Small Employer: Medicare Should Have Paid First

What This Means

This page concerns people age 65 or older covered through their own or a spouse’s current employment. Medicare and the job-based plan have rules for who pays first; the second payer may pay some remaining covered costs, but does not necessarily pay the whole balance. Disability and end-stage renal disease have different rules; see Medicare Secondary Payer.

At 20 or more employees, the work plan normally pays first. Below 20, Medicare normally pays first, subject to the multi-employer exception described below.

That reversal is where the money goes missing, and it is easiest to see with a number. Say a test costs $1,000. In a small-employer situation Medicare is meant to pay its share first — but if you never signed up for Part B, Medicare paid nothing at all, because you were not in it. Your work plan may then calculate its payment as though Medicare had paid first, depending on its terms. The difference between those two amounts did not disappear. It came to you, as a bill.

People often find this out years in, after a lot of those bills. What matters then is what can still be recovered, and the honest answer has two halves: ask about enrollment now. Payment of older Part B claims requires coverage effective for those service dates.

Why This Happens

Nobody sets out to get this wrong. It happens because everyone involved has a reasonable-sounding position:

• You had coverage, it was good coverage, and paying a second premium for Part B looked like waste.
• Your employer’s HR, if the business is small, may never have administered this before.
• Your doctors’ billing offices submitted to the insurance you gave them. Their records may not show the correct payer order.
• The plan paid, so nothing looked broken — until the amounts got large enough to notice.

First: Is It Really a Small-Employer Plan?

The rules that decide who pays first are the Medicare Secondary Payer rules. For people on Medicare because of age they start from one number: 20 employees. At 20 or more, the work plan normally pays first. Below 20, Medicare normally pays first — with one large exception, below.

The regulation treats an employer as having 20 or more “if the employer has 20 or more employees for each working day in each of 20 or more calendar weeks in the current calendar year or the preceding calendar year.” The citation is 42 CFR 411.170, and it is worth reading in full.

Two warnings, and the second one decides whether this page applies to you at all.

It is not a headcount. Part-time employees count, and the test looks across two calendar years. The threshold is also different if your Medicare is based on disability rather than age, where the figure is 100 and the formula differs again. Do not work it out yourself and do not ask a colleague. Ask the benefits administrator, in writing, whether the plan pays primary or secondary to Medicare.

If the plan is run jointly with other employers, the count is not yours alone.

A joint plan normally pays first if any participating employer meets the 20-employee test. A five-person business can therefore be in a Medicare-secondary situation.

For Medicare to pay first under the small-employer exception, the plan must request the exception from CMS and identify the eligible members. Ask the administrator whether an exception applies to you and for which dates. If the joint plan should have paid first, pursue its payment or correction process; backdating Medicare as primary is not the remedy for that payer-order error.

What You Can Recover, and the Six-Month Clock

If you were genuinely in the small-employer situation, the fix has two parts and the second depends entirely on the first.

Part one: getting Part B. Ask Social Security which enrollment period applies and when coverage can begin. Enrollment does not remove ordinary deductibles, coinsurance, or coverage requirements.

Check the ordinary employment-based SEP first. A small employer can provide qualifying group health coverage for this SEP even when Medicare is the primary payer. Eligibility depends on your coverage history, not just employer size. Ask SSA to check continuous coverage based on your own or your spouse’s current employment and any previous Part B enrollment. The usual window continues for eight months after employment or that coverage ends, whichever comes first. Bring CMS-L564 or other evidence of the employment and coverage dates.

If you qualify and enroll while still covered through current employment, or in the first full month afterward, Part B can begin on the first of the enrollment month; you may instead choose one of the following three months. Later enrollment within the eight-month SEP generally starts coverage the following month. This does not restore years of missing Part B coverage. See SSA’s eligibility rules and coverage-start instructions.

Part two: getting that Part B backdated. For an older service to be payable under Part B, coverage must reach its date of service. Backdating is not automatic, and payment still depends on the service meeting Medicare’s coverage and billing rules.

The employer-misinformation SEP is a different route. Form CMS-10797 can help if incorrect information from your employer, its health plan, or a health-plan agent or broker caused you to miss an enrollment period. The misinformation must have occurred on or after January 1, 2023. Merely discovering an older mistake after that date does not qualify.

Notify SSA and provide documentation or a signed account of the misinformation. SSA’s instructions say this SEP ends on the last day of the sixth month after the month you contact SSA. Enroll within that window to receive its penalty protection. Coverage starts the month after enrollment, so this SEP itself does not backdate coverage. The date of the misinformation, the enrollment deadline, and the start of coverage are separate requirements. See SSA’s employer-misinformation instructions.

For an enrollment error caused by the government, equitable relief may allow backdating. It is available only where the error came from the government — Social Security, Medicare, or someone acting for them. Not from an employer — with one exception worth asking about: if the employer or insurer was passing on something the government had told them, equitable relief can still reach it. Where it applies, Social Security may designate an enrollment period and “an entitlement period based on that enrollment period”. Ask for it by name and bring evidence. Approval and the effective date depend on your circumstances; retroactive premiums may be owed. SSA explains the evidence required.

