Description:
Some people who have Medicare also have group health coverage. Sometimes Medicare is their primary payer, which means that Medicare pays first on their health care claims. Sometimes, the other plan must pay first. In that case, Medicare is the secondary payer. The terms "Medicare supplement" and "Medicare secondary payer" are sometimes confused. A Medicare supplement (Medigap) policy is a private insurance policy designed to fill in some of the "gaps" in Medicare's coverage when Medicare is the primary payer. Medicare supplemental policies typically pay for the expenses that Medicare does not pay because of deductible or coinsurance amounts or other limits under the Medicare program. An employer cannot offer or subsidize a Medicare supplemental policy where the law makes Medicare the secondary payer.

Policy Statement:
I.  Federal law takes precedence over conflicting State law and private contracts. These Federal requirements are found in Section 1862(b) of the Social Security Act (42 U.S.C. Section 1395y(b) ). Applicable regulations are found at 42 C.R.F. part 411 (1990).

II.  The following are the situations in which Medicare may be used as and should be billed as a secondary payer to employer group health insurance. Employer group health insurance does not include Medigap, Medicare Supplemental Insurance or Medicaid.

EMPLOYER GROUP HEALTH PLAN COVERAGE
1.  Working Aged: Patients 65 years or older who have Employer Group Health Plan (EGHP) coverage through their own employment or employment of a spouse. A EGHP is a health insurance or benefit plan that is offered through an employer of 20 or more employees.

2.  DISABLED: Patients under age 65 entitled to Medicare (i. e. those who have Medicare because they have been receiving Social Security disability benefits for 24 months - but not ESRD beneficiaries) on the basis of permanent disability who have health insurance coverage under a Large Group Health Plan (LGHP) either through the active or current coverage of a family member or from their own active or current employment. An LGHP is a health insurance or benefit plan that is offered through an employer who has 100 or more employees or is part of a multi-employer trust or association which has at least one employer of 100 or more employees.

3.  END STAGE RENAL DISEASE (ESRD): Patients under age 65 (including dependent children) who are entitled to Medicare solely on the basis of ESRD and who have health insurance coverage under an Employer Group Health Plan (EGHP/ESRD) as a result of the patient or any family member's current or former employment. An EGHP/ESRD is a health insurance or benefit plan offered by an employer of any size. Medicare is the secondary payer for ESRD beneficiaries for the first 30 months of their Medicare entitlement. The date of the beneficiaries entitlement starts the coordination period. This means that the other insurer may actually be primary to Medicare for as long as 33 months, the 30 month coordination period plus the usual 3 month waiting period between the date a beneficiary begins dialysis and their Medicare entitlement date. (For information concerning the coordination period, please see the separate section concerning this subject).

III.  When determining primary vs. secondary, the controlling factor is the group size indicator. These indicators range from A-J and can be found on MMGC in the Group Size field.

For each indicator, the situations for which BCBS would be primary over Medicare can be different.

Listed below are the various group size indicators and the situations for which Medicare would be primary. Also indicated are the situations for which BCBS would be primary.

Beside each situation is the type of Medicare Record which needs to be loaded.

GROUP SIZE INDICATOR A
Groups with indicator A are small groups (45,06, and 05 with less than 20 employees) and conversion (81).

Medicare is primary over Group coverage in these situations:

• 65 or over, active employee or spouse
• disability only
• ESRD only, *after the coordination period
• retiree, any age

Group Coverage is primary over Medicare in these situations:

• ESRD only,*during the coordination period

NOTE:
Although Conversion (81) is under group size indicator A, the coordination period for ESRD does not apply. Once Medicare becomes effective, Medicare pays primary.

GROUP SIZE INDICATOR B
Groups with indicator B are small groups (05 with more than 20 employees) and Medium group.(15).

Medicare is primary over Group coverage in these situations:

• disability only
• ESRD only,*after the coordination period.
• retiree, any age

Group Coverage is primary over Medicare in these situations:

• 65 or over, active employee or spouse
• ESRD only,*during the coordination period

GROUP SIZE INDICATOR C
Group with indicator C are large groups (01, 02, 03, 10, 18, 25, 26, 35, 50, 60, 70, 71, 72, 95, AND 98).

