If you're an employer offering group health benefits, or an employee trying to figure out how your coverage works alongside Medicare, the Medicare Secondary Payer (MSP) rules are something you absolutely need to understand. And with 2026 shaping up to be a major enforcement year, now's the time to get your compliance ducks in a row.
Let's break down what the medicare secondary payer rules actually mean, when Medicare pays second, and what you need to do to stay on the right side of the regulations this year.
What Are Medicare Secondary Payer Rules?
Here's the deal: Medicare doesn't always pay first for your healthcare costs. In certain situations, another insurance plan is required to pay before Medicare kicks in. That's what we call the Medicare Secondary Payer rules.
These rules exist to make sure Medicare isn't footing the bill when another insurer should be responsible. Think of it as a pecking order for who pays what, and getting it wrong can lead to delayed claims, rejected payments, and some pretty hefty penalties.
The MSP rules have been around since 1980, but CMS (Centers for Medicare & Medicaid Services) is ramping up enforcement in 2026. Translation? If you've been flying under the radar with compliance issues, that grace period is officially over.
When Does Medicare Pay Second?
Understanding when Medicare acts as secondary insurance with Medicare coverage is critical. Here are the most common scenarios:
Employer Group Health Plans (20+ Employees)
If you're 65 or older and still working for a company with 20 or more employees, your employer's group health plan pays first. Medicare becomes secondary and picks up eligible costs after your primary insurance has paid its share.
This is probably the most common MSP situation, and it's where a lot of employers trip up.
Employer Group Health Plans (Under 20 Employees)
Flip that around for smaller companies. If your employer has fewer than 20 employees, Medicare is typically the primary payer. Your employer plan becomes secondary coverage.
Workers' Compensation and Liability Insurance
Got injured on the job or in an accident where someone else is liable? Workers' comp and liability insurance pay first for those related claims. Medicare steps in only after those sources have been exhausted.
End-Stage Renal Disease (ESRD)
There's a 30-month coordination period for individuals with ESRD who have group health coverage. During this window, the group plan pays primary and Medicare pays secondary.
Key 2026 Compliance Changes You Need to Know
Here's where things get serious. CMS is done playing nice when it comes to MSP compliance, and 2026 marks a turning point.
Increased Enforcement and Penalties
CMS will now randomly sample 1,000 records annually to verify compliance with Section 111 reporting requirements. These requirements mandate that group health plans report specific coverage information to CMS, and errors won't be tolerated.
If your reporting is sloppy or incomplete, expect audits, penalties, and a whole lot of headaches.
Part C and Part D Recovery Efforts
Medicare Advantage (Part C) and Prescription Drug (Part D) plans are significantly ramping up their conditional payment recovery efforts. CMS is sharing more data with these plans, which means they'll be tracking down overpayments faster and more aggressively than ever.
Private Litigation Is on the Rise
Here's something that catches a lot of employers off guard: private parties can sue under the MSP statute to recover conditional payments, and they can seek double damages. Expect more demand letters hitting your desk in 2026.
Employer Obligations for Medicare Employer Coverage
If you're an employer with 20 or more employees, here's what you're legally required to do under the medicare employer coverage rules:
Offer equal benefits. You must provide the same health benefits to workers aged 65 and older as you do to younger employees. No exceptions, no shortcuts.
Don't force Medicare first. You cannot require older workers to make Medicare their primary insurance. That's a big no-no under federal law.
Report coverage to Medicare. Under Section 111, you're required to report specific information about employees who have Medicare and are enrolled in your group health plan. This includes things like coverage dates, employment status, and plan details.
Communicate changes promptly. If an employee's coverage changes, they retire, switch plans, or lose eligibility, you need to inform Medicare.
Employee Responsibilities
Employees aren't off the hook either. If you have Medicare and other insurance coverage, you need to report that to Medicare. This ensures proper coordination of benefits and prevents billing delays or claim denials.
How Payment Coordination Actually Works
Let's walk through a real-world example so this isn't just abstract regulatory talk.
Say you're 67 years old, still working, and enrolled in your employer's group health plan. You need a minor surgery that costs $2,000. Here's how the payments shake out:
- You pay your deductible. Let's say it's $500.
- Your employer plan pays its share. If the plan covers 80% after the deductible, that's $1,200.
- Medicare processes the remaining costs. Medicare reviews the claim and covers eligible expenses that your primary insurance didn't pay.
- Medicare Supplement (if you have one) pays last. Medigap policies only kick in after Medicare has processed the claim.
The key takeaway? The order matters. If claims are submitted incorrectly or the wrong payer is billed first, everything gets delayed, and someone ends up paying more than they should.
Medicare Advantage and Supplement Plans Under MSP
A common question we get: do MSP rules apply to Medicare Advantage plans?
Yes, absolutely. The same coordination rules that apply to Original Medicare apply to Medicare Advantage (Part C) plans. If you have employer coverage and Medicare Advantage, your employer plan still pays first (assuming the 20+ employee threshold is met).
Medicare Supplement plans (Medigap) are a different animal. They don't follow MSP coordination because they're designed to pay after Medicare, not before other primary insurance. Medigap covers out-of-pocket costs that Medicare approves but doesn't fully pay: things like copays, coinsurance, and deductibles.
Steps to Stay Compliant in 2026
Feeling a little overwhelmed? Don't worry: here's a straightforward checklist to help you stay compliant:
Audit your current reporting. Review your Section 111 submissions for accuracy. Make sure employee data, coverage dates, and plan information are all correct.
Train your HR team. Ensure everyone involved in benefits administration understands MSP rules and reporting requirements.
Communicate with employees. Remind workers aged 65+ to report their Medicare status and any other insurance coverage they have.
Work with a knowledgeable broker. This is where we come in. An independent broker can help you navigate the complexities of MSP compliance, compare plan options, and make sure you're not leaving money (or legal exposure) on the table.
Document everything. Keep records of your compliance efforts, communications, and reporting submissions. If you're ever audited, you'll be glad you did.
Don't Go It Alone
Look, the Medicare Secondary Payer rules aren't exactly light reading. They're technical, they're nuanced, and getting them wrong can cost you: in penalties, lawsuits, and frustrated employees.
But here's the good news: you don't have to figure this out by yourself.
At Total Benefit Solutions, we help employers navigate group health benefits and Medicare coordination every single day. We can review your current setup, identify compliance gaps, and make sure you're ready for 2026's tougher enforcement landscape.
Ready to get compliant? Visit us at https://totalbenefits.net or give us a call at (215) 355-2121. We're here to help you protect your business and your employees.
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