If CMS or its contractor approves the retroactive-entitlement filing exception, there is a six-month extension. Medicare’s ordinary limit is one calendar year from the date of service, unless an exception applies. There is a written exception for exactly this situation: you were not entitled to Medicare when the service happened, and you were later told, in writing, that your Medicare actually started on or before that date.

But the exception is not open-ended, and this is the part that catches people. Start from the month in which you or your doctor’s office were told about the backdated start date. The window closes on the last day of the sixth calendar month after that one. Told in January, it closes on July 31. The letter that solves your problem also starts a six-month clock. Do not spend two of those months getting organized.

And it is a decision someone makes, not something you are simply owed: the regulation is framed throughout as “if CMS or one of its contractors determines” the conditions are met. It can be refused.

What To Do Next

1. Get the employer’s answer in writing. Ask your benefits administrator whether the plan pays primary or secondary to Medicare for employees age 65 or older, and whether it is a multi-employer plan. An email is enough. Ask which payer should have paid first on the service dates. If the work plan should have paid first, ask it to correct the claims; otherwise, ask SSA about your Part B enrollment options.

2. Contact Social Security now about enrollment. Call 1-800-772-1213. Ask first about the ordinary employment-based SEP, then about CMS-10797 if misinformation on or after January 1, 2023 caused you to miss an enrollment period. Get your enrollment deadline and coverage start date confirmed; CMS-10797’s misinformation SEP does not backdate coverage.

3. Ask about backdating separately, and by name. Ask Social Security whether equitable relief is available in your case, and be clear about who gave you the wrong information. If it came from the government, say so and give dates. If it came only from your employer, ask anyway, but do not plan around getting it.

4. If backdating is granted, move immediately. Get the effective date in writing, note the date on the notification, and count to the last day of the sixth calendar month after the month you were told. Check when you or each provider received notification, and have each office confirm the applicable deadline; do not assume a later letter restarts it.

5. Then go to each billing office with the citation. Ask them to refile the claims to Medicare as primary, and give them the reason the one-year limit does not bar it: 42 CFR 424.44(b)(2), retroactive Medicare entitlement, with the six-month extension at (b)(5)(ii). Ask the office to confirm the applicable deadline and whether the contractor needs additional evidence.

6. Tell your employer’s plan what has changed. Once Medicare pays as primary, the plan’s liability is recalculated. It may owe you more; it may also have overpaid and want the difference back.

7. Keep every explanation of benefits you already have. The ones showing the plan paying as a second payer are the evidence of what went wrong.

8. Get free help, and get it early. Your state’s SHIP gives free Medicare counseling with no connection to any insurer, at shiphelp.org. Bring them this before the six months start, not during.

Sources

• 42 CFR 411.170 — the Medicare Secondary Payer working-aged provisions apply to group health plans “of at least one employer of 20 or more employees”, and the definition: “20 or more employees for each working day in each of 20 or more calendar weeks in the current calendar year or the preceding calendar year.”

• 42 CFR 411.172 — paragraph (a)(3)(i) puts you in the Medicare-secondary group if covered by a plan of an employer with at least 20 employees, “including a multi-employer plan in which at least one of the participating employers meets that condition”; paragraph (b) is the exception the plan must itself request for its small-employer members; paragraph (c) covers an employee who refuses the employer’s plan, for whom Medicare is primary and the plan “may not offer that individual coverage complementary to Medicare.”

• 42 CFR 424.44 — the filing limit: “the claim must be filed no later than the close of the period ending 1 calendar year after the date of service.” Paragraph (b)(2) extends it where the beneficiary “was not entitled to Medicare” when the service was furnished and “subsequently received notification of Medicare entitlement effective retroactively to or before the date of the furnished service.” Paragraph (b)(5)(ii) is the length of that extension — “through the last day of the sixth calendar month following the month in which either the beneficiary or the provider or supplier received notification of Medicare entitlement effective retroactively to or before the date of the furnished service.” Every branch of (b) is conditioned on CMS “or one of its contractors” so determining.

• 42 CFR 407.23 — the exceptional-conditions Special Enrollment Periods. Paragraph (c) is the one for employer or health-plan misrepresentation, requested on form CMS-10797; its paragraph (c)(3) is why it cannot backdate — “Entitlement begins the first day of the month following the month of enrollment”. Paragraph (a), subject to its Medicaid exception, generally limits these SEPs to “exceptional conditions that took place on or after January 1, 2023”. See also 42 CFR 406.27 for the Part A equivalents.

• 42 CFR 407.32 — equitable relief, available where enrollment or non-enrollment is wrong “because of the error, misrepresentation, on [sic] inaction of a Federal employee or any person authorized by the Federal Government to act in its behalf”. It is the route that can produce backdating, because the relief may include “(b) Designation of an entitlement period based on that enrollment period”. An employer’s own error is not enough; government misinformation relayed through an employer may qualify under SSA POMS HI 00805.170.

• CMS: Medicare Secondary Payer — how coordination of benefits is recorded and corrected.

• SSA POMS HI 00805.266 and HI 00805.295 — the employment-based enrollment rules are distinct from payer-order rules; a qualifying group health plan can be of any size, and evidence of employment and coverage is required.

• 42 CFR 408.24(b)(2) — excludes noncoverage months in accordance with use of an exceptional-conditions SEP when the individual enrolls within that SEP. This penalty rule does not remove the misinformation-date requirement in 407.23(a).

Frequently Asked Questions