Please note: Not all groups beginning with these prefixes will fall under indicator C. Some will fall under the Indicators F or G.

Some groups process their active employees and their retirees under the same group numbers. However, some groups process their retirees on a separate group number from their active employees.

Groups under Group Size Indicator C are large groups which do not have a separate group number for their retirees.

Medicare is primary over Group coverage in these situations:

• ESRD only,*after the coordination period
• retiree, any age

Group Coverage is primary over Medicare in these situations:

• 65 or over, active employee or spouse
• disability only
• ESRD only,*during the coordination period

GROUP SIZE INDICATOR D
Groups with indicator D are individual groups (82, 84, 85, and 87).

Medicare is primary in all situations because these prefixes are for individual policies.

NOTE:
In group situations, the coordination period applies on ESRD. However, this is not applicable on individual policies. Once Medicare becomes effective, Medicare pays primary.

GROUP SIZE INDICTOR E
Groups with indicator E are over 65 supplements (83, 86, 90, 91, and 92), and they have no other party liability.

These supplements pick up what Medicare does not pay. If Medicare does not cover, we do not cover.

GROUP SIZE INDICATOR F
Some groups process their active employees and their retirees under the same group number. However some groups process their retirees on a separate group number from their active employees.

Group size indicator F is for the retiree group numbers which do not process their active employees on the same group number.

Medicare is primary over Group coverage in these situations:

• disability only
• ESRD only *after the coordination period.
• retiree, any age

GROUP SIZE INDICATOR G
Group size indicator G is for the active group numbers which do not process their retirees on the same group number.

Medicare is primary over Group coverage in these situations:

ESRD only,*after the coordination period.

Group coverage is primary over Medicare in these situations:

• 65 or over, active employee or spouse
• disability only
• ESRD only *during the coordination period

GROUP SIZE INDICATOR H
Group size indicator H is for dental only contracts.

These contracts do not coordinate with Medicare because Medicare does not pay for dental services.

GROUP SIZE INDICATOR I
Group size indicator I is for retiree supplement groups.

These groups provide regular group coverage to under 65 dependents and Medicare supplement coverage to the retiree. All under the retiree's ID number (like State Group). if patient = retiree, system will operate under "I" logic. if patient = under 65 dependent, system will operate under "G" logic. The groups will actually show "I" not "G" on the GCCF screen.

GROUP SIZE INDICATOR J
Group size indicator J is for SCHIP (94).

There is no coordination with Medicare. A person is not eligible for coverage by the POOL or for continuance of coverage by the POOL if the person is eligible for health care benefits under Medicare.

IV.  COORDINATION PERIOD
When a person has Medicare solely on the basis of end stage renal disease (ESRD) , there is a period of time in which Medicare is secondary to the employer group health plan (EGHP). This period is called the coordination period.

According to the OBRA 1990, the coordination period is applied as follows:

For those individuals who began dialysis prior to December 1, 1989, the coordination period is for up to 12 months and begins with the earlier of:

•      The month in which the person began a regular course of renal dialysis or
•      The first month in which the person becomes entitled to Medicare, if he or she receives a kidney   transplant without first beginning dialysis.

 

For those individuals, who began dialysis on or after December 1, 1989, the coordination period has been extended from 12 months to 18 months.  This change makes the coordination period begin with the earlier of the first month of entitlement to, or eligibility for, Medicare Part A based solely on ESRD.

The Balanced Budget Act of 1997 extended the 18 month period to 30 months regarding items and services related to ESRD that were furnished on or after February 5, 1996.

This change eliminates the first month of dialysis as a determining factor for the coordination period. This means that the employer group health plan may actually be primary to Medicare for as long as 33 months, the 30 month coordination period plus the usual 3 month waiting period between the date a beneficiary begins dialysis and their Medicare entitlement date.

Coordination period will not apply if Dual Disability is involved. Please see the following section on Dual Disability.

V.  DUAL ENTITLEMENT
Dual Entitlement Rule - Definition - An individual is considered to be under "Dual Entitlement" when he or she is:

 

• Age 65 or older and eligible for Medicare due to age.                             

