hand out if an employer violates the PPACA’s rules on Medicare Secondary Payers or premium reimbursements?
Medicare’s Civil Monetary Penalties refer to numerous violations that will cost an employer big time if they violate the law. For example:
- Any organization that incentivizes an employee, whether through written or verbal means, to forgo group health coverage will be fined up to $5,000 per offer.
- If an organization fails to report required group health information as specified under Section 111, the CMS can issue a fine of $1,000 per day for each instance of non-compliance.
In addition, there may also be penalties from the IRS. For instance:
- Organizations that participate in non-conforming group health plans may be subject to an excise tax levied by the IRS which equates to 25% of the employer’s group health expenses for that year. A non-conforming group health plan is classified as one that: (1) does not take Medicare-eligibility into account when developing plans for individual employees, (2) fails to provide the same benefits to individuals 65 or over, (3) offers different levels of coverage for employees with end-stage renal disease (ESRD), or (4) fails to offer a refund for incorrect Medicare payments.
- Furthermore, if an employer reimburses an individual for Medicare premiums that are not part of the group health plan, they can be fined $100 per day per violation by the IRS.
- Are there other PPACA rules that affect individuals who qualify for Medicare through disability or ESRD?
Yes. For disability, individuals that are under 65 years of age and Medicare-eligible will still use Medicare as the secondary payer, as long as they are covered by a large group health plan of 100 employees or more.
For employees that are Medicare-eligible through ESRD, the group health plan will be the primary payer for the first 30 months. After that period, Medicare becomes the primary payer.
Employers must navigate a complex web of new regulations in order to comply with strict federal standards. Medicare’s secondary payer rules certainly change the way that thousands of small businesses have been using health insurance for years. The average employer could run the risk of CMS or IRS penalties if they do not adopt new health insurance policies. Because the June 30th deadline has already passed, we advise all employers with more than 20 employees to promptly review their group health plans to make sure they comply with the PPACA’s guidelines.
Without a partner to help guide your company through these new regulations, the health insurance world can be vastly complicated. Call Providence Insurance Group today to understand how these Secondary Payer rules might affect your business.