Short answer: No. Under the Medicare Secondary Payer rules, an employer with 20 or more employees cannot require, pressure, or financially incentivize a Medicare-eligible active employee to drop the group plan in favor of Medicare. Doing so can trigger a civil money penalty of $11,823 per violation in 2026.
For an employer with 20 or more employees, the group health plan is the primary payer for active employees (and their spouses) who are 65 or older and Medicare-eligible; Medicare pays second. (For disability-based Medicare the threshold is 100+ employees, and end-stage renal disease has its own 30-month coordination period.)
Because of this, the Medicare Secondary Payer (MSP) rules prohibit an employer from taking into account an employee’s Medicare entitlement or “incentivizing” them off the group plan. An employer may not offer cash, a special arrangement, or any inducement designed to get a Medicare-eligible active employee to drop the group plan so that Medicare becomes primary. Violations can carry a civil money penalty of $11,823 per violation for 2026.
Active employees may still choose Medicare on their own, but it must be a genuinely free choice with no employer pressure. (Different rules apply to true retirees and to small employers under 20, where Medicare can be primary, and arrangements like a Medicare Premium Reimbursement Arrangement may be appropriate.) Employers should be especially careful with any program that nudges older workers toward Medicare, and should document that the choice was the employee’s own.
Sources
- Medicare Secondary Payer statute, 42 U.S.C. §1395y(b); CMS MSP guidance.
- See the Employee Benefits KB (Medicare-Eligible Employees) and the Medicare knowledge base for coordination details.
Content history
Originally published: June 16, 2026
Last reviewed: June 16, 2026