As your 65th birthday approaches and you become eligible for Medicare coverage, you might be wondering if Medicare or your existing insurance coverage will be the primary or secondary payer for health care services.
We field this question a lot, and the short answer is that it depends. In most health coverage scenarios, Medicare is the primary payer, but whether Medicare is primary or secondary will also depend on your other health insurance.
This article outlines the most common health insurance scenarios and identifies whether Medicare provides primary or secondary insurance for each.
Primary Insurance Explained
90% of Medicare beneficiaries also have other insurance. The reason for this is simple: Medicare alone is often insufficient to cover medical costs. When you seek medical treatment, there is a coordination of benefits that happens behind the scenes that distinguishes between Medicare primary insurance and Medicare secondary insurance situations.
Your primary insurance pays whatever is owed that is consistent with your medical coverage. When those benefits meet their threshold, your other coverage provider receives the bill for the remainder.
When Is Medicare Primary Insurance?
When Medicare is your only insurance coverage, Medicare pays first. Logically, this makes sense because there is no other coverage to bill. This situation is relatively rare, however, since 90% of Medicare beneficiaries have other coverage to supplement their insurance coverage.
Below, we’ve outlined common Medicare primary coverage scenarios.
You Have Health Insurance from a Business with Less than 20 Employees
The percentage of Americans working past age 65 has doubled from 10% in 1985 to 20% today. As a result, many Americans eligible for Medicare also have an employer group health plan.
If your company is a small business with fewer than 20 employees, Medicare serves as the primary payer. Your group health coverage becomes the secondary payer in this scenario.
When you have group health insurance with a company of this size, it’s vital that you enroll in Medicare Part B to avoid late enrollment penalties. The reason is that this type of group health plan is not considered creditable coverage, meaning it doesn’t meet Medicare’s minimum qualifications.
Not having creditable coverage when you become Medicare-eligible can result in late penalties when you later enroll.
You Have Retirement Health Benefits
Retiree coverage can be available through your former employer. Here, your retiree coverage is secondary, and Medicare pays first.
You Have a Medicare-Eligible Disability
If you have employer coverage through a spouse, whether Medicare is the primary or secondary payer depends on how many employees your spouse’s employer has. If the number is under 100, then Medicare retains its position as the primary insurer.
On the other hand, if the company has more than 100 employees, your Medicare plan serves as secondary insurance, and your spouse’s coverage pays first.
You Keep COBRA Coverage
When you leave a company, you could get employer insurance under COBRA (Consolidated Omnibus Budget Reconciliation Act), which allows you to access your current health insurance coverage for a limited time after leaving your job.
It is usually not advisable to keep COBRA continuation coverage if you are Medicare-eligible. COBRA will almost always cost more than Medicare premiums, especially if you are eligible for premium-free Medicare. Further, COBRA is not creditable, and as a secondary payer, it will provide little, if any, benefits. Therefore, you will still need Medicare Part B.
You are Dual-Eligible for Medicaid
When you have both Medicare and Medicaid, Medicare is primary.
You Have ESRD (End-Stage Renal Disease)
If you have End-Stage Renal Disease and maintain a group health plan through your employer, the group health plan pays as primary for 30 months. After this time, Medicare becomes the primary payer.
Medicare Supplement Plans
Also referred to as Medigap, Medicare Supplement insurance is provided by private health insurance companies to “supplement” any gaps left by Original Medicare (Medicare Part A and B). In cases where someone has a Medicare Supplement plan, Medicare pays first, and then the facility will bill your supplemental insurance.
When Medicare is the Secondary Insurance
As a federal health care provider, Medicare often serves as primary insurance and pays first for medical expenses. There are, however, several exceptions, including the following:
You Have Group Health Plan Coverage from a Business with More than 20 Employees
Though Medicare is the primary payer when a company employs less than 20 people, the tables are turned when the business has more than 20 people working for it. In this situation, your current employer coverage is the primary payer, and Medicare becomes the secondary payer.
If you receive treatment and your group health plan coverage doesn’t cover the entire bill, the group insurance company will bill Medicare for the balance. If there is anything left to pay that wasn’t covered by a combination of your group health plan coverage and Medicare, you will pay the remainder cost.
You are Covered by Workers’ Compensation Benefits
If you are currently receiving benefits due to a workers’ compensation claim, workers’ comp will pay first, and Medicare becomes a secondary payer. The rationale is that another party is liable for covering your healthcare costs – not Medicare. This coordination of benefits prevents Medicare from overpaying without depriving beneficiaries of treatment.
You are on Active Military Duty
If you are on active duty with TRICARE benefits, Medicare pays second, and TRICARE pays first.
You Have a Medicare Advantage Plan
If you have a Medicare Advantage plan, it will be your primary insurance. Medicare Advantage plans are offered through a Medicare-approved private health insurance company. Medicare Advantage plans cover the bill for your health care costs instead of Medicare.
Medicare and Veterans Benefits
Medicare and VA benefits are usually mutually exclusive, meaning there is no coordination of benefits.
When you have both Medicare and retiree insurance through the Veterans Benefits Administration, Medicare pays when you visit a Medicare-approved facility. Your VA benefits apply when you receive treatment from a VA military hospital or recovery center.
There are several variables in understanding how Medicare coordinates benefits among multiple individual and group coverage insurance plans. Choosing a Medicare agent can ensure you get comprehensive coverage at the most budget-friendly cost.