March 10, 1987

SUBJECT: INSURANCE

CIRCULAR LETTER NO. 3 (1987)

TO: ALL INSURERS LICENSED TO WRITE ACCIDENT & HEALTH INSURANCE IN NEW YORK STATE, INCLUDING ARTICLE 43 CORPORATIONS, AND CORPORATIONS WITH CERTIFICATES OF AUTHORITY UNDER ARTICLE 44 OF THE PUBLIC HEALTH LAW

RE: MEDICARE AS SECONDARY PAYOR

Enclosed are copies of a letter to me from John C. Berry of the United States Health Care Financing Administration and an accompanying explanatory memorandum on the provisions of various Federal Statutes and Regulations which serve to make the Medicare program secondary to other sources of payment. It is expected that all entities subject to the jurisdiction of this Department will become familiar with and comply with the provisions of these Federal laws. Any contractual modifications required to comply with these federal laws should be expeditiously submitted to this Department for review and approval.

Very truly yours,

[SIGNATURE]

JAMES P. CORCORAN

Superintendent of Insurance

 

Encl.

Refer to: BPO-P33

Mr. James P. Corcoran

Superintendent of Insurance

New York Department of Insurance

160 West Broadway

New York, New York 10013

Dear Mr. Corcoran:

We are writing regarding the provisions of the Social Security Act which make Medicare a secondary payer to other insurers. While we have generally been pleased with the support shown by most of the insurance industry as we have implemented these rules, we are concerned about those insurers who are still not coordinating benefits properly with the Medicare program. Since there have been a number of recent changes affecting the Medicare Secondary Payer (MSP) provisions, we are taking this opportunity to provide each State Insurance Commissioner with some important information on this program. We would also like to enlist your support in assuring that private insurers pay primary benefits in those situations where Federal law requires that Medicare is the secondary payer.

Notwithstanding those exclusions which have been part of the Medicare program since its inception (Workers" Compensation, Black Lung, Veterans Administration), Medicare's role as a secondary payer of health insurance benefits is a relatively new one. In 1980 Congress mandated that Medicare pay only secondary benefits where payment for services is available under automobile medical or no fault insurance or any liability insurance. Since that time, additional MSP provisions have been added. Medicare is now secondary to employer group health plans (EGHPs) of "working aged" beneficiaries age 65 and older and is the secondary payer for beneficiaries age 65 and older who have working spouses of any age with EGHP coverage. The working aged and "spousal" provisions previously applied only to beneficiaries age 65-69, but were extended to cover those over age 69 under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) effective May 1, 1986. Medicare is also the secondary payer for a period of up to 12 months for those beneficiaries entitled to benefits solely on the basis of end stage renal disease (ESRD) who also have EGHP coverage. Effective January 1, 1987, Medicare will be the secondary payer for disabled beneficiaries who elect to be covered by an EGHP of certain large employers. The "disabled" amendments are contained in Section 9319 of the Omnibus Budget Reconciliation Act of 1986.

We have enclosed a document entitled "Medicare As A Secondary Payer" which explains each of the MSP provisions and includes a chart which summarizes the

Medicare As A Secondary Payer

Until 1980, when Congress mandated that Medicare pay only secondary benefits in certain situations, the program had generally assumed a position of primary payer responsibility for its beneficiaries. Since that time there have been other changes in the Medicare Law which have added new circumstances under which Medicare is a secondary payer. A chart of Medicare secondary payer (MSP) legislative and regulatory references follows the text below. MSP is essentially the same concept known in the private insurance industry as coordination of benefits and refers to those situations where Medicare does not have primary responsibility for paying the medical expenses of a Medicare beneficiary. The main purpose of this document is to clarify those circumstances under which Medicare is a secondary payer.

MSP is not a completely new concept, since some other programs have been primary to Medicare since its inception. Services for which benefits are payable under workers" compensation plans, the Federal Black Lung Program or authorized by the Veterans Administration have always been excluded from payment under Medicare. The Medicare program can, however, pay secondary benefits in certain situations where these programs do not pay for services in full. Since our main purpose here is to summarize the more recent changes to the law which make Medicare a secondary payer, these exclusions will not be discussed further, but are included in the chart of legislative and regulatory references.

Basically, there are four areas addressed by recent legislation making Medicare the secondary payer:

(1) Where services are reimbursable under automobile medical, no fault or any liability insurance.

(2) Where a Medicare beneficiary age 65 or older has employer group health plan (EGHP) coverage through his own employment or the employment of a spouse (of any age).

(3) Where a beneficiary is entitled to Medicare solely on the basis of end stage renal disease (ESRD), Medicare is secondary to an EGHP for a period of up to 12 months after the individual has been determined eligible for ESRD benefits.

(4) Where a disabled beneficiary (except ESRD beneficiary) elects to be covered by an EGHP as a current employee of certain large employers or family member of such employee.

Where an employer group plan pays benefits as primary payer, but does not pay in full for the services, secondary Medicare benefits based on Medicare reimbursement levels may be paid to supplement the amount paid by the employer plan. Also, if an employer plan denies payment for particular services because they are not covered by the plan, primary Medicare benefits may be paid for them subject to Medicare program coverage requirements. Claims for Medicare primary benefits will be denied, however, when an employer plan denies payment based solely on an assertion that such plan pays only secondary benefits for services covered by Medicare. This action is specified in 42 CFR 405.341(C)(1) of the Federal regulations which states that Medicare will not pay primary benefits for otherwise covered services even though the employer plan states that its benefits are secondary to Medicare's or otherwise excludes or limits its payments to Medicare beneficiaries.

The legislative history of the working aged provisions includes three separate statutes. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) required Medicare to be secondary payer for workers age 65-69 and their spouses age 65-69, who are covered by their employer's group health plan. Under the Deficit Reduction Act of 1984 (DEFRA) the working aged provisions were expanded to spouses age 65-69 of employees under age 69 who must be offered dependent group health coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) amendments removed the age 69 limit for employees and spouses; it became effective May 1, 1986.

In addition to amending the Social Security Act, the acts dealing with the working aged provisions amended the Age Discrimination in Employment Act (ADEA). Questions regarding ADEA compliance should be directed to:

Executive Secretariat

Equal Employment Opportunity Commission

2401 E Street, N.W., Room 214

Washington, D.C. 20506

Telephone: (202) 634-6592 or (202) 634-6690.

LIMITATIONS ON PAYMENT FOR SERVICES TO INDIVIDUALS ENTITLED TO BENEFITS SOLELY ON THE BASIS OF END STAGE RENAL DISEASE WHO ARE COVERED BY EMPLOYER GROUP HEALTH, PLANS

Medicare benefits are secondary to benefits payable under an employer group health plan in the case of individuals who are entitled to benefits solely on the basis of End Stage Renal Disease (ESRD) during a period of up to 12 consecutive months. The 12-month period begins with the earlier of:

(1) The month in which a regular course of renal dialysis is initiated or,

(2) In the case of an individual who receives a kidney transplant, the first month in which the individual becomes entitled to Medicare.

ARA - Associate Regional Administrator