What Is GHP Insurance and How It Works With Medicare?

Group Health Plan (GHP) insurance is a common form of health coverage established through employment. Employers often provide these plans as a benefit to attract and retain talent. This type of insurance pools risk across a group of individuals, often leading to more stable and lower premium costs compared to individual policies. Understanding GHPs is important for employees, especially when nearing Medicare eligibility.

Defining Group Health Plans

A Group Health Plan (GHP) is a health insurance plan offered by an employer or employee organization, providing coverage to employees and their families. Unlike individual insurance, GHPs involve shared costs, with employers typically paying a significant portion of premiums and employees covering the rest through payroll deductions.

The group nature of GHPs extends coverage to multiple individuals under a single contract, spreading the risk of high healthcare costs. This collective approach often leads to more affordable rates and allows employers to negotiate better terms with insurers.

GHPs are a significant part of an employee’s compensation, often including supplemental benefits like dental, vision, or pharmacy services. Employers gain tax advantages as contributions are often tax-deductible, and employee contributions can be pre-tax, lowering taxable income.

Coordination of Benefits with Medicare

When an individual has both Group Health Plan (GHP) coverage and Medicare, specific rules determine which plan pays first. This is known as Medicare Secondary Payer (MSP) rules. The primary payer processes the claim first, and any remaining costs are then sent to the secondary payer.

For individuals aged 65 or older covered by a GHP based on current employment, employer size determines primary payment. If the employer has 20 or more employees, the GHP is primary, and Medicare is secondary. Employers with 20 or more employees cannot incentivize Medicare-eligible employees to choose Medicare over the GHP.

Conversely, if the employer has fewer than 20 employees, Medicare typically serves as the primary payer for individuals aged 65 or older. In such cases, the GHP becomes the secondary payer, covering costs after Medicare has paid its share. These employer size rules for the working aged apply if the coverage is based on current employment; retiree or COBRA coverage generally makes Medicare primary regardless of employer size.

For individuals under age 65 who are Medicare-eligible due to disability, the GHP is primary if the employer has 100 or more employees. If the employer has fewer than 100 employees, Medicare is the primary payer, and the GHP is secondary.

Special rules apply to individuals with End-Stage Renal Disease (ESRD). For those Medicare-eligible solely due to ESRD, the GHP is primary for a coordination period of up to 30 months. This period begins with the first month of Medicare eligibility due to ESRD. After 30 months, Medicare generally becomes the primary payer for ESRD-related services.

Navigating Coverage with GHP and Medicare

Individuals with both Group Health Plan (GHP) coverage and Medicare need to understand the implications for their healthcare expenses and enrollment decisions. One common scenario involves delaying Medicare Part B enrollment when covered by a GHP based on current employment. This delay is permissible without penalty if the GHP coverage is “creditable,” meaning it is comparable to Medicare’s coverage.

Upon termination of employment or GHP coverage, individuals typically qualify for an eight-month Special Enrollment Period (SEP) to sign up for Medicare Part B without penalty. COBRA, retiree health coverage, or individual market plans do not qualify for this SEP, and delaying Part B enrollment with these types of coverage could lead to penalties.

If an individual does not enroll in Medicare Part B during eligible enrollment periods, including any SEP, they may face a permanent late enrollment penalty. This penalty adds 10% to the monthly Part B premium for each full 12-month period they were eligible for Part B but did not enroll.

When both GHP and Medicare are involved, coordination of benefits impacts deductibles, co-pays, and out-of-pocket maximums. The primary payer’s benefits are applied first, and the secondary payer may then cover remaining costs, potentially reducing out-of-pocket expenses. For example, if the GHP is primary, its deductible and co-pays apply first, and Medicare may then help pay for services. Individuals should inform their healthcare providers about both coverages for accurate billing.