About a year ago, we posted an article about Medicare Premium Reimbursement Arrangements, which allow small employers to pay for the Medicare Part B, Part D, and supplement premiums for their active employees. As explained in the article, the employer cannot force older employees off of the group plan (they have the same enrollment rights as all other full-time employees), but it can often be a win-win solution for both the employer and the employee.
The one caveat mentioned in the article is that this strategy only works when Medicare is primary. The Medicare Secondary Payer (MSP) rules kick in when a group has 20 or more employees (full- and part-time), and the MSP rules prohibit an employer from incentivizing an employee to drop off the group plan and sign up for Medicare.
So that raises a couple questions about timing:
The answer to both of these questions can be found in a 2017 training course developed by CMS. The course discusses employer size as it relates to MSP for working age adults, people with a disability, and people with ESRD (end-stage renal disease). Some of those topics are beyond the scope of this article, but it is worth reviewing the CMS slides if you market either group or Medicare-related products.
As the course explains, “Medicare is the secondary payer to GHPs (group health plans) for the working aged where either a single employer of 20 or more full and/or part-time employees is the sponsor of the GHP or contributor to the GHP, or two or more employers are sponsors or contributors to a multi-employer/multiple employer plan, and a least one of the employers has 20 or more full and/or part-time employees.”
That does not answer our question about timing, though. How soon after a company crosses that 20-employee threshold does MSP apply, and how soon after a company drops below 20 employees will Medicare be considered primary to the group health plan? That answer is found in the slide notes later in the presentation:
To help clarify the rules, CMS provides the following example:
Again, knowing when the MSP rules apply is important for agents recommending a Medicare Premium Reimbursement Arrangement to their small group clients. This can be a great strategy to save small employers money, but it only works when Medicare is primary to the group health coverage.