Medicare secondary payer rules for employers: when your plan pays first and when Medicare does.
The employee-count thresholds for working-aged and disabled beneficiaries, the end-stage renal disease rule, what employers may not do to steer people toward Medicare and the reporting that follows. Written for the owner or HR lead.
Who Pays First Depends on Employer Size and Reason for Medicare
When a person has both employer coverage and Medicare, one pays first and the other pays what is left. The order is set by federal law, not by plan choice.
Primary and Secondary
The primary payer pays claims first as if no other coverage existed. The secondary payer may pay some of what is left. Which payer is primary affects who sees the claim first, how much the member owes and how fast bills clear. Ask your carrier or administrator how your plan coordinates with Medicare, since secondary payment depends on the plan’s terms.
Why It Matters
Paying in the wrong order creates recoveries, denied claims and angry employees. Employers are responsible for getting the order right on their side. To see the enrollment window around an employee’s 65th birthday, use our Medicare window calculator. The 20 and 100 employee lines are part of our compliance threshold checker.
Who It Applies To
Employees and covered spouses who are eligible for Medicare while the employee is actively working. This is about people who have Medicare while still on an active employee’s plan. Keep your enrollment records current for every covered person, since Medicare status often changes mid-year and the plan needs to know when it does.
People Sixty-Five and Older
The threshold is twenty employees.
Twenty or More Employees
If your employer has twenty or more employees for at least twenty calendar weeks in the current or prior year, your group health plan pays first for an active employee or spouse age sixty-five or older. Counting employees can be technical, including how part-time workers and related companies are treated. Have your adviser or counsel confirm your count, and recheck it as your headcount changes rather than assuming last year’s answer still holds.
Under Twenty
At smaller employers Medicare pays first. The employee should enroll in Part B to avoid a gap, even if still on the group plan. This is where employees most often get caught. If they skip Part B and rely on the group plan alone, claims may be delayed or denied. Tell eligible employees early to talk with Social Security and your adviser about their timing.
Multi-Employer Plans
For a plan with more than one employer, the plan is primary if at least one participating employer meets the threshold, with exceptions. The result can turn on how the plan is structured and who the participating employers are. If you take part in a plan with several employers, ask the plan sponsor or counsel which rule applies to your group and get the answer in writing.
People Under Sixty-Five Who Are Entitled to Medicare
The threshold is one hundred employees.
One Hundred or More
If your employer is a large group health plan sponsor with one hundred or more employees, the plan pays first for active employees or family members entitled to Medicare because of disability. The size test is separate from the one for age-based Medicare, so an employer can be treated differently under each rule. Confirm which test applies for disability-based entitlement with your adviser, and recheck the count when your workforce changes.
Under One Hundred
Medicare pays first for those beneficiaries. Plan terms may still cover costs after Medicare pays. This difference is easy to miss when an employee is under sixty-five and has Medicare because of a disability. Ask the carrier how benefits are coordinated so you can explain to the employee what they may still owe.
Disability Is Not Retirement
The rule covers people who are actively employed or covered through someone who is. Retirees are generally outside it. Retiree coverage follows different coordination rules, so the active-work test matters. If someone moves from active work to retiree status or leave, ask your administrator to update coverage records so claims are paid in the right order.
The Thirty-Month Coordination Period
This rule applies regardless of employer size.
Plan Pays First
For the first thirty months of Medicare eligibility based on end-stage renal disease, the group health plan is primary, no matter how small the employer. The thirty-month period is called the coordination period, and its start date depends on Medicare entitlement. Ask your administrator to track it for any covered person with this condition, since it affects billing and the member’s costs.
Then Medicare
After the thirty months, Medicare becomes primary. The plan becomes secondary. Members should be told in advance, because the change affects their cards, their out-of-pocket costs and which bills go where. Give them time to enroll as needed, and refer them to Medicare resources for questions about their own coverage.
Plan Design Limits
A plan cannot take into account that a person has this condition, or Medicare eligibility because of it, to limit benefits or charge more. In practice, a plan cannot cut benefits, raise premiums or add waiting periods for these individuals because of the condition. Review plan changes with counsel before implementing them to make sure nothing could be seen as targeting a diagnosis.
Do Not Steer People Away From Your Plan
The law protects a beneficiary’s right to have the primary plan pay first.
No Incentives to Decline
An employer cannot offer a person money, a Medicare supplement or any other benefit as an incentive to decline or drop the group health plan when it is primary. Well-meant offers, such as a stipend or a richer supplement, can create problems. Before you offer anything to an employee who is thinking about Medicare, check it with counsel, since good intentions do not make a prohibited incentive acceptable.
