If you're an employer with 20 or more employees, you need to understand Medicare Secondary Payer rules, because CMS isn't asking nicely anymore.
2026 is shaping up to be a major enforcement year. CMS is tightening scrutiny on employers who mess up Medicare coordination, and the penalties aren't slaps on the wrist. We're talking mandatory reimbursements to Medicare, civil money penalties, and potential lawsuits that can drain your budget faster than any premium increase.
The problem? Most employers have no idea they're even at risk until CMS comes knocking.
At Total Benefit Solutions, we fight these battles every day, pushing back when carriers get the rules wrong, advocating when employers get caught in billing nightmares, and refusing to accept "that's just how it works" from administrators who should know better.
Here are the seven biggest Medicare secondary payer mistakes we're seeing employers make right now, the penalties you're facing, and what you need to do to protect yourself.
Mistake #1: Billing Medicare First When Your Group Plan Should Be Primary
This is the single most common violation that triggers enforcement actions.
The rule: If you have 20 or more employees and a worker age 65 or older is actively employed with your group health coverage, your plan pays first, not Medicare. Medicare is secondary.
What employers get wrong: They assume that once someone hits 65 and becomes Medicare-eligible, Medicare automatically becomes primary. It doesn't. As long as the employee is actively working and covered under your group plan (and you meet the 20+ employee threshold), your plan is the primary payer.
The penalty: CMS will demand reimbursement for every claim they paid that your plan should have covered. Plus civil money penalties. Plus the administrative nightmare of untangling months (or years) of misbilled claims.
What to do: Make sure your plan administrator, TPA, and carrier understand your MSP obligations. Verify that your system correctly identifies active employees over 65 and routes claims appropriately. Don't assume it's being handled, confirm it.
Mistake #2: Failing to Identify or Update Medicare-Eligible Employees
Lots of employers don't have a process to track when employees become Medicare-eligible or when their coverage status changes.
The rule: Employers need to know who's enrolled in Medicare, what type of coverage they have (Part A, Part B, both), and whether they're still actively employed. This affects claim sequencing and mandatory reporting (more on that in Mistake #3).
What employers get wrong: No one's tracking it. HR doesn't flag it. Payroll doesn't flag it. The carrier assumes someone else is handling it. Meanwhile, claims get processed incorrectly for months.
The penalty: Incorrect billing, delayed reimbursements, potential CMS audits, and, if it goes on long enough, formal enforcement action.
What to do: Build a simple tracking system. When employees turn 65, confirm their Medicare enrollment status and document it. Update your records when coverage changes (retirement, spouse coverage, etc.). Make this part of your annual benefits review process.
Mistake #3: Ignoring Section 111 Mandatory Reporting Requirements
This is the compliance landmine most employers don't even know exists.
The rule: Federal law requires group health plan sponsors (that's you) to report specific information to CMS about employees who have both Medicare and group health coverage. This includes coverage dates, employment status, and plan details. It's called Section 111 reporting, and it's not optional.
What employers get wrong: They've never heard of Section 111. Or they assume their carrier handles it. Or they know about it but don't prioritize it because "we've never been audited."
The penalty: CMS has made it clear, 2026 is an enforcement year for Section 111 violations. Expect civil money penalties for noncompliance. The penalties scale based on how long you've been out of compliance and how many affected individuals are involved.
What to do: If you don't have a Section 111 reporting process in place, get one now. Work with your TPA or benefits administrator to confirm reporting is happening and compliant. Document everything. CMS wants proof you're meeting deadlines and submitting accurate data.
At Total Benefit Solutions, we help clients navigate Section 111 obligations and make sure nothing falls through the cracks, because "I didn't know" isn't a defense CMS accepts.
Mistake #4: Failing to Report Settlements, Judgments, and Liability Payments
This one catches employers off guard, especially if they're dealing with workers' compensation or liability claims.
The rule: If there's a settlement, judgment, award, or ongoing liability insurance payment that could affect Medicare payments, you're required to report it to CMS. This ensures Medicare doesn't pay for something another payer should cover.
What employers get wrong: They settle a workers' comp claim or resolve a liability issue and don't connect the dots to Medicare reporting. Or they think the insurance carrier will handle it (and the carrier thinks the employer will handle it).
The penalty: Medicare pays conditionally, then comes back demanding reimbursement, with interest. If you don't cooperate or delay repayment, CMS can escalate to formal collections and penalties.
