TEFRA/Federal Law as it Pertains to Health InsuranceCity of Kalispell
Charles A. Harball Office of City Attorney
City Attorney 312 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
MEMORANDUM
TO: Mayor Pamela B. Kennedy
and Kalispell City Council
FROM: Charles Harball, City Attorney
Chris Kukulski, City Manager
Tel 406.758.7708
Fax 406.758.7771
charball@kalispell.com
SUBJECT: Effects of Federal Law on Medical Insurance
MEETING DATE: Monday, July 21, 2003 Workshop
BACKGROUND: Duane Larson brought this issue to my attention after he was
advised that he would not be eligible to receive Medicare Supplemental coverage
through the City's Blue Cross medical insurance package. Apparently the TEFRA-
OBRA federal law places certain restrictions on employer groups that forces
primary coverage over to the employer's insurance rather than Medicare. This has
an effect on Duane because he is 1) by virtue of his paid position as a Council
member, an employee of the City and 2) he is at least 65 years of age. This limits
his insurance options to the much more expensive package offered to retirees of the
City. Essentially, even after receiving his otherwise generous compensation
package from the City, Duane must pay for the opportunity to serve the City.
Council should be aware that although this would appear to only apply to
Duane, it is not unusual for retirees of the City to wish to become involved in the
elective positions of the City and that this situation seems to provide a considerable
disincentive to such involvement.
RECOMMENDATION: Council may wish to discuss the issue and determine if it
is desirable to inquire about a resolution to the problem.
Respectfully submitted,
Charles Har , City Attorney Chris Kukulski, City Manager
Note: If you are eligible for benefits under Medicare A
and B, benefits will be paid as if you were enrolled in
both Medicare A and B.
Unless otherwise required by federal law, benefits
payable under Medicare will be determined before
benefits payable under this plan.
2.2.1 Group Primary
As required by federal law, benefits payable
under a group will be determined before benefits
payable under Medicare in the following
situations:
a. For employer groups with 20 or more full- or
part-time employees who work 50 percent or
more of the typical business days during a
calendar year, the group will pay before
Medicare for the following covered persons:
1. Those employees who continue to work
after age 65; and
2. The dependent spouse age 65 and over
of a non -retired active employee.
Each individual in 1 and 2 above has the option
of elective Medicare as the primary coverage.
However, if such an election is made, coverage
under this plan must terminate. Such an
election must be made in writing.
b. For employer groups with 100 or more full -
or part-time employees who work 50 percent
or more of the typical business days during a
calendar year, the group will pay before
Medicare for the following covered persons:
1. Employees who become totally and
permanently disabled; and
2. Totally and permanently disabled
spouses and/or dependents of an active
employee.
For (a) and (b) above, the employee count (as
defined in (a) and (b) above) of one calendar year
determines whether these laws apply during the
following calendar year, even if the count drops
below 20 or 100 that following year. If an
employer does not have 20 or 100 employees as
defined above, but attains that number, these
laws apply immediately.
2.2.2 Group Secondary
Federal Law requiring that group plan benefits
be determined before Medicare benefit does not
apply iOthe following cases:
a. Rntro�n'
� '
b. Spouses of retirees;
c. Employers with fewer than 20 employees, as
defined above under Group Primary (a)|and
d. For Medicare disability cases, employers with
fewer than IOO as defined above under
Group Primary (b).
2.2.3 End -Stage Renal Disease
Special nu|nS apply when a person iSentitled to
Medicare benefits solely onthe basis of
enU'sta8erana| disease.
Medicare benefits are secondary tobenefits
payable under anemployer plan for services
furnished an ESRD(end'3tDgarenal disease)
beneficiary asspecified below.
Medicare will bethe secondary payer for upt0
30 months even if the ESRD beneficiary becomes
disabled oraged (age 65) before the
coordination period is over. In additiVO, a new
coordination period will start for working aged Or
disabled beneficiaries as ESRD provisions begin
to apply.
The combined payments bvMedicare and the
group plan will be no more than the charge for
the covered services the employee receives.
Large Group Manual