Employers with 20 or more employees, who are considered Medicare Secondary Payer eligible, may receive a letter from a joint data matching project sponsored by the Centers for Medicare and Medicaid Services (CMS), the Social Security Administration and the Internal Revenue Service. This project is all about one thing: Medicare Secondary Payer rules.
There has been a long-standing rule that employers who are considered Medicare Secondary are prohibited from offering an incentive of any kind to an individual who is Medicare-eligible to enroll in Medicare in lieu of the employer's group health plan.
A Medicare-eligible employee or dependent of an employee may voluntarily choose to waive his or her employer's plan and take Medicare coverage as "primary" coverage. In this situation, the individual may choose to purchase an individual Medicare supplement and Medicare Rx plan; however, this policy should not be paid for by the employer. The rules prohibit an employer (including those counted together under common control group rules) with 20 or more employees from encouraging those who are 65 or older to elect Medicare as primary coverage. One important note: the 20+ rule is based on the average number of all employees (including full-time) for the prior year. Employers are often surprised when their 10-employee group (from their eyes) actually is 20+ under these rules and is subject to the rules.
An employer also must provide complete information that is not misleading about the effect of a rejection of the plan coverage. CMS has stated that employers must fully inform Medicare beneficiaries of the impact of rejecting the group health plan in favor of Medicare. This detailed explanation must appear in any materials setting forth a choice between Medicare and the group health plan.
While there are fines that can be assessed for encouraging or enticing the employee to take Medicare ($5,000 per situation), the bigger "hit" is the bill for claims that Medicare paid as primary versus what they should have paid as secondary. This claim can typically be for a scary big amount; representing what the carrier or employer must repay Medicare for the discovered individuals.
In short, nearly every employer who has received one of these letters is usually in shock at the amount demanded that they (or the carrier) repay.
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