What to do: If your company settles any claim involving an employee with Medicare, immediately confirm reporting obligations. Work with legal counsel and your benefits team to ensure CMS gets the required information. Don't wait.
Mistake #5: Refusing or Delaying Repayment of Conditional Medicare Payments
When Medicare pays a claim that another payer should have covered (your group health plan, workers' comp, liability insurance), that payment is conditional. Medicare expects to be repaid.
The rule: If Medicare sends a demand letter for reimbursement of a conditional payment, you need to respond, and pay, promptly.
What employers get wrong: They ignore the letter. They dispute it without providing documentation. They drag their feet because they're hoping it goes away. It won't.
The penalty: Interest accrues. CMS escalates collections. You may face formal enforcement actions and penalties on top of the repayment amount.
What to do: Take conditional payment demands seriously. Review the claim details. If Medicare is right, pay it. If they're wrong (and sometimes they are), provide detailed documentation and push back hard. At Total Benefit Solutions, we don't let CMS bully our clients with incorrect demands, but we also don't ignore legitimate ones.
Mistake #6: No Internal Policies or Procedures for MSP Compliance
This is the systemic problem behind most of the other mistakes.
The rule: There's no specific "policy requirement" from CMS, but practically speaking, if you don't have documented processes for MSP compliance, you can't consistently meet your obligations.
What employers get wrong: They operate on assumptions and informal practices. Nobody's accountable. There's no checklist. No annual review. No training for HR or benefits staff.
The penalty: You won't get penalized for lacking a written policy, but you will get penalized for the compliance failures that result from not having one.
What to do: Document your MSP compliance process. Assign responsibility. Create a checklist that covers Medicare status tracking, Section 111 reporting, coordination of benefits, and conditional payment handling. Review it annually and update it when regulations change.
Mistake #7: Coordination of Benefits Errors and Delays
Even when employers know the rules, execution breaks down during actual claims processing.
The rule: Claims need to be submitted to the correct primary payer first, processed, then, if applicable, sent to the secondary payer. Coordination of benefits (COB) must be accurate and timely.
What employers get wrong: Claims get routed to the wrong payer. Information isn't shared properly between insurers. Delays pile up. Employees get stuck in the middle with unpaid bills and angry providers.
The penalty: Misbilled claims, repayment demands from Medicare, employee dissatisfaction, and, if it's systemic, potential CMS audits.
What to do: Test your COB process regularly. Confirm your carrier and TPA are correctly identifying Medicare coordination situations and processing claims in the right order. When COB errors happen, escalate immediately, don't let them sit.
Why 2026 Is Different (And Why You Should Care)
CMS enforcement is ramping up. The days of "hoping you don't get audited" are over.
Medicare Secondary Payer rules have been around for decades, but historically, enforcement was inconsistent. That's changing. CMS is prioritizing compliance, tightening reporting requirements, and issuing penalties more aggressively.
If you're an employer with Medicare-eligible employees and group health coverage, you're in scope, whether you realize it or not.
We Don't Accept "That's Just How It Works"
At Total Benefit Solutions, we fight for our clients when carriers, TPAs, and administrators try to dodge responsibility for MSP compliance.
We've pushed back on incorrect conditional payment demands. We've corrected billing errors that carriers insisted were "right." We've helped employers build compliant processes when their previous broker left them exposed.
Because here's the truth: most employers don't violate MSP rules intentionally. They violate them because nobody explained the rules clearly, nobody set up the right systems, and nobody fought for them when things went wrong.
That's where we come in.
What to Do Right Now
If you're not confident in your MSP compliance, here's your action plan:
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Identify all employees age 65+ with group health coverage. Confirm their Medicare enrollment status and document it.
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Verify Section 111 reporting is happening. If you're not sure, assume it's not, and fix it.
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Review your coordination of benefits process. Make sure claims are being routed correctly when Medicare is involved.
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Document your MSP compliance policies. Assign responsibility and create accountability.
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Don't ignore CMS correspondence. If you get a demand letter or audit notice, respond immediately.
If you need help navigating medicare secondary payer rules, managing medicare employer coverage coordination, or fighting back when carriers get it wrong, we're here.
Total Benefit Solutions
We don't take "no" for an answer, especially when "no" puts our clients at risk.
Contact us: https://totalbenefits.net/contact/contact-info
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