                                       OR

• Under 65 and elgible for Medicare due to a disability other than ESRD

                                        AND

• He or she also has irreparable kidney damage that requires dialysis or a transplant.

Applying the Dual Entitlement Rule - Pior to OBRA '93, Medicare became primary when a person met entitlement criteria for two provisions at the same time.

Since OBRA '93, the person has to complete the 30-month ESRD coordination period before Edicare would become the primary payer.

Easiest determination of when insurance through an employer, or former employer, should be primary for the 30-month coordination period is to consider the person's status at the time he/she developed the Dual Entitlement.

If the person already had Medicare coverage and Medicare had been paying primary, Medicare will remain the primary payer for the 30-month period.

If the person was covered by another insurance through a current or former employer, and that insurance was paying primary at the time he/she became eligible for Dual Entitlement, then that insurance will remain the primary payer for the 30-month period.

Dual Entitlement Chart
0;                               2nd Entitlement to Medicare Based Upon

 

1st Entitlement of Medicare Based Upon	ESRD	Disability	Age 65
Age 65	1	N/A	---
ESRD	---	2	3
Disability	1	---	4

1. If there is a group health plan covering the patient, Medicare is primary effective upon completion of the 30-month ESRD coordination period.
2. Medicare is primary effective with the month the individual could be entitled to Medicare on the basis of Disability, provided the 30-month ESRD coordination period has been completed.
3. Medicare is primary the month the individual attains age 65, provided the 30-month ESRD coordination period has been completed.  The coordination period must always be completed.
4. Follow the Working Aged rules.

VI.
THERE ARE TWO METHODS WHICH MAY BE USED TO COORDINATE MEDICARE CLAIMS:

Carve-out
COB
CARVE-OUT
This method of coordination calculates what the BCBS payment for a given service would be in the absence of Medicare. The Medicare payment would then be subtracted or "carved-out" of this payment calculation.

ASSIGNED CLAIMS

Calculation A

Medicare Allowed - Medicare Paid

Calculation B

BCBS Primary liability - Medicare Paid

Compare CALCULATION A and CALCULATION B and pay the LESSER of the two.

NON-ASSIGNED CLAIMS

BCBS Primary liability

BCBS Primary liability - Medicare Paid

COB

Another method of coordination is called COB. In this situation, two calculations must be done in order to determine actual payment. These two calculations are called primary liability and secondary liability.

Primary liability is the amount in which would be payable under the group contract if no Medicare were involved. In other words, primary liability will be subject to deductible and co-insurance just as any other claims situation. Once this calculation is completed the primary liability amount is set aside for comparison purposes later.

Now the secondary liability must be determined. This amount is derived by subtracting the Medicare payment from the allowed amount if the provider accepts assignment. If the provider does not accept assignment, secondary liability is derived by subtracting the Medicare payment from the total covered charge. The secondary liability amount is then compared to the primary liability. The lesser of the two amounts will be the payment for the claim.

VII.
DETERMINING WHICH METHOD OF COORDINATION TO USE
You may refer to one of three screens (MMGC, RMIH, Medicare/COB tab or MMCT) to determine which method of coordination would be used in coordinating benefits with Medicare for a particular policy. The indicators will be:

     9 is the standard COB method all other indicators default to the CARVE-OUT Method (Most Commonly viewed indicators are 7 & 8)    

1.  MMGC - THE MEDICARE METHOD IS FOUND IN THE COB FIELD.
2.  RMIH - THE MEDICARE METHOD IS FOUND ON MEDICARE/COB TAB IN THE MED METHOD FIELD.
3.  MMCT - THE MEDICARE METHOD IS FOUND IN THE MED PROVISIONS FIELD.

VIII.
ASSIGNMENT
In addition to the two methods of coordination, assignment of a claim will also affect how we determine the coordinated benefits. Providers who volunteer to "accept assignment" agree to accept as full payment the fee set by Medicare for the covered service. Also, if the provider does "accept assignment" an a claim, the payment from Blue Cross and Blue Shield will go to the provider.

