By: HUB’s EB Compliance Team

Medicare can be quite confusing, especially when considering how it interacts with employer-sponsored health plans. It can create headaches for employees (and those on COBRA) and employers trying to avoid penalties under the Medicare Secondary Payer rules (as we discussed here and here). But how do these rules apply when an employer plan covers Domestic Partners?

Domestic Partners

Some employer sponsored health and welfare plans extend eligibility to Domestic Partners (“DPs”). DPs are generally defined as a person in a committed relationship with an employee, of the opposite sex or same sex, in which the partners share attributes that demonstrate the committed nature of their relationship (such as sharing a residence and financial obligations and not being in a marriage, civil union, or domestic partnership with anyone else). Usually, DPs also must be old enough to marry and not related in a way that would prohibit legal marriage in their jurisdiction.

The list above is not exhaustive and employer plans and insurance carriers have leeway in how DP is defined under their specific plans. Likewise, some states, including California, Maine, and Washington allow registered domestic partnerships. Those in registered domestic partnerships are often provided with rights and benefits similar to those of spouses under those state laws. Other states, including Colorado, Hawaii and Illinois allow for Civil Unions, which are similar in scope to registered domestic partnerships, and for purposes of this analysis, are one and the same.

Most importantly, DPs are not recognized for federal purposes. This impacts every piece of the law that refers specifically to spouses, since by definition, DPs are not spouses. 

Medicare Part B

Medicare Part B covers medically necessary as well as preventive services. The federal government has strict timing requirements for enrollment in Part B. For those who aren’t automatically enrolled in Part B, there is a 7-month initial enrollment period which begins 3 months before turning 65, the month the individual turns 65, and ending 3 months after turning 65.

Those who don’t enroll in Part B during their initial enrollment period may have late enrollment penalties when they do enroll, unless they have coverage through their active employment, or the active employment of a spouse. Currently late enrollment penalties of up to 10% of the total premium cost for each 12 months a Medicare eligible individual didn’t have Part B or qualifying employer coverage. These penalties apply for as long as the individual is enrolled in Part B. Importantly, coverage through active employment does not include COBRA or state continuation coverage. Individuals who lose coverage through active employment have an 8-month special enrollment period which they can enroll in Part B without incurring late enrollment penalties.

The Medicare + Domestic Partner Conflict

Herein lies the crux of the issue: since federal law does not recognize DPs as spouses, an individual who has coverage through the active coverage of their DP is not considered to have coverage through active employment. This is a potential trap for those who are covered as a DP under an employer plan and approaching age 65.

As they approach age 65, DPs have two options to avoid a Part B late enrollment penalty:

  • If the DP is still actively working, they can enroll in coverage offered by their own employer plan. This may not be ideal. It could mean each DP would separately be enrolled in coverage, and thus would incur expenses towards separate deductibles and out of pocket maximums, for example.
  • Enroll in Medicare Parts A and B (unless automatically enrolled) during the initial enrollment period. This option may or may not be more expensive than remaining enrolled in just the DP’s employer plan.

Domestic Partners and Medicare Secondary Payer Rules

Employers aware of this trap for DPs may be tempted to provide some incentive to help balance the scales for the DPs. However, they cannot.

The Medicare Secondary Payer rules are in place in part to prevent employers from incentivizing enrollment in Medicare when employer coverage is available. Since DPs aren’t recognized for federal purposes one might incorrectly assume could incentivize DPs to enroll in Medicare.

However, while some statutes refer to spouses and thus don’t apply to someone who is not a spouse, the MSP rules take a different approach. Rather than identify individuals by relationship, the MSP rules refer broadly to Medicare beneficiaries by stating, “An employer … is prohibited from offering Medicare beneficiaries financial or other benefits as incentives not to enroll in, or to terminate enrollment in, a [group health plan] that is, or would be, primary to Medicare.” Thus, this prohibition extends to anyone who is a Medicare beneficiary, without regard to their relationship to the employee.

Conclusion

Employers who offer coverage to domestic partners should be aware of how domestic partner coverage interacts with Medicare. Though we typically think of Medicare as only being for those who are over age 65, this isn’t the always case since Medicare offers coverage before age 65 due to disability, ESRD, and ALS. Employers with significant domestic partner populations may consider educating (without incentivizing) their employees with domestic partners about the potential traps that exist in the interaction between Medicare and their DP coverage.

If you have any questions, please contact your HUB Advisor. You can also view more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.