Employers who provide health insurance coverage for their employees should be aware of the Medicare Secondary Payer (MSP) rules that are often misunderstood. The MSP rules are designed to shift costs from the Medicare program to private sources of payment (such as employer-sponsored group health plans) in certain situations. The MSP provisions govern the coordination of benefits rules for determining when an employer-sponsored group health plan will pay primary or secondary to Medicare.
For employers with fewer than 20 employees, Medicare coverage is primary for employees age 65 or older. Those employees should enroll in Medicare. Failure to enroll will trigger higher Medicare premium penalties in the future.
For employers with more than 20 employees, Medicare coverage is secondary for employees age 65 or older, and the company’s health insurance plan is primary. Those employees may choose not to enroll in Medicare while still employed, and not suffer future premium penalties. Please note that employers in the 20-plus employee category cannot offer any financial or other incentive for a Medicare-entitled person (employee or spouse) not to enroll or to terminate enrollment under a group health plan.