Column 76 Medicare COB

As we get older, 65 simply doesn't seem like it's THAT old!  For quite some time, the concept of "age 65 as retirement age" was a theme that decorated the number in grey hair.  In some cases there was a watermark of someone playing golf or maybe strolling with a cane in the background.

In reality that is simply not the case.  Many of my clients and friends are still working well past age 65.  Medicare refers to them as the "Working Aged" and created a whole set of rules for employers that employ them or their spouses.  The rules are different depending on the size of the employer.

The strictest rules are for employers who employ 20 or more employees. They must provide the same benefits to those over age 65 as those under age 65. To save money for the Medicare program the law provides that Medicare be secondary to the employer sponsored plan.

Medicare beneficiaries are free to reject employer plan coverage, in which case they retain Medicare as their primary coverage. Employers may not sponsor or contribute to individual Medigap or Medicare supplement policies for beneficiaries who have or whose spouse has current employment status. The MSP manual at the IRS website has more detail.


An employer that has fluctuating employment numbers can get stuck if the employer has a temporary increase in employment. If the employer has 20 or more full-time and/or part time employees for each working day in each of 20 or more calendar weeks in the current or preceding year, the group is considered to have 20+ employees.  Self-employed individuals who participate in an employer plan are not counted as employees for this calculation.


When a plan is for retirees, this Medicare Primary status is not required.  But it is important for individual to determine if the retiree plan requires that the individual enroll in Medicare A & B when eligible.  Typically, this is required.


Individuals who have Medicare in addition to a group health plan want to look for a description of how claims are paid.  Is the plan a "carve-out".  This means that the plan will pay its own benefits as defined by the plan and simply carve out, what Medicare pays.  That limits the plan liability for the claim.  A COB (Coordination of Benefits) Provision will typically result in a greater claim payment on behalf of the insured.


Speaking of COB, this is an area of claims that has changed since I started in the business some 36 years ago.  In the past, it could be very attractive to be covered by two insurance plans.  In many cases double coverage would result in the insured's being covered at 100% between the two plans.  If you had individual coverage and group insurance, you could actually make money in the event of a large claim, because both would pay full benefits and the excess would come to you in the case of a large claim.


That is no longer the situation.  Most plans require that their full deductible be met.  So if your plan has $1000 Deductible and your spouse's plan has $2500 deductible, you will get credit for the $1000 met on his plan, but still need to meet the balance of $1500 on yours.  You will still be required to pay the coinsurance on your plan until your out of pocket maximum is met as well as met on his plan. 


I recommend that people look carefully at whether or not it is worth double paying to be covered on spousal plans. You will see now that when one applies for individual coverage, the carrier also asks that you drop any other coverage when you are approved for their plan.   


The order for COB is still the same.  Each individual's primary plan is that which they obtain by virtue of their own employment.  Children's order of coverage is subject to the birthday rule.  This means the spouse whose birthday month is earliest in the year is primary for the children. 


At no time in my career has health insurance been more a subject of interest. Learning the nuances of the system is important to help you make good decisions. Employers too, more than ever need a benefits consultant to work with them to address benefits issues.