However, if the provider does not "accept assignment", he/she does not agree to accept as full payment the fee set by Medicare for covered services. If the provider does not "accept assignment" on a claim, the payment from Blue Cross and Blue Shield will go to the policyholder.

COB
A.Provider accept assignment.
Medicare is primary. Payment between Medicare and BCBS cannot exceed Medicare's allowed amount.
B. Provider did not accept assignment.
Total payment between Medicare and BCBS can equal total covered charges.

CARVE-OUT
A. Provider accept assignment.
Payment between Medicare and BCBS cannot exceed Medicare's allowed amount.
B. Provider did not accept assignment.

Payment between Medicare and BCBS cannot exceed BCBS's primary liability amount, regardless of Medicare's allowed amount.

NOTE:
If a hardcopy claim is received with an EOMB stating the provider has accepted assignment, but the claim itself indicates the assignment should go to the subscriber, BCBS will follow Medicare's assignment.

Also, if a hardcopy claim is received with an EOMB stating the provider has not accepted assignment, but the claim itself indicates the assignment should go to the provider, BCBS will follow Medicare's assignment.

Once you have determined that Medicare is primary to BCBS, two questions must be asked before beginning to apply coordination of benefits:

1.  What type of coordination does the group policy require? COB method? or Carve-out? (Refer to the previous section to determine method used).
2.  Is the claim assigned or non-assigned?

MEDICARE CARVE-OUT

NON-ASSIGNED CLAIMS

The concept of carve-out is to carve-out or subtract Medicare's payment from what we would have paid (in absence of Medicare). We will then actually pay the remaining amount.

1.  First calculate what BCBS would have paid in the absence of Medicare. Remember to determine BCBS approved amount. Subtract BCBS contract's deductible, and determine BCBS percentage of payment.

EXAMPLE:
A charge of $400 is filed on a contract that has $100 deductible (no portion satisfied) and an 80% payment. BCBS allowed is $300 for this procedure (see pricing screen). We would then calculate payment as follows:

 

CHARGE:	$400
BCBSSC ALLOWED:	300
LESS DEDUCTIBLE:	-100
BALANCE USED TO CALCULATE PAYMENT	200
BALANCE at 80% (Which is BCBS Primary Liability)	$160

2.  Next subtract the Medicare payment from what we would have paid in the absence of Medicare.

EXAMPLE:
Using the example above, let's assume that Medicare paid $100 on the $400 charge. Remember BCBS calculated payment in absence of Medicare was $160.

BCBS Payment in Absence of Medicare
Subtract Medicare's Payment -100
BCBS Coordinated Payment for this Claim $60

Another Example:
Charge: $155.00
BCBS Approved: $150.00
Non-Covered : $5.00(Exceeds Allowed Chgs.)
BCBS Allowed: $150.00
Less Deductible: $50.00
Total: $100.00
Pymt at 80%: $80.00
Less Medicare Payment: $125.00
BCBS Coord. Pymt.: $0.00

Notice that in the last example, there were no benefits paid by BCBS. In this situation, Medicare paid more than BCBS would have in the absence of Medicare; therefore, no benefits are paid by BCBS.

MEDICARE CARVE-OUT

ASSIGNED CLAIMS

This method requires additional calculations not used in the carve-out for non-assigned claims. This type of claim will require two payment calculations and a comparison to determine BCBS coordinated payment.

EXAMPLE:

Total Charge:	$4,000.00
BCBS Allowed:	$3,900.00
Less BCBS’s Deductible:	-$100.00
Medicare Approved:	$4,000.00
Medicare Payment:	$3,480.00

1.  Subtract the Medicare payment from the Medicare approved amount. This is called Calculation A.

BCBS first calculation as described above will be as follows:

Charge:	$4,000.00
Medicare Allowed:	$4,000.00
Less Medicare’s Payment:	-$3,480.00
Payment Calculation A:	$520.00

2.  Our next step will be to calculate what we would have paid in the absence of Medicare.

Using the example above, your calculation should look like the one below:

Charge:	$4,000.00
BCBS Allowed:	$3,900.00
Less BCBS’s Deductible:	-$100.00
Balance to use for pymt. calculation:	$3,800.00
Balance @ 80% (which is BCBS primary liability)	$3,040.00

Now subtract the Medicare Payment from BCBS liability in the absence of Medicare.  The difference will be known as Calculation B.

