Warning! Do You Have Employees Age 65 or Older?

Editor’s Note: This article is a special edition to the Medical Association — May 27, 2016

In partnership with the Internal Revenue Service (IRS) and Social Security Administration (SSA), the Centers for Medicare and Medicaid Services (CMS) is using their data matching project more aggressively, to compare their records with other federal programs. CMS is looking for Medicare enrollees who are still working and have access to employer-provided coverage. Medicare Secondary Payer rules prohibit an employer from offering an incentive of any kind to an individual who is Medicare-eligible to enroll in Medicare in lieu of the employer’s group health plan. Employers are subject to severe penalties if they are determined to have encouraged those who are 65 or older to switch from employer-provided coverage to Medicare coverage.

Employers with 20 or more employees are the target of the prohibition. The 20 or more employee threshold is determined by head count and not by full-time status. For example, an employer with five part-time employees and 16 full-time employees would be considered as having 21 employees under this rule.

The penalty is $5,000 per instance, which is severe. However, the greater risk and potential penalty for employers found in violation is repaying CMS for payments on claims that Medicare paid as primary that should have been paid as secondary. For Medicare-eligible employees who have chronic illnesses that require ongoing treatment, the repayment could be significant.

While some employers received these letters in prior years, CMS is stepping up their goal of successful recoveries from below 5 percent to close to 100 percent. That is why they have partnered with the IRS and SSA in the joint data match project. If a Medicare-eligible employee shows up on both the income tax withholding list of an employer and on the Medicare list, a data match generates the letter.

Some employers who get the letter may not realize how seriously they should take the request. There is a 30-day deadline, which puts more pressure on busy owners and managers to be alert and respond correctly and in a timely manner.

Responding to the questionnaire can be complicated. If the process is not followed precisely, the employer could face fines and penalties for the wrong employee. There are three steps of which to be aware:

Step 1 Employer sets up account in the data match program.

Step 2 Complete the information about the health plan and the specific questions on the employees identified by the data match program.

Step 3 After certifying the information is correct, wait for the next request for information.

Protect your business by responding timely and accurately to the CMS letter. Evaluate whether you have risks with any employee aged 65 or older. If you have Medicare-eligible employees who voluntarily declined coverage under your business health plan to take Medicare, you need proof on file. Ask your insurance carrier to provide a form for employees to decline coverage.

Be careful advising your employees with comparisons of coverage and premiums. Remember, an employer encouraging an employee to take Medicare and to decline the group health plan is where this problem begins.

The information in this article is not intended as tax or legal advice. Please consult your tax advisor for specific information regarding your individual situation.

Contributed by Mark Baker, CPA and Patti Perdue, CPA.CITP, Jackson Thornton. Jackson Thornton is a Certified Public Accounting and Consulting Firm and an official partner with the Medical Association.