February 8, 2015

Medicare Secondary Payor Rules – A Hidden Trap for Federal Contractors (Article)

Recently issued guidance by the Centers for Medicare and Medicaid Services (CMS) underscores the importance of understanding the Medicare Secondary Payor (MSP) rules.  As background, if an individual has current employment status, and if certain conditions are met, the group health plan is primary to Medicare, and the employer cannot, in any way, incent the individual to decline group coverage in favor of Medicare. 


According to the recently issued CMS guidance, this has particular implications for federal contractors who are subject to the fringe benefit requirements of the Service Contract Act, the Davis-Bacon Act, and related laws.  If an individual has the right to decline group health coverage and take the fringe benefit contribution, and then use the contribution for other purposes, such as, by way of example, a retirement plan, this is deemed to be an incentive in violation of the MSP rules.  The exception to this would be if the individual is covered by his/her spouse’s health plan.


Employers with Medicare-eligible employees entitled to fringe benefit contributions should review this guidance carefully.


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