When Medicare Is the Secondary Payer for the 'Working Aged'

The "working aged" are employed people age 65 or over, and people age 65 or over with employed spouses of any age, who have group health plan (GHP) coverage because of their own or their spouse's current employment.

Medicare is secondary payer to group health plans for the "working aged" where either:

• A single employer of 20 or more employees is the sponsor, or contributor, or an employee organization associated with that employer is the sponsor or contributor
• Two or more employers or employee organizations are sponsors or contributors and at least one of the employers has 20 or more employees

If a single employer with fewer than 20 employees sponsors or contributes to a plan, Medicare is the primary payer for all working aged people enrolled in the plan. Also, if an employee organization, such as a union, is associated with an employer of fewer than 20 employees and sponsors or contributes to a plan, Medicare is the primary payer for all working aged people enrolled in the plan. 

The "20 or More Employees" Threshold
The "20 or more employees" threshold is met when an employer has 20 or more full and/or part-time employees for each working day in each of 20 or more calendar weeks in the current calendar or preceding calendar year. The 20 calendar weeks do not have to be consecutive. This requirement is based on the number of employees, not the number of people covered under the plan. Group health plans assure correct application of the "20 or more employees" rule by taking the following steps:

• At the beginning of a calendar year, employers should examine their records to determine whether they had 20 or more employees for each working day in each of 20 or more calendar weeks during the preceding calendar year. If so, the threshold has been met and Medicare is the secondary payer for working aged people covered by the group health plan for the entire calendar year that has just begun. Once the employer has met the requirement in a particular year, they must provide primary coverage for the remainder of the year and throughout the following year.
• If employers have not satisfied the threshold during the previous calendar year, it is still possible that they will meet it at some point during the new calendar year. Once employers reach the threshold, Medicare becomes the secondary payer retroactively for the part of the year before the threshold is reached.

Multiple Employer and Multi-Employer Plans
The Medicare Secondary Payer requirements for the working aged apply to both multiple employer plans and multi-employer plans. A multiple employer plan is a plan sponsored by more than one employer. A multi-employer plan is a plan jointly sponsored by employers and unions under the Taft-Hartley law. (Under multi-employer plans, an employer typically pays a premium based on the hours that a union employee works. The premium is paid into a special health and welfare fund that administers benefits.)

• For group health plans with more than one sponsor or contributor, there are three possibilities:
  • When all of the employers have less than 20 employees, Medicare is the primary payer for all working aged people enrolled in the plan because the plan is not subject to the Medicare Secondary Payer provisions
  • When all of the employers have 20 or more employees, Medicare is the secondary payer for all working aged people enrolled in the plan
  • When at least one of the employers has 20 or more employees, even if some have less than 20, Medicare is the secondary payer for all working aged people enrolled in plan. There is one exception: a group health plan may exempt those working aged people enrolled through an employer with fewer than 20 employees. In that case, Medicare would become the primary payer for specifically identified working aged people enrolled through an employer with fewer than 20 employees. The group health plan must be able to document its decision to exempt such people. The plan may then offer those people coverage that supplements Medicare.

Employers must follow the Internal Revenue Service aggregation rules to determine whether the "20 or more employees" threshold is met.

If a GHP wishes to exempt such employees of a particular employer from the Working Aged provision because the employer does not meet the "20 or more employees" requirement, the following documentation must be submitted:

• A letter from the employer that specifies the number of employees that the employer employs and a statement that the employer does not meet the requirements of the 20-or-more employee provision;
• A copy of a letter that the GHP has sent to the affected employees notifying them and their spouses covered by the plan that the plan has elected to exempt their employer, and Medicare is therefore, the primary payer; and
• A letter that identifies the individual as an employee of a small employer that participates in the plan

If all the above information is not included, the GHP should be asked to provide the information required before Palmetto GBA can process claims as the primary payer.

CMS regulation reference: Publication 100-05, Chapter 1 (PDF, 191 KB).