Two Retirees, One Active Employee, and a Denied Hospital Bill
Ruth, 68, still works full time as billing manager for Keystone Fabricators, a Pennsylvania firm with 27 employees and a fully insured group PPO. She enrolled in Medicare Parts A and B at 65 but kept the group plan as her primary coverage. Her husband Abe, 70 and retired, is covered as her dependent under the group plan and also has Medicare. In June the group plan paid nothing on Ruth's $22,000 hospital claim, stating "Medicare is primary for anyone 65 or older." That same month Ruth's daughter Nina, 24, was removed from the plan when she "aged out" and now faces a $9,000 emergency room bill with no coverage.
1. For Ruth and for Abe, which payer is primary and why? Was the plan's denial correct?
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Ruth. Under the Medicare Secondary Payer working-aged rules, a group health plan of an employer with 20 or more employees is primary for an employee age 65 or older who is covered based on current employment. Keystone has 27 employees and Ruth is an active full-time employee, so the group PPO is primary and Medicare is secondary. The plan's "anyone 65 or older" statement is wrong.
Abe. He is covered as the spouse of an active employee. Where the spouse's Medicare eligibility is based on age and the coverage is derived from the active employee's current employment at a 20+ employer, the group plan is primary and Medicare secondary. Same result.
The denial. It is improper for both claims. Ruth should file a written appeal citing the MSP working-aged provisions, request the plan document and the specific exclusion relied on, and simultaneously file a complaint with the Pennsylvania Insurance Department, since this is a fully insured policy subject to state regulation.
Judgment point: The employer-size threshold and the "current employment" status drive everything. Had Keystone had 19 employees, Medicare would have been primary for Ruth.
2. What coverage options does Nina have, and which continuation law applies?
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First, question the termination. Group health plans must offer dependent coverage to age 26. Removing Nina at 24 is likely a plan violation unless the plan document shows she never met the dependent definition. Ruth should demand the plan's dependent eligibility provision in writing.
If the termination stands, continuation applies. Keystone has 27 employees, so federal COBRA applies (20+ employees). Pennsylvania's mini-COBRA fills the gap for employers with 2 to 19 employees and does not apply here. Loss of dependent status is a qualifying event; Nina has 60 days from the notice or coverage loss to elect, and coverage can continue up to 36 months at up to 102% of the premium.
Other routes. A loss of coverage is a special enrollment opportunity for an individual marketplace plan, and if her own employer offers coverage she should compare that against COBRA cost.
Judgment point: Choosing the wrong continuation statute is the common error - count employees first, then pick COBRA or mini-COBRA.
3. Ruth asks whether she should drop the group plan and rely on Medicare instead. What analysis should the producer walk her through?
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Cost comparison, not just premium. Compare total annual outlay: her payroll deduction plus the plan's deductible and out-of-pocket maximum against Medicare Part B and Part D premiums, a Medigap premium, and Medicare cost-sharing. At 27 employees the group plan is primary and pays first, so dropping it shifts the full cost to Medicare plus supplemental coverage.
Coverage gaps. Confirm whether Ruth's prescriptions are on the group formulary versus a Part D formulary, and whether her physicians and hospital are in-network for both.
Timing traps. If she later drops the group plan, she gets a Medicare special enrollment period, but a gap in drug coverage can trigger a Part D late-enrollment penalty. Dropping employer coverage is also generally irreversible until open enrollment.
Document it. Provide the comparison in writing; a recommendation to leave a primary group plan is exactly the kind of advice that generates an errors-and-omissions claim if the analysis is not documented.