Medicare’s Primary vs. Secondary Payer (MSP) rules determine whether an employer-sponsored group health plan pays benefits before or after Medicare for Medicare-eligible employees and dependents.
Unlike ACA and COBRA group size determinations, Medicare MSP status is not based on a single annual snapshot. Instead, it is determined using a look-back measurement across 20 or more calendar weeks.
Why Medicare MSP Status Matters
Medicare MSP rules affect:
- Employees age 65 or older
- Medicare-eligible spouses and dependents
- Coordination of benefits between Medicare and the employer-sponsored group health plan
If an employer incorrectly treats Medicare as primary or secondary, claims may be denied, paid incorrectly, or subject to recovery by Medicare.
How Medicare MSP Group Size Is Determined
Step 1: Understand Group Size Thresholds
For age-based Medicare eligibility (65+), the key threshold is:
- 20 or more employees → Employer group health plan is Primary. Medicare pays Secondary.
- Fewer than 20 employees → Medicare is Primary. The employer group plan pays Secondary.
This 20-employee threshold applies only to age-based Medicare eligibility.
Medicare Secondary Payer (MSP) rules differ for other types of Medicare eligibility:
- Medicare due to disability
- Employer group health plan is Primary only if the employer has 100 or more employees.
- If the employer has fewer than 100 employees, Medicare is Primary.
- Medicare due to End-Stage Renal Disease (ESRD)
- The employer group health plan is Primary for a limited coordination period (generally up to 30 months), regardless of employer size.
- After the coordination period ends, Medicare becomes Primary.
Because MSP rules vary based on why an individual is Medicare-eligible, employers should not assume that one group size calculation applies universally.
Step 2: Select the Measurement Period
Medicare MSP status is determined by reviewing 20 or more calendar weeks during a rolling two-year period, which includes:
- The current calendar year, and
- The immediately preceding calendar year
Employers may choose which 20+ weeks to use, provided that:
- The weeks are calendar weeks
- Each selected week is counted consistently
- The same methodology is applied across the measurement period
Since employers choose the measurement weeks, many complete this review in January and reuse the same weeks year over year unless workforce patterns materially change. This timing often aligns with ACA ALE and federal COBRA calculations.
Step 3: Count Employees for Each Selected Week
For each selected calendar week:
- Count all employees, including:
- Full-time employees
- Part-time employees (each counts as one employee – no hour-based proration)
- Do not use ACA Full-Time Equivalent (FTE) calculations.
- Do not average or cap hours worked.
If the employer has 20 or more employees on each working day of the selected week, that week counts toward Medicare primary payer status.
Step 4: Apply the Majority Test
- If the employer had 20 or more employees during 20 or more calendar weeks in the two-year period → Employer plan is Primary / Medicare is Secondary
- If not → Medicare is Primary / Employer plan is Secondary
How This Differs from ACA and COBRA Counting
| Rule Set | Measurement Method |
|---|---|
| ACA | Monthly averaging using full-time employees plus FTEs |
| COBRA | Fractional counting based on hours |
| Medicare MSP | Weekly headcount, no FTEs |
Because each rule uses a different methodology, employers should never assume one calculation satisfies all compliance requirements.
Can Medicare MSP Status Change Midyear?
Yes – Medicare MSP status can change midyear if:
- The employer selects different calendar weeks, or
- Workforce size materially changes across the two-year look-back
However, in practice, many employers lock in their MSP determination for the year by consistently using the same 20 or more weeks unless a structural change occurs.
Documentation Best Practices
Employers should:
- Document the selected measurement weeks
- Retain employee counts for each week
- Apply MSP status consistently across plans and participants
- Coordinate with carriers and TPAs to ensure proper claims administration