So, your business is growing, your team is aging like a fine wine, and suddenly, you’ve got employees hitting that magical number: 65. Congratulations! You’ve reached the level of the "Medicare Secondary Payer" (MSP) boss fight. If that sounds intimidating, it’s because it can be.
Medicare Secondary Payer rules are essentially the government’s way of saying, “We aren’t paying for this if someone else can.” At Total Benefit Solutions Inc, we spend our days navigating these regulatory minefields so you don't have to step on a $1,000-per-claim landmine. Whether you’re offering group health insurance for employers or looking into affordable group health insurance options, understanding MSP is non-negotiable.
Here are 15 things you need to know to keep the CMS (Centers for Medicare & Medicaid Services) off your back and your bank account intact.
1. The "Who Pays First" Hierarchy
The core of MSP rules is determining the "primary" and "secondary" payer. If an employee has both Medicare and a group health plan (GHP), one of them has to take the lead. If you mess up the order and Medicare pays when your group plan should have, CMS will come knocking, and they don’t just ask for the money back; they bring penalties.
2. The Magic Number: 20 Employees
For most small business owners, the "Working Aged" rule is the big one. If your company has 20 or more employees, your group health insurance for employers is the primary payer for employees aged 65 or older. If you have fewer than 20 employees, Medicare is usually primary. It sounds simple, but the way CMS counts "20 employees" (based on 20 or more weeks in the current or preceding year) is enough to give anyone a headache.
3. The $1,000 Per Claim Penalty
Let’s talk stakes. Non-compliance isn't just a "slap on the wrist" situation. CMS can levy fines of up to $1,000 per claim for MSP violations. If you’ve been incorrectly billing Medicare as primary for a year, those $1,000 hits add up faster than the calories at a company pizza party.
4. No "Bribing" Employees to Leave the Plan
This is a common trap. You might think, “Hey, if I offer Steve $200 a month to drop our company plan and just use Medicare, I’ll save a fortune on premiums!” Stop right there. That is a massive violation. Employers are strictly prohibited from offering any financial or other incentives for a Medicare-eligible individual to opt out of the group plan.
5. Disability and the 100-Employee Rule
The rules change if the employee (or their dependent) is on Medicare due to a disability rather than age. In this case, the group health plan is primary only if the employer has 100 or more employees. If you’re a mid-sized firm hovering around that 100-employee mark, you need to be extremely careful with your reporting.
6. The 30-Month ESRD Coordination Period
End-Stage Renal Disease (ESRD) has its own special set of rules (because why make it easy?). For the first 30 months of Medicare eligibility due to ESRD, the group health plan is the primary payer, regardless of the employer's size. After that 30-month "coordination period," Medicare becomes primary.
7. COBRA is Almost Always Secondary
If you have a former employee on COBRA who is also eligible for Medicare, Medicare is almost always the primary payer. Many employers mistakenly keep COBRA as primary, which can lead to huge issues if the COBRA carrier realizes they shouldn't have paid and tries to claw back the funds after Medicare’s filing window has closed.
8. Reference Based Pricing as a Shield
While we're talking about costs, many of our clients are moving toward Reference Based Pricing (RBP). RBP can actually help manage the costs associated with being the primary payer because it caps what the plan pays providers based on a percentage of Medicare rates. It’s a great way to provide affordable group health insurance while staying compliant with MSP rules.
9. Section 111 Reporting
If you are a "Responsible Reporting Entity" (usually the insurer or the TPA, but the responsibility often falls back on the employer to ensure it’s done), you must report specific data to CMS about Medicare-eligible individuals. This is how the government keeps track of who should be paying first. Failure to report correctly is another gateway to those lovely penalties we mentioned.
10. The "Same Terms and Conditions" Rule
You cannot offer Medicare-eligible employees a different plan than you offer everyone else. If your younger employees get a fancy Level funded health insurance plan with all the bells and whistles, your 65+ employees must be offered the exact same thing. No "Medicare-lite" plans allowed.
11. Coding is Your Best Friend (or Worst Enemy)
When claims are submitted, insurance type codes are used to tell Medicare why they are secondary. Use Code 12 for "Working Aged," Code 13 for "ESRD," and Code 43 for "Disability." Using the wrong code is the quickest way to trigger an audit.
12. Retiring doesn't always flip the switch
If an employee retires but stays on a "retiree health plan," Medicare usually becomes the primary payer. However, you need to ensure the transition is documented perfectly. Total Benefit Solutions Inc often acts as the intermediary here, ensuring the handoff between the group plan and Medicare is seamless.
13. Querying the CMS Portal
Don't guess who is on Medicare. We advise our clients to use the CMS portal to verify the MSP status of their employees. It’s better to spend five minutes checking a portal than five months fighting a federal fine.
14. Matching Diagnosis Codes
Medicare is very picky (big surprise). If the diagnosis code on the primary insurance claim doesn't perfectly match what is eventually sent to Medicare for secondary payment, the claim will be rejected. This often happens in workers' compensation cases where MSP rules also apply.
15. Why You Need an Advocate
If your head is spinning, that’s a normal reaction. MSP rules are dense, clinical, and frankly, a bit mean-spirited toward small business owners who are just trying to do the right thing. This is why working with an independent broker is vital. We don’t just "sell" insurance; we advocate for your business.
At Total Benefit Solutions Inc, we take the "Benefit" in our name seriously. Whether you’re looking to implement Level funded health insurance to save money or need a deep dive into your medicare secondary payer rules compliance, we are the team in your corner.
Don't let a clerical error turn into a financial catastrophe. We work for your benefit, ensuring you have the most affordable group health insurance while staying strictly within the lines of federal law.
Ready to get compliant?
Stop guessing and start protecting your business. We can help you audit your current plan, navigate the 20-employee rule, and find the best insurance solutions for your unique team.
Total Benefit Solutions Inc
Visit us: www.totalbenefits.net
Call us today: (215) 355-2121
We Work for Your Benefit!!
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