BCBS Liability  in the absence of Medicare $3040.00
Less Medicare’s Payment                          3480.00
Payment Calculation B                         -  440.00 or 0

Compare Payment Calculation A to Payment Calculation B and pay the lesser of the two.

Note:  Negative numbers, as in the example above, always equate to 0.

ANOTHER EXAMPLE

Calculation A:
Step 1

Charge:	$50.00
Medicare Allowed:	$25.00
Less Medicare’s Payment:	-$20.00
Payment Calculation A:	$5.00

Step 2 

Charge:	$50.00
BCBS Allowed:	$50.00
Less BCBS’s Deductible:	-$0.00
Balance to use for pymt. calculation:	$50.00
Balance @ 80% (which is BCBS primary liability)	$40.00

Calculation B:

Step 3 

BCBS Liability in the Absence of Medicare:	$40.00
Less Medicare’s Payment:	$20.00
Payment Calculation B:	$20.00

Step 4

Payment Calculation A:	$5.00
Payment Calculation B:	$20.00

Since $5.00 is less than $20. 00, BCBS coordinated payment will be $5.00 for this claim.

MEDICARE COB

NON-ASSIGNED CLAIMS

For non-assigned claims, which means the provider does not accept assignment, BCBS will pay up to the total covered charge. This is true even if the BCBS approved amount on a procedure is less than the total charge.

1.  First calculate what we would have paid if Medicare were not involved. Remember to determine our
      percentage of payment.

Charge:	$400.00
BCBS Allowed:	300.00
Less BCBS Deductible:	100.00
Equals:	200.00
Payment 80%:	160.00

Primary Liability = $160.00

 

Charge (Total Charge):	$400.00
Less Medicare Payment:	100.00
Balance:	300.00

Secondary Liability = $300.00

Since the primary liability is the lesser of the two calculations, we will pay $160.00 for this claim.

Another Example:

PRIMARY LIABILITY

Charge:	$50.00
BCBS Allowed:	40.00
Less BCBS Deductible:	0.00
Equals:	40.00
Payment 80%:	32.00

Primary Liability = $32.00

SECONDARY LIABILITY

Charge (total charge):	$50.00
Less Medicare Payment:	35.00
Balance:	15.00

Secondary Liability = $15.00

Since the secondary liability is the lesser of the two calculations, we will pay the $15.00 for this claim

MEDICARE COB

ASSIGNED
For assigned claims, which means the provider has "accepted assignment", BCBS will only pay up to the Medicare approved charge.

1.  First calculate the amount payable under the group contract as if no Medicare were involved. In
     other words, the charge will be subject to the deductible and coinsurance and paid at the group's   
     percentage.

     EXAMPLE:
     A charge of $60 is filed on a contract that has a $100 deductible (has been satisfied) and an 80% 
     payment. BCBS allowed amount (indicated on the pricing screen) is $50 for this procedure. We
     would calculate payment as follows:

PRIMARY LIABILITY

Charge:	$60.00
BCBS Allowed:	50.00
Less BCBS Deductible:	0.00
Equals:	50.00
Payment 80%:	40.00

Primary Liability = $40.00

2. After primary liability is calculated, we will subtract the Medicare payment from the covered
   charge. Since theprovider has accepted assignment we will not exceed the Medicare approved
   allowance.

* Assume that Medicare approved $50 and paid $40 on the $60 charge.

     SECONDARY LIABILITY

Medicare Allowed mount:	$50.00
Less Medicare Payment:	40.00
Payment (Balance):	10.00

Secondary Liability = $10.00

3.   Compare the primary liability and the secondary liability. BCBS coordinated payment will be the
      lesser of the two.

Since the secondary liability is the lesser of the two calculations we will pay the $10.00 for this claim.

Another Example:
PRIMARY LIABILITY

Charge:	$4,000.00
BCBS Allowed:	4,000.00
Less BCBS Deductible:	100.00
Equals:	3,900.00
Payment at 80%	3,120.00

Primary Liability = $3120.00

* Assume that Medicare approved $4000 and paid $3480 on the $4000 charge.

