If I Have Employer Insurance and Medicare, Which Is Primary?

When an individual has both employer-sponsored health insurance and Medicare, one plan is designated as the “primary” payer, responsible for covering costs initially. The other acts as the “secondary” payer, potentially covering remaining expenses. This arrangement helps manage healthcare costs and ensures claims are processed efficiently.

Understanding Primary and Secondary Coverage

When an individual holds more than one health insurance policy, a process called “coordination of benefits” (COB) is used to determine the payment order for healthcare services. The primary payer is the insurance plan that pays first for healthcare services, up to the limits of its coverage. This initial payment reduces the amount owed for medical care.

Following the primary payer’s contribution, the secondary payer then steps in. This plan pays after the primary payer, potentially covering remaining costs such as deductibles, copayments, or coinsurance. Coordination of benefits ensures claims are paid correctly, preventing duplicate payments and helping individuals manage out-of-pocket expenses.

Determining Primary Payer for Employer Insurance and Medicare

Federal law, specifically the Medicare Secondary Payer (MSP) rules, dictates which insurance plan is primary when an individual has both employer-sponsored health coverage and Medicare. These rules prevent Medicare from paying for services when another payer has primary responsibility. The determination of primary versus secondary status hinges on several key factors, including the size of the employer and the individual’s employment status.

For active employees aged 65 or older, and their spouses, the employer’s group health plan (EGHP) is primary if the employer has 20 or more employees. Medicare acts as the secondary payer, covering costs the EGHP did not. An employer is considered to have 20 or more employees if they have had this number for each working day in at least 20 calendar weeks in the current or preceding year.

Conversely, for active employees aged 65 or older, and their spouses, if the employer has fewer than 20 employees, Medicare is the primary payer, and the EGHP is secondary. This rule ensures that smaller employers are not unduly burdened by being the primary insurer for Medicare-eligible employees.

For individuals under 65 who are eligible for Medicare due to disability, the rules for primary payment also depend on employer size. If the employer has 100 or more employees, the employer’s group health plan is primary, and Medicare is secondary. If the employer has fewer than 100 employees, Medicare is primary for these individuals.

For retired employees or their spouses, Medicare serves as the primary payer, with any retiree health plan from the former employer being secondary. Individuals should confirm their specific coordination of benefits with their employer’s benefits administrator or the Centers for Medicare & Medicaid Services (CMS).

Specific Scenarios for Coordination

Medicare Advantage (Part C) plans function as primary Medicare coverage. If an individual has a Medicare Advantage plan and employer coverage, the coordination rules based on employer size and employment status still apply. The interaction occurs between the Medicare Advantage plan and the employer plan, rather than Original Medicare.

COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage coordinates with Medicare. If an individual is eligible for both, Medicare is primary to COBRA. If COBRA was obtained first and then Medicare eligibility began, COBRA coverage may end. Individuals can maintain COBRA for benefits not covered by Medicare, such as dental or vision.

Retiree health plans from a former employer coordinate with Medicare as the primary payer. Medicare pays first, and the retiree plan provides secondary coverage for remaining costs like deductibles, copayments, and coinsurance. Some employers offer Medicare Advantage plans for retirees, which follow Medicare Advantage coordination rules.

Veterans Affairs (VA) benefits are distinct from Medicare and do not coordinate in the same primary/secondary manner. Individuals with both VA benefits and Medicare must choose which benefit to use for a particular service. VA benefits take precedence for service-connected conditions, while Medicare may be primary for non-service-connected conditions. VA benefits do not cover Medicare deductibles, copayments, or coinsurance.

Medicare Supplement (Medigap) policies work with Original Medicare, not as primary or secondary insurance like employer plans. Medigap policies pay after Original Medicare, covering out-of-pocket costs such as deductibles, copayments, and coinsurance. They supplement Original Medicare benefits and do not coordinate directly with employer plans.

Financial Impact of Coordinated Benefits

Coordination of benefits between employer insurance and Medicare directly impacts an individual’s out-of-pocket healthcare costs. When a healthcare claim is submitted, the primary payer processes it first, paying for covered services up to the limits of its policy.

After the primary payer processes the claim, any remaining balance is forwarded to the secondary payer. The secondary plan may cover remaining costs, including deductibles, copayments, and coinsurance. For instance, if the primary plan has a deductible, the secondary plan might help satisfy that deductible, reducing the individual’s direct payment.

Coordination of benefits prevents duplicate payments, ensuring efficient use of healthcare funds. While dual coverage can lead to substantial savings, it does not always guarantee zero out-of-pocket costs. Individuals may still be responsible for certain expenses, depending on the specifics of both policies and the services received. Regularly reviewing the Explanation of Benefits (EOB) from both plans is important to understand claim processing and remaining amounts owed.