When an Employee is Medicare Eligible, Can They be Terminated from the Group Health Plan?

One of Amsterdam Consulting Group’s clients has been in business for 30 years. In the next 20 months, 5 employees, who are among the company’s original employees, turn 65.  Our client called and asked us, Can we terminate employees from our group plan when they become Medicare eligible?” (see infographic)

Short Answer. The answer is kind of yes and no, it really depends on the group size and if Medicare is going to be the primary coverage or the secondary coverage.

Long Answer. One might initially think at the time an employee turns age 65 and their Medicare kicks in, it would be perfectly fine to terminate them from the company’s group plan – however, it is not that simple.  The guidelines regarding termination vary based on the number of employees covered in a company.

Rules set forth by the federal Medicare Secondary Payer (MSP) prohibit some employers from terminating group coverage as well as providing financial or other incentives to encourage dropping group coverage. It is also prohibited for employers to purchase a Medicare supplement policy for active employees (or their spouses) who are Medicare-eligible.

Employers who violate this prohibition are subject to penalties of up to $5,000 for each violation.

RULES VARY BASED ON 3 GROUP SIZES
Employer’s size determines whether the employer’s group health plan is the “primary” plan.
The primary plan is required to pay claims first or before Medicare.

ACG_Benefits_Medicare

 

BELOW 20 EMPLOYEES
  • Primary payer is Medicare = Medicare entitlement is due to age(age 65 or over)
  • Primary payer is Medicare = Medicare entitlement is due to disability (under age 65)
20 to 99 EMPLOYEES
  • Primary payer is the group health plan = Medicare entitlement is due to age (age 65 or over)
  • Primary payer is Medicare = Medicare entitlement is due to disability (under age 65)
100+ EMPLOYEES
  • Primary payer is the group health plan =  Medicare entitlement is due to age (age 65 or over)
  • Primary payer is the group health plan = Medicare entitlement is due to disability (under age 65)

Furthermore,  for non-active employees (or their spouses), such as retirees or COBRA beneficiaries, the group health plan is no longer the primary payer.

Amsterdam Consulting is available to elaborate on all things Medicare.
Call us with your questions or email amarino@acgbenefits.com
Phone: 631.448.7677
Website www.acgbenefits.com

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