Question: As a small group health plan in PA (less than 20 employees), employees/dependents age 65 over increase my premiums substantially. Because of my group’s size, is it legal to offer incentives to entice them to go off the group plan and onto Medicare at age 65…or simply not offer coverage to those actively at work age 65+ since they have other options and the younger employees don’t.

Answer: This one comes up often so I’m going to quote chapter and verse:

“Medicare beneficiaries are free to reject employer plan coverage, in which case they retain Medicare as their primary coverage. When Medicare is primary payer, employers cannot offer such employees or their spouse’s secondary coverage for items and services covered by Medicare. Employers may not sponsor or contribute to individual Medigap or Medicare supplement policies for beneficiaries who have or whose spouse has current employment status.” (Excerpt from CMS Medicare Secondary Payer Manual, Chapter 1, (Rev 34,09-07-05)).

If an employer offers a Medicare beneficiary an incentive, financial or otherwise, not to enroll in the group, the health plan is subject to a civil money penalty of up to $5,000 for each violation. In addition, an excise tax could be applied that would equal 25% of the plan’s expenses incurred during the calendar year. This applies to all groups -large and small.