SECONDARY LIABILITY

Medicare Allowed Amount:	$4,000.00
Less Medicare Payment:	3,480.00
Payment (Balance):	520.00

Secondary Liability = $520.00

Since the secondary liability is the lesser of the two calculations we will pay the $520.00 for this claim.

GRAMM-RUDMAN-HOLLINGS REDUCTION

The Gramm-Rudman-Hollings Bill (also known as The Balanced Budget and Emergency Deficit Control Act of 1985) establishes an automatic budget reduction procedure for fiscal years 1986 through 1991. This procedure provides for reductions in Federal programs should the budget deficit exceed specific amounts for any year.

As a result of this bill, there have been reductions in Medicare payments on all Part B services, supplies, and equipment during various years. In 1990, the reduction was 2%, but thus far in 1991 there has been no reduction in Medicare payments.

When there is a reduction and the provider accepts assignment on the claim, the provider is also agreeing to accept the reduced payment. This means the provider can bill the subscriber for the coinsurance amount only. The reduction amount cannot be billed to the subscriber.

Coordination of Medicare and COBRA Continuation Coverage

The coverage provided by most employer-sponsored health plans usually ends when employment terminates for any reason whatsoever, because most plans do not provide retiree coverage.  However, since 1986, COBRA has required most employer-sponsored health plans to provide continuation coverage for up to 18, 29 or 36 months, depending on the reason for coverage termination.  If COBRA continuation coverage is in effect and the COBRA qualified beneficiary becomes entitled to Medicare, the COBRA continuation coverage may be terminated.  However, if a person who is already covered by Medicare becomes entitled to COBRA continuation coverage because he or she had a qualifying event that caused existing employer-sponsored health coverage to end, the qualified beneficiary would be entitled to elect and maintain the COBRA continuation coverage for the maximum period allowed by the COBRA statute.

Coordination of COBRA continuation coverage with Medicare based on ESRD  

If a person has Medicare coverage based on ESRD before a qualifying event, and subsequently elects to have COBRA continuation coverage, the COBRA continuation coverage is primary and Medicare is secondary for a period of 30 months starting with the date of Medicare entitlement based on ESRD.  If a person already has COBRA continuation coverage and gets ESRD and thus becomes entitled to Medicare, the COBRA continuation coverage can be terminated, in which case Medicare becomes the only coverage available.  However, if the employer voluntarily maintains coverage beyond the period required by COBRA (for example, by providing retiree coverage that supplements Medicare or carves out Medicare benefits), that voluntary supplemental coverage is primary and Medicare is secondary.

Coordination of COBRA continuation coverage and Medicare based on age

The applicable Medicare regulations state that Medicare is primary when the covered services are furnished to an individual whose COBRA continuation coverage has been terminated because of the individual's Medicare entitlement, or who is covered under COBRA continuation coverage notwithstanding the individual's Medicare entitlement  The regulations appear to make Medicare primary to all COBRA continuation coverage regardless of active employment status that would exist if the qualifying event was a reduction in hours.

Coordination of COBRA continuation coverage and Medicare based on disability

Medicare is primary when the covered services are furnished to individuals: (1) whose COBRA continuation coverage has been terminated because of the individuals' Medicare entitlement; or (2) are covered under COBRA continuation coverage notwithstanding the individuals' Medicare entitlement.

In summary, Medicare is primary to COBRA continuation coverage in all instances when Medicare coverage is based on age or disability.  However, Medicare is secondary to COBRA continuation coverage or any voluntary continuation coverage provided in lieu of or in addition to COBRA continuation coverage when Medicare coverage is based on ESRD.  If a person has COBRA continuation coverage before contracting ESRD (and thereby before Medicare entitlement), the COBRA continuation coverage can be terminated.  This leaves Medicare as the sole available coverage (which has the same effect as having Medicare pay primary.  If the employer continues the health coverage on a voluntary basis once Medicare based on ESRD comes into effect, the employer's plan is primary for the first 30 months following the start of the Medicare coverage.