Group Medicare is health coverage provided by an employer or union that coordinates with a beneficiary’s Medicare coverage. This arrangement is a Group Health Plan (GHP) offered to current or former employees and their dependents who are also eligible for Medicare. The plan structure is designed to supplement or sometimes replace Original Medicare benefits, ensuring comprehensive coverage. The key function of Group Medicare is determining which coverage source pays medical claims first. This coordination is highly dependent on the employee’s work status and the size of the employer.
Group Health Plans: Defining Eligibility and Scope
Group Medicare coverage is organized around two primary categories of beneficiaries: active employees and retirees. An active employee is someone still working for the company, and their eligibility for the GHP is tied directly to their current employment status. This status may also extend coverage to the employee’s spouse or dependents who are eligible for Medicare.
Retirees, in contrast, are former employees who receive coverage under a separate retiree health plan. The employer or union sets the eligibility rules for these plans, often requiring a specific number of years of service to qualify for the benefit. While the GHP is offered to the group, members must still be entitled to Medicare, typically by being age 65 or older, to utilize the coordinated benefits.
The employer’s size plays a significant role in how the Group Health Plan operates alongside Medicare. Federal rules define a threshold of 20 or more employees as a large group, which fundamentally changes the coordination of benefits. This size distinction is a primary factor used to determine which insurer is responsible for paying medical claims first, forming the basis of the Medicare Secondary Payer provisions.
Determining Primary Coverage: The Payer Rules
The core of coordinating Group Medicare with the federal program is governed by the Medicare Secondary Payer (MSP) provisions of the Social Security Act. These provisions establish a hierarchy for payment, determining whether the Group Health Plan (GHP) or Medicare pays a medical claim first. The payment order is based on the beneficiary’s current employment status and the size of the employer.
For active employees who are Medicare-eligible due to age, the size of the employer is the deciding factor. If the employer has 20 or more employees, the GHP is mandated to be the primary payer, meaning it pays the claim before Medicare. Medicare functions as the secondary payer, only covering costs not paid by the GHP. The employer cannot incentivize the Medicare-eligible employee to drop the GHP coverage or enroll in Medicare Part B.
If an active employee works for a small employer with fewer than 20 employees, the payment hierarchy reverses. Medicare is generally the primary payer, and the GHP is secondary. The small employer GHP only pays for services after Medicare has paid its share. This distinction may influence the employee’s decision to enroll in Medicare Part B, which has a monthly premium.
The payment rule for retirees is different and simpler, regardless of the employer’s size. For individuals covered under an employer-sponsored retiree health plan, Medicare is nearly always the primary payer. The GHP then acts as secondary coverage, paying for deductibles, coinsurance, or services that Medicare did not fully cover.
Specific Group Medicare Structures
Employers and unions utilize specific insurance structures to deliver their Group Medicare benefits, especially for retirees.
Group Medicare Advantage Plans
One common approach involves contracting with private insurers to offer Group Medicare Advantage (MA) plans, which are also known as Employer Group Waiver Plans (EGWPs). These plans bundle Medicare Part A (hospital) and Part B (medical) coverage, often including Part D (prescription drugs), into a single managed-care product. Group MA plans are customized for the specific retiree population, allowing the employer to offer richer benefits, lower out-of-pocket costs, or a streamlined experience. Medicare pays a fixed amount to the private insurer for each enrollee, and the employer often contributes an additional amount to fund the enhanced benefits.
Supplemental Coverage
Another frequent structure involves the employer providing supplemental coverage that works with Original Medicare. This coverage functions similarly to a Medigap policy, paying for costs like deductibles and coinsurance left over by Medicare Parts A and B. Many groups also provide Employer Retiree Drug Coverage, which is a Part D prescription drug plan tailored specifically for the group’s members.
The availability of a credible Group Health Plan often impacts the Medicare enrollment rules for beneficiaries. Individuals covered by a GHP based on active employment can typically delay enrolling in Medicare Part B or Part D without facing late enrollment penalties later on. This flexibility is a significant advantage of having employer-sponsored coverage that coordinates with Medicare.