Question: Can an employer offer a group Medicare supplemental plan (employer paid) for employees enrolled in Medicare Parts A & B?
Answer: Employer-sponsored group health plans are required to comply with the federal “Medicare Secondary Payer” provision. The MSP rules determine whether the group plan or Medicare will be the primary payer with respect to ACTIVE employees (and spouses). The rules vary based whether the employer size is under 20 employees, between 20-99 employees, or 100 or more employees. Very briefly, Medicare is primary for groups under 20, which means that Medicare pays first for Medicare beneficiaries regardless of whether they also have employer-sponsored group health coverage.
Large employers (those sponsoring group health plans that must pay first before Medicare) are prohibited from offering or providing secondary coverage for items or services by Medicare. Therefore, large employers are prohibited from offering or providing Medicare Supplement plans for active employees (or spouses of active employees). However, this prohibition does not apply to small employers (those under 20 employees) since Medicare is the primary payer.
Reference: CMS Medicare Secondary Payer (MSP) Manual (copy available at http://www.cms.gov/regulations-and-guidance/guidance/manuals/downloads/msp105c01.pdf)