UGS Coordination of Benefits

Coordination of Benefits with Medicare

Group health plans must determine whether the plan or Medicare is the primary payer (pays a health claim first) for Medicare eligible individuals.  The term “Coordination of Benefits (COB) is used when assigning responsibility for first and second payment.  The Medicare Secondary Payer Rules (“MSP Rules”) are used between Medicare and group health plans.

Plans Covered

The working aged MSP Rules apply only to group health plans of employers with 20 or more employees.

Multi-employer and multiple employer group health plans must have at least one employer who employs 20 or more employees for the working aged MSP Rules to apply.

• A multi-employer group health plan having at least one employer participating that has at least one employer with 20 or more employees may prospectively request to except employees (and their spouses) of identified employers with fewer than 20 employees from the working aged provision.
• Such members and their spouses are not subject to the working aged provision once an exception has been granted as long as the employer continues to meet the requirements for the exception.
• This requirement is met if an employer has 20 or more full-time and/or part-time employees for each working day in each of 20 or more calendar weeks in the current or preceding year.

The MSP Rules applicable to disabled individuals do not apply for participants who work or whose family member works for employers of fewer than 100 employees unless the GHP is a multi-employer plan in which at least one employer of 100 or more employees participates.

MSP – Working Aged

Medicare is secondary payer to group health plans for individuals age 65 or over if their group health coverage is by virtue of the individual’s current employment status or the current employment status of the individual’s spouse.

• Group health insurance plans for retirees or the spouses of retirees do not meet this condition and are not primary to Medicare.

The law requires employers to offer to their employees age 65 or over and to the age 65 or over spouses of employees of any age the same coverage as they offer to employees and employees’ spouses under age 65.

• For example, a group health plan may not provide benefits that are less for individuals age 65 or over or charge participants contributions that are higher for individuals age 65 or over since this would create an incentive for these individuals to reject the GHP coverage and make Medicare the primary payer.
• This provision applies whether or not the individual age 65 or over is entitled to Medicare. This equal benefit rule applies to coverage offered to full-time and part-time employees.

Medicare beneficiaries are free to reject employer plan coverage, in which case they retain Medicare as their primary coverage. However, employers are prohibited from giving incentives to Medicare-eligible individuals to decline employer coverage.

• When Medicare is primary payer, employers cannot offer such employees or their spouse’s secondary coverage of items and services covered by Medicare.
• Where an employer’s group health plan is the primary payer, but does not pay in full for the services, secondary Medicare benefits may be paid to supplement the amount it paid for Medicare-covered services.
• If an employer’s group health plan denies payment for services because they are not covered by the plan as a plan benefit bought for all covered individuals, primary Medicare benefits may be paid if the services are covered by Medicare.

MSP – Renal Disease

MSP- End Stage Renal Disease (ESRD)

Medicare is secondary payer to group health plans for individuals eligible for, or entitled to Medicare benefits based on End-Stage Renal Disease (ESRD) during a coordination period described below.

• Determining the 30 Month Coordination Period During Which Medicare May Be Secondary Payer

If Medicare was not the proper primary payer for an individual on the basis of age or disability at the time the individual became eligible for or entitled to Medicare on the basis of End Stage Renal Disease, Medicare is secondary payer to group health plans for items and services furnished during a period of up to 30 consecutive months which begins with the earlier of:

• The month in which a regular course of renal dialysis is initiated, or
• If the patient undergoes a course of self-dialysis training the first day of the month in which the training occurred, or
• If an individual who received a kidney transplant, the first month in which the individual became entitled.

See ESRD Medicare Guidelines.

MSP – Disabled Beneficiary

Medicare is secondary payer to “large group health plans” (more than 100 participants) for individuals under age 65 entitled to Medicare on the basis of disability and whose plan coverage is based on the individual’s current employment status or the current employment status of a family member.

• Under the law, a group health plan may not “take into account” that such an individual is eligible for, or receives, Medicare benefits based on disability.
• Medicare is secondary payer to group health plan coverage based on an individual’s or family members current employment status for services provided on or after August 10, 1993.

Medicare is not secondary under the MSP for the disabled provision for individuals:

• Who work or whose family member works for employers of fewer than 100 employees unless the group health plan is a multi-employer plan in which at least one employer of 100 or more employees participates
• Covered by an group health plan as a result of past employment (e.g., as a retired former employee or as the spouse of a retired former employee) and whose coverage is not also based on current employment status of their own or a family members current employment status
• Covered by a health plan other than a group health plan (e.g., one that is purchased by the individual privately and not through an employer)
• Who have FEHB coverage under the Spouse Equity Act

The Medicare as secondary for the disabled provision applies only to group health plans that cover employees of at least one employer that employed 100 or more full-time and/or part-time employees on 50 percent or more of its business days during the previous calendar year.

New MSP Reporting

The Medicare, Medicaid and SCHIP Extension Act, enacted December 31, 2007, established mandatory insurer reporting requirements.  These new reports are intended to help the CMS enforce the MSP rules.

Starting January 1, 2009, group health plans must provide reports to the Centers of Medicare and Medicaid Services (CMS) about plan participants who also have Medicare coverage.

Unified Group Services is submitting these reports for you on a quarterly basis as required by CMS.

Under the reporting rules, health Flexible Spending Accounts (FSAs) are not group health plans for MSP purposes and should not be included in the reporting to CMS.  Health Savings Accounts (HSAs) also do not have to be reported, as long as Medicare beneficiaries do not make current year contributions.  However, Health Reimbursement Accounts (HRAs) are considered to be group health plans and must be reported.  Typically, stand-alone dental and vision care coverage need not be reported, but reporting entities are responsible for being aware of situations where dental or vision care services are covered by Medicare and should be paid primary to Medicare.

The penalty for noncompliance is up to $1,000 per day of noncompliance for each individual not reported.

Click Here for more information from the CMS.

Tricare COB

Tricare is the health services component of the military health system.  It provides health benefits to retired members (and their families) of the Armed Forces, National Guard and Reserves.

If a participant in an employer sponsored group health plan is also covered by Tricare, the coordination of benefits is similar to Medicare: the employer sponsored plan pays first.

In the past, employers have provided Tricare supplements (insurance that pays after Tricare pays its portion of the bill) to employees eligible for Tricare.  These supplements were typically offered through a cafeteria plan, either in the form of supplemental insurance or a cash allowance.  Effective January 1, 2008, this practice was outlawed with the passage of the National Defense Authorization Act (NDAA).

The Department of Defense has proposed a new rule that would allow employers (with 20 or more employees) to still offer supplements, as long as they are offered to all employees – not just those eligible for Tricare. Please note that this rule has not yet been finalized and employers violating the NDAA are subject to a $5,000 fine.

Additional Resources

Centers for Medicare and Medicaid Services Web Site

Medicare Secondary Payer – CRS Report for Congress

End-Stage Renal Disease Medicare Guidelines

MSP Reporting Requirements

Disclosure to CMS Guidance and Instructions

Creditable Coverage Disclosure Form