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January 16, 2018

MSP Minefield (article)

A recent decision from the U. S. District Court, N.D. Indiana, Fort Wayne Division, offers an opportunity to reflect on the Medicare secondary payor (MSP) rules.  The MSP rules require, in certain instances, that a group plan pay primary to Medicare. 

In Renal Care Grp. Indiana, LLC v. City of Fort Wayne (2017 WL 4990618 (N.D. Ind. 2017)), a retiree was receiving dialysis for his end-stage renal disease (ESRD).  Such treatment had been covered under his former employer’s group health plan until he became entitled to Medicare due to the ESRD, at which point, the employer then terminated the group coverage.  The dialysis center initiated a legal challenge against the City on the basis that the immediate termination of coverage violated the MSP rules relating to ESRD, which require the group coverage to pay primary during a 30-month coordination period.

As background, the MSP rule relating to end-stage renal disease (ESRD) applies without regard to:

  • Employer size;
  • Current employment status (active or inactive status); or
  • Source of the health coverage (coverage through the individual's employer or through the employment of a parent or spouse). 

Employer-provided health coverage is the primary payer and Medicare is the secondary payer during the coordination period for individuals who have Medicare solely on the basis of ESRD.  Specifically, for items or services furnished on or after August 5, 1997 for periods beginning on or after February 5, 1996, the group health plan is the primary payer for the first 30 months. After the initial 30-month period, Medicare is the primary payer.  

In this case, the Court found that the City violated the MSP rules since the ESRD rules apply regardless of active employment status and that the employer’s group plan is required to pay primary during the first 30 months of the coordination period for the retiree’s treatment.

In addition to the MSP rules relating to end-stage renal disease, there are separate rules applicable to the working aged and in the event of disability as follows:

MSP rule relating to the Working Aged.  The working aged MSP rule is applicable to employers with at least 20 full and/or part-time employees on each working day in each of 20 or more calendar weeks in the current or preceding calendar year.  It should be noted that the 20 weeks need not be consecutive.  It should further be noted that if the threshold had been met for the preceding calendar year, the law applies for all of the current calendar year.  Conversely, if the threshold had not been met for the preceding calendar year, but is met part way through the current calendar year, the law applies to the remainder of the current calendar year. For purposes of determining employer size, leased employees, as defined in IRC §414(n), are counted as employees of the employer.

For a multi-employer plan or multiple employer plan, if all participating employers have fewer than 20 employees, Medicare is the primary payer.  If all participating employers have 20 or more employees, the MSP rule is applicable.  If a multi-employer plan or multiple employer plan includes both employers with 20 or more employees and employers with fewer than 20 employees, then the MSP rule generally applies.  The plan can, however, exempt small employers from the MSP rule.

Employer-provided health coverage is the primary payer and Medicare is the secondary payer for the working aged.  For purposes of the MSP rules, the "working aged" are:

  • Individuals in current employment status, aged 65 and over.
  • A spouse, aged 65 or older, of an individual who has current employment status. 

For purposes of the MSP rules, current employment means an individual, including a self-employed person, who is actively working as an employee.  Current employment also includes an individual who is on an approved leave of absence, furlough, or comparable status, during which time employment has not been terminated.

MSP rule relating to Disability.  Medicare is the secondary payer for currently employed disabled individuals under age 65 with coverage through a large group health plan. A large group health plan is defined as a plan sponsored by an employer who employs at least 100 full or part-time employees on at least 50 percent of the regular business days in the preceding calendar year. For purposes of determining employer size, leased employees, as defined in IRC §414(n), are counted as employees of the employer.  The MSP rule relating to disability applies to an actively working employee, including a self-employed individual, or a disabled dependent of a currently employed individual.

Quick Chart of the MSP Rules.  The MSP rules have evolved over the past several years. The current status of the MSP rules is as follows:

 

Condition

Who Pays First

Who Pays Second

Working Aged (65+) and Covered by: 1) Employer’s Group Health Plan or 2) Working Spouse’s Group Health Plan

Employer employing <20 Employees

Medicare

Group health plan

Employer employing 20+ Employees

Group health plan

Medicare

 

 

 

Disabled and Covered by: 1) Large Employer’s Group Health Plan or 2) Working Family Member’s Plan

Employer employing <100 Employees

(and not part of a multi-employer plan where any employer has 100+ employees)

 

 

Medicare

 

 

 

Group health plan

 

Employer employing 100+ Employees (“large group health plan”)

 

Large group health plan

 

Medicare

 

End Stage Renal Disease and Group Health Plan

First 30 months of Medicare entitlement or eligibility

Group health plan

Medicare

After 30 months

Medicare

Group health plan

 

 

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. 

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