No Differing Benefits
A plan cannot offer Medicare-eligible people different benefits solely because of their eligibility, such as a plan that is secondary to Medicare when the group plan should pay first. Two benefit levels within one group, based on Medicare status, are a red flag. Compare what your plan provides to Medicare-eligible and other members, and ask counsel to review any carve-out before it goes into your plan document.
No Conditioning Coverage
Employment or coverage cannot depend on enrolling in Medicare when the group plan is primary. Employees should never be told that they must sign up for Medicare to keep their job or their group coverage when the group plan is primary. Train HR staff to say this correctly, and ask counsel to review any related policy language.
Section 111 Reporting and Data
Medicare gets data on who has employer coverage.
Responsible Reporting Entity
Insurers report for insured plans. For self-funded plans, the plan or its administrator is responsible, and it often delegates to a third party. The responsible party is the one that must file the required reports with the government. Confirm in writing who holds this role for your plan, and make sure that party has the data it needs from you each reporting cycle.
Your Data Role
Employers provide accurate enrollment data, including Medicare-eligible status when requested. Delays and errors surface in claims. Typical needs include names, dates of birth, and Social Security or Medicare identifiers where permitted. Respond quickly to data requests, correct errors when found, and handle the information securely, since it is sensitive.
Penalties
Failure to report can lead to civil penalties. Confirm who is responsible for your plan. Penalties can fall on the responsible reporting entity, and the facts matter. Even where a carrier or administrator files for you, ask what you must supply and how errors are caught, and consult counsel if you learn of a missed filing.
What to Tell Employees Approaching Medicare
Employees make mistakes here because no one told them.
Part B and Active Coverage
An employee covered by a large employer’s group plan based on active work can generally delay Part B without a late penalty. Smaller employers differ. The word “generally” matters here. Whether coverage counts as creditable for this purpose depends on the employer’s size and the facts, so employees should ask Social Security and your adviser before delaying Part B instead of assuming.
Special Enrollment
After active-employment coverage ends, a special enrollment period lets the person enroll in Part B without penalty if they act in time. The window is limited, and a missed deadline can lead to a late penalty and a gap in coverage. Encourage employees to plan well before their last day of active coverage, and to keep records showing when their group coverage ended.
HSA Contributions Stop
Once an employee is enrolled in any part of Medicare, they can no longer contribute to an HSA. Because Part A can be backdated in some cases, employees nearing Medicare age should talk with a tax adviser before making HSA contributions. Contributions made after the cutoff can lead to tax consequences that are painful to unwind.
COBRA and Retiree Coverage
COBRA or retiree coverage does not substitute for Part B timing, and Medicare generally pays first once employment ends. Relying on COBRA or retiree coverage in place of Part B can leave gaps in claim payment and may lead to a penalty later. Employees nearing retirement should review their timing with Social Security and your adviser before their last day.
The questions that come before an employee turns sixty-five.
Six questions employers bring us about Medicare Secondary Payer.
Does our plan pay first for a seventy-year-old employee?
If you have twenty or more employees and the person is actively working, generally yes. Under twenty, Medicare pays first.
Can we pay an employee to drop our plan and take Medicare?
No, not when your plan should be primary. Offering incentives to decline coverage is prohibited.
Should an older employee still enroll in Part B?
At a large employer, they can often delay without penalty. At a smaller one they should usually enroll to avoid gaps.
What about spouses?
The same thresholds apply to a spouse who is eligible for Medicare when the employee is actively working.
What if our headcount is close to twenty?
Count carefully. Part-time employees count, and the test covers a span of weeks over the current or prior year.
Who reports Medicare data for us?
The carrier for insured plans. For self-funded plans, the plan or its administrator. Confirm in writing.
Ready? Send us your renewal, or talk it through with someone first. No cost, no obligation.
General information about Medicare Secondary Payer rules, not legal advice. Individual coordination questions belong with benefits counsel and Medicare, and we will bring them in.
Related guides.
Coordination of Benefits
Which plan pays first for employees, spouses and children with more than one plan.
Medicare Rules for Employer Plans
Notices, reporting and coordination.
Medicare Maximization
Retiree coordination and opportunities.
COBRA Administration
Notices, deadlines and who owns them.
Medicare Enrollment and HSA Contributions
Why the HSA limit is zero once Medicare starts.
COBRA And Medicare
How the timing rules interact.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
42 U.S.C. § 1395y(b)(1) and 42 C.F.R. § 411.172 — Medicare pays second to a group health plan for working aged employees of employers with 20 or more employees.
42 C.F.R. § 411.108 — A group health plan may not take Medicare entitlement into account for active employees.
42 U.S.C. § 1395y(b)(8) — Section 111 mandatory reporting of group health plan coverage to Medicare.
This page is general information, not legal or tax advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
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