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.
Summary chart
The chart below summarizes the Medicare Secondary Payer (MSP) rules, based on employer size:

Why the rush of letters now?

In 2007, Congress passed the Medicare Modernization Act that included higher recovery through CMS's coordination of benefits program targeting these primary versus secondary payer situations as a major source of revenue for the bill. Now this program is implementing the program with a goal of increasing the number of successful recoveries from below 5% to nearly 100%.

How are they doing this? It appears that these three government organizations have come together and are specifically looking for instances where an employee (or the dependent of an employee) is enrolled in Medicare and is also the employee of a group who is Medicare Secondary eligible. How are they gleaning this information? By seeing where someone's social security number is showing up both on the income tax withholding list for an employer and also on the Medicare rolls, a very simple bit of computer working asking for situations where nine digits match. Hence the term "data match."

What does this mean for employers? Many employers will receive the letter and have no earthly idea what it means. The two most dangerous things that employers can do is ignore the letter's 30-day deadline or provide incomplete data. 

The data match questionnaire is complicated and there are three different stages to the process. First, the employer must set up an account with the data match program. Once that's been completed, there's a 1-2 day wait so that the account can connect with the data match questionnaire. The second stage is filled with requests for information about health plan information (back to 2011, including group ID, Rx PCN numbers and carrier information such as address and EIN) and then specific questions about a handful of employees or dependents. 

Once completed (by certifying the information submitted is correct), the third stage is expected to be some additional request for information. If someone on that list waived on their own to take Medicare or was not eligible based on hours worked, the employer should have proof to provide when the request comes.
Thank you, 
George Knox, CLU, ChFC
214.695.2904 (mobile) 214.443.1400 (office) |

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