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Printed Date: 9/22/2015
The definition of CES is found in section 42 of the Code of Federal Regulations 411.104.
The regulations provide that a person has CES even if he or she is not actively working and/or if he or she is receiving disability benefits from an employer for up to six months.
This is what is referred to as the "six-month requirement." In accordance with the Internal Revenue Code, the IRS treats the first six months of disability benefits paid by an employer as wages; i.e., such benefits are subject to FICA (Social Security) taxes. In other words, a person who is receiving disability benefits from an employer for six months or less is considered an employee and the payments are considered "sick pay" (which is subject to FICA taxes) despite the fact that the employer may refer to the payments as "disability benefits." Also see Rule 2(b).
Since the first six months of employer paid disability benefits are taxed under FICA, CMS also treats such benefits as wages for the purpose of Medicare Secondary Payer (MSP). Thus, a person who is receiving disability benefits from an employer for six months or less is considered to be employed; i.e., to have "current employment" status.
In addition to Rule 1, a person has CES if he or she if not actively working but meets all the following conditions:
a. Retains employment rights in the industry and has not had his or her employment terminated by the employer if the employer provides the coverage, (or has not had his or her membership in the employee organization terminated, if the employee organization provides the coverage).
Under Rule 2(a), Medicare is secondary for individuals who are not working and who have group health coverage, provided the individual is either: 1) still carried on the employer's employment rolls and is available for employment in the same industry as the employer or 2) in the case of members of employee organization plans such as Taft Hartley union plans, available for assignment by the organization to another job. If coverage continues for a member of such a plan who is not actively working but who is available for work in the industry, the coverage is by virtue of CES. Thus, for example, members of trade unions and screen actors who move from one job to another and whose group coverage continues between jobs, have that coverage "by virtue of CES."
b. Is not receiving disability benefits from an employer for more than six months.
This is the converse of Rule 1. Since, under Rule 1, a person is considered to have CES if he or she is receiving disability benefits from an employer for up to six months, it follows that a person who is receiving disability benefits from an employer for more than six months is not considered to have CES.
c. Is not receiving social security disability benefits.
A person who has been determined to be disabled by the Social Security Administration becomes entitled to disability benefits beginning with the sixth month of disability, i.e., there is a five month waiting period before entitlement to disability benefits begins. Since disability is defined for social security purposes as "inability to engage in any substantial gainful activity," CMS considers an individual who has been found disabled under social security not to have CES after the first six months of disability. The six months corresponds to the six month period during which a person who is receiving disability benefits from an employer is considered to have CES under Rule 1.
d. Has group health coverage that is not COBRA continuation coverage.
Under the law, Medicare is secondary to group health coverage only if the coverage is by virtue of CES. The COBRA continuation of benefits law requires employers to continue health coverage for employees and dependents of employees who no longer work sufficient hours to qualify for the employer's health plan. Where the employer is required to provide such coverage, the coverage is considered to be "by virtue" of the COBRA law, rather than by virtue of "current employment status." Therefore, Medicare is primary to such coverage.
A person who is not working and who meets either the condition in Rule 1 or who meets all of the conditions in Rule 2, sections (a) through (d), is considered to have CES.
Medicare would be the secondary payer in these instances.
Medicare would be primary payer for a disabled person who is not working if the individual does not meet the condition in Rule 1 and also does not meet any of the conditions in Rule 2.
Regulation References: 42 CFR 411.104
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Last Updated: 10/08/2019